Offsets Put Green Air Travel Within Reach
Air travel makes the world smaller – connecting businesses and allowing individuals to travel the world – adding to GDP as well as bringing pleasure into people’s lives.
But jet engines don’t run on thin air.
Aviation emissions currently account for approximately 2% of total CO2 emissions with significant aviation demand growth expected in the short and medium term, particularly in Middle East and Asia.
The World Economic Forum calculates that CO2 emissions from aviation will grow at a rate of 3% per year (from 630 million tons in 2010 to approximately 2,000 million tons in 2050), assuming industry fleet improvements to replace old aircraft accounts for 1.5% per year (which assumes 70,000 new aircraft being introduced by 2050 so probably quite generous). Otherwise emissions will increase by 4.5%.
Recognising the negative impacts of this rise in emissions and anticipating the potential for regulation, in 2009 the aviation industry set itself a bold target to reduce its emissions impact by 2050. That target equates to the following reductions based on 2005 emissions baselines:
A) 1.5% growth in emissions between now and 2020;
B) carbon neutral growth from 2020;
C) a 50% reduction in emissions from 2050.
These are ambitious pledges and set the aviation industry well ahead of some of the weak targets set by national governments in international conferences. They are simple, progressive and challenging. For those inside the industry and for regulators trying to manage the impact of our emissions on climate change, they are very welcome.
But can they be delivered? Surely without fundamentally shifting from our reliance on jet-propelled flight, we are not going to be able to reduce aviation emissions by 50% in a generation.
Biofuels are the technological game-changer for the aviation industry, but there is doubt over whether we can manufacture enough to have the impact required on CO2 levels within the time allowed.
While the world waits for biofuels to be produced sustainably at the volumes required, there is a need for a short-term solution. The solution is carbon offsets.
Offsets are a creature of the international carbon market. This market has driven investments in emissions reductions in the developing world since the signing of the Kyoto Protocol in 1997. Through the Clean Development Mechanism (CDM) alone, over $215bn has been channeled into projects to date, resulting in 110GW of new renewable energy capacity and between $21.5bn and $43bn of additional foreign investment.
The UN carefully reviews emission reductions from CDM projects and for each tonne of CO2 reduced, a ‘Certified Emission Reduction’ or CER is issued which can be used by some industries to offset emissions through the international carbon market.
With the biggest market for emissions reductions – Europe – oversupplied and showing little sign of the economic recovery that would drive demand for offsets, the value of a CER has plummeted from €22 to €0.40.
At €0.40 per tonne, investing in carbon reduction projects makes little sense at the moment. The present situation therefore potentially spells the end of €215bn of investments in CDM projects and will draw a line under the 1bn tonnes of CO2 already abated.
But every cloud……
This price crash provides a great opportunity for the aviation industry and the carbon markets to work together for the benefit of the environment.
Offsetting is one of the options available to ICAO (the aviation industry’s international regulator) as it tries to find a palatable solution to the industry’s environmental impact for the globe’s airlines. The other options – a global trading scheme or increased efficiency – are doomed to failure as they are far too ambitious or not nearly capable of delivering the emissions improvements required to meet the industry’s targets.
The failure (thus far) of ICAO to agree a workable solution was the cause of the European Union taking matters into their own hands and imposing the European emissions trading scheme on all airlines entering and exiting European air space. The application of that scheme to airlines outside of the EU has been postponed in the face of intense lobbying , but quick action from ICAO is required to prevent that decision being reversed.
PwC calculates that using a long term CER price of €10 the aviation industry as a whole only needs to find €1.1bn annually to offset the industry’s carbon footprint. Compare this to the $6tn required to replace 70,000 aircraft between now and 2050 which will only scratch the surface of the problem.
Offsetting is not everyone’s cup of tea. However for the aviation industry it makes perfect sense since jet planes have no cheap way to substantially reduce emissions in the short term.
A reduction of a tonne of CO2 is a reduction of a tonne of CO2 wherever it is reduced.
It is far more efficient for the aviation industry to pay for cheaper CO2 abatement in other industries – eg by funding switches solar power in Africa, or paying for energy efficiency measures in India’s heavy industry – to offset the environmental impact of growth in the aviation sector.
There will be political opposition to the idea as a result of developing countries’ determination to avoid emission reduction targets, even for their aviation industry. Nevertheless, the fact that the aviation sector has developed worldwide at more-or-less the same rate, makes this objection more difficult to justify. Both politically and economically, there is logic in the offset solution.
In the meantime, a commitment to use CERs to offset the industry’s emissions, if only for the short term would support continued investment in the CDM. This will ensure that crucial work to put the developing world on the low emissions growth trajectory will be continued. It will also sustain a successful and robust environmental mechanism that may otherwise struggle to continue into the second half of this decade.
ICAO has set up a panel, including emissions trading progressives like Jos Delbecke and Todd Stern to consider the options and report back to ICAO in September 2013. Action could feasibly be reasonably prompt after that – dare we hope for a decision by 2015?
“It is likely that carbon offsets will feature, at least as an interim solution,” Jonathan Grant, a director at PwC, said in a press release.
“We could see offset demand from the aviation sector growing to more than 100 megatonnes of CO2 per year by 2020, which would provide a significant boost to the carbon markets. This is more than one quarter of the CERs issued in 2012,” he said.
ICAO have been working on this issue for 15 years already. The fall in the price of CERs provides the perfect context for a politically palatable deal. The aviation sector and the carbon market could finally become comfortable bedfellows.
The aviation industry should seize this opportunity to be cast as the innovative, progressive and environmentally positive sector that it has always claimed to be.