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Greenhouse gas emissions from international aviation and allocation options

5 Possibilities for reducing aviation GHG emissions

This chapter briefly describes some main possibilities for reducing aviation greenhouse gas emissions. Furthermore some possible future government options for implementing incentives that can help controlling aviation greenhouse gas emissions are listed. The options for reducing greenhouse gas emissions mentioned in section 5.1 and the list of possible control measures given in section 5.2 do not represent all possibilities, but merely mentions the options found in the literature reviewed in the process of writing this report. It is not the intention of this report to suggest which reduction options are the biggest and which measures that would be most effective or politically and legally feasible. The intention is merely to indicate some main possibilities that may be taken into consideration in a future scheme for reducing emissions of greenhouse gases from aviation.

5.1 Potentials for reducing aviation GHG emissions

A reduction of the growth in commercial civil air transport could be part of a strategy for reducing the global emissions of greenhouse gases in the future. Such a strategy would benefit from people adapting their lifestyles towards fewer holiday and business trips and towards travelling less by air, for example by choosing less remote destinations as well as by choosing to travel in transportation modes that are less greenhouse gas intensive than aircraft. Furthermore, the aerospace industry could produce aircraft that are less greenhouse gas intensive and the airlines could optimise operational procedures and scrap or re-engine their oldest and most fuel intensive aircraft. Figure 6 exemplifies some main principles by which greenhouse gas emissions of civil air traffic can be reduced.

1. A reduction of the transport work, or transport volume, measured as tonne-kilometres (which represents the total weight of the revenue freight tonne kilometres (RFTKs)⁶ and the revenue passenger kilometres (RPKs)⁷), leads directly to less aircraft movements (if the load factor is kept constant) and hence to reduced GHG emission.
     
2. A shift to transport modes with lower GHG intensity than aircraft will reduce the emissions per amount of transport work performed, and can reduce the overall GHG emission (if the transport work and the load factors are kept constant). An example is a switch of passengers or goods from aircraft to railway, the latter being generally less GHG intensive than aircraft [Roos et. al. 1997] [IPCC 1996e and 1999].

Figure 6:
Examples of options for reducing greenhouse gas (GHG) emissions from commercial civil air transport. Source: [Nielsen 2001].

3. Increasing the load factor (the passenger load factor and the freight load factor) involves better use of the aircraft capacity. This will reduce the necessary vehicle kilometres and hence the GHG emissions per unit of transport work performed [Daggett et. al 1999]. For example, the average passenger load factor of the World's scheduled airlines has been improved from around 50 percent in the early 1970s to around 70 percent in the late 1990s [Mortimer 1994a and 1994b] [ICAO 1998f].
     
4. A reduction of the energy intensity per seat or per freight capacity unit of aircraft directly reduces the emissions of CO₂ (if the transport work, the fuel type and the load factor are kept constant). This involves the development of more fuel-efficient types of aircraft. Examples are the development of more fuel-efficient engine types [IPCC 1999] [Birch 2000] [ACARE 2002] or new fuselage shapes offering larger capacity per weight unit or lower air resistance [Cranfield College of Aeronautics 2000a]. However, there is a trade-off between aircraft engine fuel-efficiency improvements and emissions of NO_x that act as a greenhouse gas precursor when emitted at high altitudes [IPCC 1999]. A strategy to reduce the greenhouse gas intensity therefore has to take this into account. Another possibility for reducing the greenhouse gas intensity of aircraft may be to design aircraft for cruising at lower speeds and altitude [Barrett 1994] [Dings et. al. 2000b].
     
5. By improving the operational procedures the flow of air traffic can be optimised, thereby reducing the GHG emissions for a given trip. One example is that stacking and queuing in and above airports could be reduced leading the aircraft to consume less fuel for take-off and landing [Lufthansa 1999]. Another example is that aircraft could be allowed to fly more direct routings. Many routes are today longer than the shortest great circle distances because of restrictions in the use of airspace⁸ [ACARE 2002] and regulations on how far away from airports twin-engine aircraft are allowed to operate when passing over the great oceans [Air International 2000]. A third example is that the choice of routings could be optimised as to avoid flying at altitudes and latitudes where aircraft emissions are considered to contribute most to global warming [Lee 2000]. Such a strategy could for example take into account that the layers in the atmosphere that are considered most sensitive to aircraft emissions are situated at lower altitude near the Poles than at latitudes nearer to the Equator.
      
6. Choosing a fuel with lower GHG emissions per available energy unit than the fossil jet fuel that is currently being used can reduce the emissions per distance travelled. An example could be a switch from fossil kerosene fuel to jet fuel produced from biomass or to liquid hydrogen produced on the basis of renewable energy sources [Brewer 1991] [Pohl 1995a]. However, there is uncertainty as to whether for example hydrogen is a less GHG intensive fuel than fossil kerosene when combusted at high altitude, primarily because the combustion of hydrogen leads to higher emissions of water vapour than combustion of kerosene [Marquart et. al. 2001].

It should be noted that the theoretical options for reducing the emissions of greenhouse gases from commercial civil air transport described in Figure 6 are to a large extent interdependent, and therefore not fully separable and addable, and furthermore to some extent counteractive. Most of the options exemplified in Figure 6 could be promoted by different types of government incentives and control options, as discussed further in section 5.2.

5.2 Possible government incentives and control options

The commercial civil air transport industry has until now not been subject to international regulations aimed specifically at reducing aircraft greenhouse gas emissions. Rather, standards issued by ICAO set limits for aircraft noise and engine emissions in and near airports [ICAO 1993a and 1998f]. However, the industry may soon be facing new environmental policies that can to some extent contribute to reduce the GHG intensity as well as the growth in passenger air travel. Some of the most commonly suggested policies are listed below:

	Economic means that reduce the demand for passenger air travel and airfreight and/or increase the airlines' incentive to reduce their emissions, i.e. a jet fuel tax, a passenger tax, landing charges, an emission tax9, environmental charges10 and/or emission trading schemes11 for commercial civil air transport.
	Voluntary agreements12 between governments and the aviation industry, i.e. certain reduction targets to be met by the commercial civil air transport industry such as targets for the future improvement of airlines' average fuel efficiency and targets for aircraft producer's improvement of the fuel-efficiency of next-generation aircraft.
	Regulatory means for improving aircraft technologies and operational procedures, i.e. in-flight emission standards for new aircraft, speed limits, performance standard incentives13, "old for new" aircraft scrapping schemes14 and/or banning operation with the oldest aircraft15 and implementation of new technologies for improving the flow of traffic and optimising flight routings (such as for example satellite based navigation).
	Regulatory means for reducing the demand for commercial civil air transport, i.e. personal passenger air travel emission quotas limiting individual mobility patterns as well as promotion of railway infrastructure and restrictions to expanding airport capacity16.
	Cancelling direct and indirect subsidies for the commercial civil air transport sector. That is, direct subsidies for producers of aircraft and engines and for airlines and airports as well as indirect subsidies such as the commercial civil air transport industry's exemption from paying VAT and kerosene tax and its allowance to maintain duty free sales17.
	Cancelling indirect subsidies to business travellers, i.e. the ability of companies to deduct their travel expenses against taxes and the ability of frequent business fliers to use airmiles earned through frequent flier programmes for private trips.
	Support for research into and development of more environmentally benign aircraft technologies and new improved air traffic management systems.
	Institutional measures, e.g. the necessity of creating new institutions that can promote lifestyle changes or the need of creating a supranational organisation that can implement and police for example global agreements on GHG reductions or economic measures such as a global jet fuel tax.
	Behavioural measures, e.g. information campaigns that aim at enlightening the public on commercial civil air transport's possible impact on climate change as well as on giving information on possibilities for changing lifestyle in more appropriate directions.
	Other policies aimed at changing the driving forces behind transport growth through adapting policies in economics, labour, etc. towards transport patterns in appropriate directions. Some examples could be to aim policies at impeding globalisation or at reducing economic growth rates.

In line with what is suggested by Figure 5 and Figure 6, the implementation of any of these policies may likely slow down the growth in aviation's environmental load. Sections 5.2.1 and 5.2.2 look a bit further into two of the main types of measures often being proposed, namely voluntary agreements and economic measures.

5.2.1 A further look at voluntary measures

As mentioned in section 5.2 voluntary agreements between governments and the aviation industry, i.e. certain reduction targets to be met by the commercial civil air transport industry, are often mentioned as one possible future incentive that could be part of a scheme for reducing emissions of greenhouse gases from aviation. Voluntary agreements could be designed to set out targets for the future improvement of airlines' average fuel efficiency and targets for aircraft producer's improvement of the fuel-efficiency of nextgeneration aircraft. The latter, an agreement with aircraft producers, would be in line with what has been agreed upon between the European Community and European automobile manufacturers [CEC 1997]. However, this section looks into the first option mentioned, i.e. the possibility of setting up a voluntary scheme with airlines.

A number of airlines around the World have already voluntarily committed to certain goals for reducing their fuel intensity in the future [IATA 2002] [Nielsen 2001]. For example, Lufthansa's passenger airline aims at reducing the specific fuel consumption per revenue passenger kilometre by 35% in 2012 as compared to 1991. This goal acquires that Lufthansa reduces its specific fuel consumption by around 18 percent between 1999 and 2012 [Lufthansa 2000b]. British Airways has similarly committed to reduce the specific fuel consumption per passenger kilometre by 30% in 2010 as compared to 1990, corresponding a reduction of some 16% as compared to the 1999-level [British Airways 1999a and 1999b]. Furthermore, in 1998, the Scheduled Airlines Association of Japan, that represents ten Japanese airlines, has committed to the target of reducing the emissions of CO₂ per available seat kilometre (ASK) by 10% in 2010 as compared to 1990 [All Nippon Airways 1999, p. 5]. Likewise, the airlines that are members of the International Air Transport Association (IATA) are planning to reduce their specific fuel consumption per RPK by 10% in 2010 as compared to 2000 [Dobbie 2001]. These targets may reflect the magnitude of the fuel efficiency improvements that can be expected due to voluntary measures in the next decade. It should be noted, as also mentioned in Sections 3.4 and 4.2, that these efficiency gains are generally expected by far to be overridden by demand growth.

In Europe, the reduction of the fuel intensity due to the introduction of new aircraft may become relatively modest in the next decade, because many airlines have already recently carried through some major fleet renewal programmes. The current average age of the European aircraft fleet is estimated at 9 years. The European aeronautical industry does not expect to exceed annual reductions in the specific fuel consumption of more than 1.1% per RPK on the average until 2012. Only a part of that reduction is expected due to introduction of new aircraft, while some may come from improved load factors and operating procedures [AEA and AECMA 1999]. In the US, airlines generally operate older fleets, suggesting that, in principle, the potential for improving fuel-efficiency may be higher than in Europe [Nielsen 2001].

As described above, airlines around the World have committed to different voluntary goals for improving their fuel efficiency. However, studies of airline environmental reporting reveal that the goals vary significantly from airline to airline [Nielsen 2001] [IATA 2002]. First of all, airlines have several different ways of measuring fuel efficiency. Some airlines measure their efficiency towards capacity (e.g. available seat kilometres, available freighttonne kilometres or available tonne-kilometres) whereas others measure efficiency towards productivity (e.g. revenue passenger kilometres, revenue freighttonne kilometres and revenue tonne kilometres). It is generally acknowledged that these differences in reporting make it difficult to compare the fuel efficiency of different airlines as well as their respective efficiency goals [Nielsen 2001] [IATA 2002]. The problems connected to benchmarking airline fuel efficiency are explained further in sections 9.3 and 9.3.2.

The International Civil Aviation Organisation's (ICAO) Committee for Environmental Protection (CAEP) is currently in the process of studying how a voluntary scheme for reducing the fuel intensity of airlines could be set up [CAEP 2002a]. However, in a status report from its fifth meeting (CAEP5) CAEP acknowledges, "…voluntary measures alone could not achieve an ambitious emission reduction target. They would have to be used in conjunction with other measures. In addition, these voluntary measures allow industry to enhance its ability to undertake activities related to "capacity building". They are primarily looked at as transitional measures. A key issue is the need to ensure that any such action would be to the advantage of the participants if market-based or other regulatory measures were imposed at a later date" [CAEP 2001n]. The main reason why voluntary measures are not considered sufficient is that the growth in aviation is expected to override the technical and operational improvements that could be part of a voluntary emission reduction scheme. However, as noted by CAEP in the citation above, if carefully designed, a voluntary scheme could be used to streamline airline environmental reporting, potentially improving the data material that may also have to be available if other market-based measures, such as a kerosene tax or an emissions trading scheme, are implemented at a later date.

5.2.2 A further look at fuel taxation and other economic measures

Several academic studies have been undertaken in recent years to assess the likely impact of jet fuel taxation implemented either at a regional or global scale¹⁸. These studies investigate to what extent a kerosene tax will raise airfares thereby reducing consumers' access to air transport and changing their preferences towards other modes of consumption and to what extent a jet fuel tax will give the aircraft producers and airlines increased incentive to develop and introduce more fuel-efficient aircraft in the future.

The future demand reduction due to introduction of a jet fuel tax can by its nature not be foreseen. The impact will to a large extent depend on economic growth, rise in real income and improvements in airline productivity reducing real airfares as well as consumer preferences for air travel over other modes of consumption. These determinants therefore have to be forecasted to give a reasonable estimate of the possible effect of a future kerosene tax.

Studies assessing the likely future demand impact of a kerosene tax generally use a methodology based on projecting the future demand growth in a socalled "business as usual" forecast. "Business as usual" forecasts are most often based on assumptions on future economic growth and income rise as well as increasing airline productivity reducing real airfares. Studies furthermore use demand elasticity estimates indicating how consumers might react to the airfare increases. Note that the studies base their projections on statistical analysis of historical time-series data. Different studies use varying assumptions on these key parameters [Nielsen 2001].

As a rule of thumb, most studies conclude that the environmental effectiveness of a kerosene tax will be rather small unless a quite substantial tax rate is applied [Nielsen 2001]. The main reason for this is that studies assume that, in a business as usual scenario, economic growth and income rise will continue at current rates leading to a tripling of global demand for air travel and freight within a twenty-year time period. Some studies even forecast higher growth rates [Barrett 1996] [OECD 1997].

One study suggests, that at a projected future "business as usual" growth rate of 3% in CO₂ emissions from commercial civil air transport, a kerosene tax of some 80-130US¢/kg may be needed to stabilise global emissions at current level [Bleijenberg et. al 1998]. Another study calculates that to reduce fuel use by 5% in 2010 as compared to 1990 a tax rate of around 180 US¢/kg might be needed [Pulles 2000b] [Wickrama 2001]. A main explanation for the difference between these two studies is that the first mentioned study has higher expectations for fuel-efficiency improvement, anticipating that socalled propfan engines will be introduced throughout all size categories of the fleet in the future and that lower operating speeds will be deployed. This assumption has been criticised by various sources for not taking adequately into account the costs barriers connected to operating at lower speeds [Dings 2000b, Annex VIII, pp.1-6] and the technological barriers to meeting airworthiness [Wickrama 2001, p. 57]. Thus, the lower estimates given by Bleijenberg et. al [1998] for the level of kerosene tax needed to stabilise the CO₂ emissions from commercial civil air transport (80-130 US¢/kg) may be too low if such radically improved technologies do not emerge. Other studies anticipate that even higher tax levels than the 180 US¢/kg suggested by Wickrama [2001] would be needed to stabilise CO₂ emissions at current level [DIW 1999] [Olsthoorn, X. 2001].

For comparison, EU minimum fuel tax for road diesel fuel is around 30 US¢/kg, but some countries levy higher taxes, up to 87 US¢/kg in the United Kingdom [Nielsen 2001].

As can be seen from Figure 7 jet fuel constitutes a major component in airlines' operating costs. The actual fuel price is fluctuating, following crude oil spot prices. In the period from the early 1970s, before the 1973 oil crisis, and until the second oil price shock in 1979 the real jet fuel price rose by a factor of five. Following the second oil crisis in 1979 the fuel costs peaked at around 30% of the total airline operating costs [Jenkins 1999] and above 50% of the direct operating costs [Dings et. al. 2000b]. Throughout the 1980s the real fuel price plummeted (except for a short peak in 1990 due to the Iraqi war in the Gulf) and fuel costs reached a historical low of 12% of the total airline operating costs in 1998. This left the real kerosene price at 18 US¢ per kilogram, which is comparable to the pre-1973 level when measured in constant 2000$. In 2000, the jet fuel price peaked again above 30 US¢ per kilogram, see Figure 7.

Figure 7:
Jet fuel price development 1967-2000 in current and constant 2000$ and jet fuel costs as percent of total airline operating expenses.
Yearly averages have been used except for 2000 using the average for January to August. Current price has been converted into constant 2000 US$ using the US consumer price index. Data sources: Fuel costs from [Jenkins 1999] except for jet fuel cost data for 1999 and 2000 that are taken from [Air Transport Association 2000a].

Thus, a tax on jet fuel corresponding the EU minimum fuel tax for road diesel (30 US¢/kg) would correspond to a doubling of the jet fuel price in 2000. Similarly, a jet fuel tax of 87 US¢/kg, corresponding the tax on road diesel in the United Kingdom, would roughly quadruple the airlines' fuel costs, again as compared to the fuel price in August 2000. The tax needed to stabilise aviation CO₂ emissions at the current level may be around 180 US¢/kg leading to something like a seven-doubling of the August 2000 fuel price level [Nielsen 2001].

In its assessment of a range of market-based measures CAEP recently concluded that an "open emissions trading scheme" allowing the commercial civil air transport industry to buy emission quotas in other energy consuming sectors would be a better and cheaper solution than for example a tax on emissions or fuel [Wickrama 2001] [CAEP 2000a and 2000b]. This is because it appears that less costly reductions are possible in other sectors (than aviation) because the aviation sector faces higher abatement costs, and hence the potential savings from trading with other sectors would be substantial [Seidel and Rossell 2001].

However, CAEP considers emissions trading a long-term solution because the design of an emissions trading regime would have to be agreed upon before trading can begin. Some of the key issues here are the setting of a cap for aviation emissions and the distribution of emission permits between airlines (i.e. grandfathering, based on past or current use, or auctioning through a bidding process) [Hewitt 2000] and possibly also the allocation of CO₂ emissions to Parties to the Climate Convention.

Another important issue for the design of an emissions trading scheme for aviation is whether the scheme should only consider CO₂ or if emissions of NO_x and water vapour at cruise altitude should be included. The last mentioned solution would mean that the aviation industry would have to buy more GHG emission permits than the before mentioned solution. For example, the UK Royal Commission on Environmental Pollution states in a recent report that an aviation emissions trading scheme ought to take into account that the total radiative forcing of aviation is about three times that of the carbon dioxide emitted [Royal Commission on Environmental Pollution 2002]. Yet another important issue raised by the UK Royal Commission on Environmental Pollution is that emissions from international aviation would have to be included in national greenhouse gas inventories of the Parties to the Kyoto Protocol. If this is not the case there is a risk that, if the aviation industry supports for example either renewable energy (such as wind turbines) or energy efficiency (such as energy efficient combined heat and power plants) to offset its own growth in emissions, the resulting emission savings could be double-counted as part of the host nation's commitments and no net emission reduction result.

In Europe, the European Commission has been investigating the possibility of introducing European control options. Some recent studies have been commissioned by the European Commission assessing aspects such as environmental effectiveness, legal feasibility and competition effects of different economic measures such as kerosene taxation [Resource Analysis 1998], performance standard incentives [Wit 2002] and environmental charges [Wit 2002] to be lifted on aircraft operating within European Union airspace. The scale of the economic incentives explored in these studies is generally quite low as compared to the global fuel tax of 180 US¢/kg that may be needed to stabilise global aviation CO₂ emissions. For example, a recent study operates with values of 30 EURO/tonne of CO₂ and 3,6 EURO/kg of NO_x to be implemented within European Union airspace. 30 EURO/tonne of CO₂ corresponds 0,095 EURO/kg of jet fuel. In the study such an incentive is expected to reduce European aviation CO₂ emissions by around 9% in 2010 over a business as usual scenario, and around half of the reduction is expected from less demand increase while the other half may appear due to enhanced technical and operational measures implemented by airlines in response to the incentive (as compared to what could otherwise be expected in a business as usual scenario). It should be mentioned that the studies on the possible impact of European control options that are mentioned here do not necessarily reflect the view of the European Commission, and, until now, the European Community has not implemented such measures.

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