In Giuseppe Tomasi’s novel The Leopard, one of the characters declares: “If we want things to stay as they are, things will have to change.” That statement, though dating back to 1958, is equally applicable today, particularly with regards to the issue of global warming: if we want to continue growing and thriving here on Earth, things will have to change. There is no alternative planet and reversing growth is out of the question. It is widely accepted that what needs to change is the way we grow.

The Kyoto Protocol, adopted in 1997 and implemented in 2005, was supposed to be the planet’s white knight that would save the choking Earth from our destructive behaviour. The legally binding commitment requires 193 parties – including the European community – to reduce emissions of greenhouse gases by an average of 5 per cent compared to 1990 levels in the first phase, which runs from 2008 to this year.

However, instead of global warming slowing down, things have actually become worse. According to the Global Carbon Project, carbon dioxide (CO2) levels in the atmosphere are higher than they have been at any time in the last 800,000 years, with CO2 emissions from burning fossil fuels increasing by 5.9 per cent in 2010 alone. Meanwhile, the US National Aeronautics and Space Administration (NASA) adds that global temperatures reached their highest recorded levels between January 2000 and December 2009.

Green loophole

These facts may be dizzying, but they are just the tip of a melting iceberg. When it comes to zeroing in on individual sources of climate change – the aviation industry, for example – and finding ways to control them, the issue quickly becomes cloudy.

Civil aviation produces 2 per cent of all human-induced CO2 emissions, and 12 per cent of all CO2 emissions from transport sources. In 1999, the Intergovernmental Panel on Climate Change (IPCC) released a report stating that “fuel consumption by civil aviation is expected to reach 300 million tonnes in 2015 and 450 million tonnes in 2050”. Yet the industry is excluded from the Kyoto Protocol, which is peculiar given its sizeable contribution to global warming. Instead, the International Civil Aviation Organization (ICAO) was put in charge of limiting and reducing emissions from international aviation.

In 2010, the ICAO required members to commit to improving fuel efficiency by almost 2 per cent per year by 2050, and to develop a global framework for the use of alternative fuels. However, being separate to the Kyoto Protocol, it is not legally binding and therefore appears to be largely ineffectual.

The European Union (EU) decided to take things into its own hands. The EU Emissions Trading System (ETS) was adopted in 2005 as a means to meet the Kyoto Protocol’s target of reducing emissions by 8 per cent below 1990 levels. The cap-and-trade mechanism creates a market-based system for pollution reduction where entities are allowed to pollute up to a certain point. Those that exceed their limits will be penalised, and those that do not can either save their permits for future use or sell them to other entities. So far, the ETS applies to CO2 emissions from almost 11,000 power stations and industrial plants.

This year, the EU plans to include international flights to, from and within Europe in the scheme. Emissions from the aviation industry will be capped at 97 per cent of the sector’s annual average between 2004 and 2006, and from 2013 to 2020 the cap will be lowered to 95 per cent of average emissions from the same time frame. Airlines will have to surrender one CO2 allowance for each tonne of CO2 emitted on a flight. Up to 85 per cent of emissions allowances will be given to operators for free, while 15 per cent will be auctioned off. From 2013 to 2020, 82 per cent will be given for free while 3 per cent will be reserved for new aircraft operators or those experiencing sharp growth.

What’s all the noise about?

Inevitably, the airlines that are subject to the scheme have something to say about it. The Air Transport Association of America (ATA; recently renamed Airlines for America, or A4A), the China Air Transport Association (CATA) and the Association of Asia Pacific Airlines (AAPA), along with several other individual carriers, have all been sounding their horns, whining about the extra costs the scheme will add to operations as well as accusing the EU of acting ultra vires.

“According to the IATA, the scheme would cost carriers US$1.2 billion in the first year,” said Jonathon Counsell, British Airways’ head of environment. “Our parent company IAG released figures saying that the group expects to pay US$120 million to cover emissions trading alone.” The Association of European Airlines (AEA) released estimates that costs could even hit €2.9 billion (US$3.8 billion) this year, working on the assumption that COper tonne will be priced at €30 (US$40).

A lot of that cost will of course be handed over to the customer: each passenger may have to dish out almost US$8 on average, based on the number of passengers carried and the 650 million tonnes of net carbon dioxide emitted globally by carriers each year.

However, though passengers will inevitably foot part of the bill, the EU ETS will still eat away significantly at airlines’ typically thin profit margins. “Unfortunately, not all of it can be transferred onto the passenger because airlines won’t know how much fuel they have burnt until they’ve actually done so, which makes the charge very difficult to transfer to the passenger, meaning a large proportion of it will be absorbed by the airline,” said Martin Eran-Tasker, technical director at AAPA.

The rife uncertainty of how to calculate emissions charges is compounded by the doubt about whether the ETS will actually even go through. As of now, the system’s legality is being heatedly debated in the European Courts of Justice. The case was first brought forward by the ATA, United Airlines and American Airlines in 2009, claiming that applying the EU ETS to the international aviation industry would be illegal because it breaches clauses of the Convention on International Civil Aviation, also known as the Chicago Convention, which states very clearly that “every State has complete and exclusive sovereignty over the airspace above its territory”. They claim the way that the ETS works means the EU would be controlling airspace beyond its territory. During a court hearing in July, the ATA argued that the EU would effectively be regulating emissions “on the ground in third countries, in third country airspace, and over high seas”, since the ETS applies to and regulates emissions during an airline’s entire flight regardless of distance.

Preliminary findings of the Advocate General in the European Court of Justice, which was released in October last year, pointed out that the EU ETS is not illegal since the EU as a whole is not the signatory behind the Chicago Convention. “But, this ignores the fact that all the countries within the EU are signatories of the Convention. So basically, they are playing with semantics,” said Eran-Tasker.

As this magazine goes to press the political backlash is escalating, with Senator John Thune introducing a bill prohibiting US carriers from participating in the scheme, leaving the aviation industry in a strange limbo, waiting with baited breath for the final decision.

Boycotting the scheme, however, is hardly an alternative for airlines because non-compliance comes with harsh penalties. For every tonne of CO2exceeding an airline’s allowances, airlines will be charged €100 (US$133). The proposed legislation also goes so far as to give airports the right to confiscate and auction off aircraft in cases of non-payment. “With further non-payment, they might go as far as selling the aircraft,” explained Eran-Tasker – although the likelihood of that worst-case scenario actually taking place is low.

Another concern with the EU ETS is the idea that it may even make European airports less competitive as carriers turn to cheaper alternative routes and hubs. “The issue here is not about European destinations as transit hubs per se, but more about carriers seeking ways to reduce their carbon liability,” said Dr Mark Watson, head of environmental affairs at Cathay Pacific Airways. “It is one of the more perverse incentives of the EU ETS that some carriers may seek to establish transit points outside of the EU, since a flight originating in a port outside of the Europe will only be liable for the sector of the journey that includes EU take-off and landing.” This will then lead to a phenomenon known as “carbon leakage”, where instead of reducing carbon emissions, activities simply take place elsewhere, which will ultimately emit more carbon, as landing and taking off burns additional fuel. “It makes no sense to penalise non-stop long-haul flights as these as more fuel efficient and hence generate less CO2, which therefore defeats the very objectives of the scheme,” said Watson.

The flip side

All the brouhaha stemming from this scheme raises the question of whether the EU ETS is actually worth all the effort, or if the industry can come up with alternatives that could be used instead?

Already, without the ETS and under the watchful eye of the ICAO, many airlines have invested in new, cleaner aircraft to enhance fuel efficiency, as well as overhauling operational procedures to further shrink their carbon footprint. British Airways, for example, has saved 50,000 tonnes of CO2 in the last two years simply by flying shorter, more direct routes and adopting operational techniques, such as taxiing with engines shut down.

Another beacon of hope is biofuel development, which is closer to viability today than it was just three years ago. Lufthansa already uses biofuel in one engine of an A321 flying between Frankfurt and Hamburg. The only obstacle with this option is the persistently high costs, which at present are higher than ordinary jet fuel because of the various feedstocks involved, therefore requiring much more investment.

Finally, one alternative that everyone seems to agree on is a global emissions trading system. “The industry isn’t against emissions trading schemes, but just those that are imposed unilaterally,” said Eran-Tasker. That, however, is not going to happen overnight. The first step would perhaps require the Kyoto Protocol to include aviation, which would take a lot of political will.

Maybe the greatest outcome of the EU ETS is the debate it has stirred up. Diverse parties from around the world have come together, unified in their resistance and criticism of this move, thus creating a rare platform where everyone is on the same page for a global, binding framework. The EU ETS has changed the way the aviation industry views itself – and that is definitely a change for the better.

2.7 billion Estimated total number of passengers carried by airlines around the world in 2011 – a jump up from 2.4 billion passengers in 2010.*

80% The amount of aviation emissions that stem from flight journeys of over 1,500km.

1.5 billion Number of barrels of Jet A-1 fuel the aviation industry consumes every year.*

8% Growth in carbon emissions from China in 2009, making it the world’s largest polluter, above the USA.**

3.27 Rise, in millimetres, of sea levels per year as a result of global warming, according to satellite data collected by the National Aeronautics and Space Administration (NASA).

100 Number of cubic kilometres of land ice lost per year in Antarctica since 2002 due to global warming.

60% Real emissions from an airline that the ETS’s free allowances will actually cover. The rest will need to be bought by the carrier.***

* Source: Air Transport Action Group

 ** China, alongside other “developing nations” is not included within
the original Kyoto Protocol. At time of press, delegates at the COP17
summit, taking place in Durban, South Africa, were negotiating
how to enhance the Kyoto Protocol and develop a roadmap
for the future that includes developing nations. 

*** Source: Pricewaterhouse Cooper