Friday, July 20, 2007
Special Report: Aviation and Climate Change – Part I
This report is part of AviationToday.com’s coverage of the greening of aviation which will be the subject of its latest webinar July 31 at 11 am. AviationToday.com experts Anupam Bhargava, general manager, line maintenance services for Pratt & Whitney Global Service Partners, Washington Post National Aviation Reporter Del Wilber, and Aviation Maintenance Editor Joy Finnegan, will discuss how the industry is embracing “clean” technology and how it will impact the bottom line. They will also discuss how governmental initiatives threaten to stunt the growth of airlines just now recovering from 9/11 as well as cleaner, quieter and more efficient engines, and the use of composites and alternative fuels such as that powering Embraer’s (ERJ) Ipanema crop duster. To sign up for the webinar click here.
Part I of this special report recounts the achievements made by the aviation industry and the impact of current proposals to cut aviation emissions, something the industry has more than enough motivation to continue without regulation. Part II will cover new airline and aircraft initiatives already in the works, including the various emissions trading schemes already in place around the world.
Regulators and legislators are focusing attention on aviation, perhaps because it is far easier than addressing the really tough issues – the impact of the average homeowner or driver. Despite all the political rhetoric, aviation constitutes only two percent of all global emissions, according to the International Air Transport Association (IATA). Globally, all transportation modes account for 20 percent of Green House Gases (GHGs), according to the European Regions Airline Association (ERA). Of transportation’s contribution to GHGs, road transports – trucks and cars – constitute a full 80 percent to the airlines’ 12 percent while emissions from energy generation for lighting is three times that from aviation at 36 percent.
• Airliners are 70 percent more fuel efficient than 40 years ago. Modern aircraft contribute 3.5 liters per 100 passenger kilometers, similar to a small compact car but at six times the speed.
• Airline CO2 contribution to climate change is 1.5 percent of total EU CO2 emissions. Road transport is 53 percent with commercial and residential fuel burn accounting for 39 percent.
• Aviation carbon monoxide emissions have been reduced by 50 percent in the past 40 years while unburned hydrocarbons and smoke have been cut by 90 percent.
• Fuel efficiency improved 20 percent in just the last decade with five percent being achieved in the last two years alone.
• Research is working on a further 50 percent in fuel saving and an 80 percent reduction in nitrogen oxides by 2020.
The Air Transport Association (ATA) also pointed to its massive fleet turnover in the last decade and cited the industry’s scheduled deliveries over the next three years of more than 500 aircraft which constitutes a $40 billion investment for an improved fleet. Commercial aviation has achieved a 35 percent improvement in fuel efficiency since 2001 alone, said ATA. In fact, absolute fuel consumption of U.S. carriers in 2006 remained five percent below the peak reached in 2000, although airlines carried 12 percent more passengers and 22 percent more cargo.
“The emphasis on aviation is misplaced,” said Nancy Young, who just assumed the newly created post of vice president, environmental affairs for ATA. “We are getting more and more economic output for our carbon emissions. One thing you have to keep in mind is aircraft today meet very stringent emissions standards for both carbon monoxide and nitrogen oxide (NOx) standards as well as smoke and noise standards. This is not to say we have done enough. We have a commitment to continue to push for more fuel efficiencies. But, we can do a better job of managing green house gases than any regulatory structure would yield.”
The International Civil Aviation Organization (ICAO) agrees. “No other industry has matched aviation’s achievements and investments in quieter and cleaner technology,” it said. “While projected emissions from aviation industry growth will take it from its current two percent of global contributions to three percent by 2050, the industry has already committed to a 25 percent improvement in emissions between 2006 and 2020. Indeed, IATA airlines have already committed voluntarily to improving fuel efficiency by 10 percent over the next three years.”
In addition to the money airlines have invested in improved fleets, procedures and research, IATA emphasized airlines are the only transport sector that must pay for its own infrastructure – $42 billion annually. Meanwhile, each rail journey is subsidized between €2.4 and €7.4 while aviation contributes between €4.6 and €8.4 in government revenues. In the U.S., the average tax on a $200 ticket is 26 percent contributing $15 billion to government coffers. Its tax rate is similar to the sin taxes for tobacco and alcohol.
Trading Schemes, Taxes Counterproductive
Despite the controversy already raging, it is clear that nothing is going to happen any time soon. Even so, airlines are justifiably worried given the impact current proposals will have on their bottom lines. An ICAO study of GHGs concluded taxes and charges and emissions trading are counterproductive, because the money spent on such initiatives siphon away funding for research into alternative fuels, air traffic procedural initiatives, fleet re-equipment and applying technologies that further reduce fuel consumption such as composites and winglets.
In fact, ICAO, the organization vested to develop aviation’s response to the Kyoto Protocols, declined to endorse Europe’s proposed Emissions Trading Scheme (ETS) or to recommend its members do so, specifically because of the costs as well as the fact aviation already has more than enough incentive to reign in their emissions and costs on their own.
“Specifically, assuming a hypothetical target of a 25 percent decrease in projected growth of emissions, ICAO found that GHG taxes/charges would cost $47 billion annually on a worldwide-basis,” said the ATA in recent Congressional testimony. “Considering that the U.S. share of global aviation is approximately 34 percent, this would translate to a cost to U.S. carriers of approximately $16 billion annually. ICAO found that targeting absolute emissions would be even more costly. For example, a hypothetical target of a five percent absolute reduction from 1990 levels was estimated to cost approximately $245 billion annually if implemented on a worldwide basis. In light of these considerations, in 2004, ICAO member states agreed to a moratorium on implementation of GHG charges on international aviation.”
Still, Europe is moving ahead with its plan to include aviation in its ETS in 2011 when all intra-European flights would be included with all flights arriving and departing in Europe included the following year. European airlines say that the costs of purchasing allowances for airlines will be substantial, with an 'optimistic' estimate of over €45 billion from 2011 to 2022, or €4 billion additional costs per year.
“This is approximately equivalent per annum to twice the cumulative profit of Europe's airlines over the last decade,” according to a study commissioned by a European aviation group. The group includes AEA (Association of European Airlines), EBAA (European Business Aviation Association), ECA (European Cargo Alliance), ELFAA (European Low Fares Airline Association), ERA (European Regions Airline Association) and IACA (International Air Carrier Association), with the financial support of Airbus, Eurocopter and Safran.
“Aircraft operators’ overall profits will be reduced by over €40 billion during the same period, weakening the financial stability of a number of operators,” said the group’s report done by Ernst & Young and York Aviation. “EU operators will be at a perpetual competitive disadvantage vis-à-vis non-European carriers, regardless of the geographical scope of the scheme. EU aircraft operators will bear emissions-related financial costs for their entire network, whilst only a small part of the operations of non-EU carriers will be affected. Similarly, the proposed inclusion of intra-EU flights only during the first year will have an uneven impact on European operators, depending on the proportion of their network captured and, more importantly, will produce no significant environmental benefit. The complexity and costs of administrating the scheme will be a challenge, particularly if the scheme is applied to small operators, such as business aviation and helicopters, which contribute less than one percent of aviation emissions.”
The study was done to educate legislators and regulators who suggest in their ETS proposal that airlines can pass on its ETS costs to passengers. This flies in the face of commonly understood price elasticity in airline pricing. Indeed, less than a third of costs of the European ETS proposal will be recovered from passengers and shippers, according to the Ernst & Young/York Aviation study.
ERA indicated that the introduction of an airline trading scheme will mean the loss of 42,000 direct jobs. In addition, Europe will be less connected internally. "It will also result in a reduction in consumer choice in terms of range and frequency of service,” it said, quoting the Ernst & Young/York Aviation study on its web site. “We expect that regions and regional airports would be particularly affected. It will also cause a loss of consumer surplus of between €55.9 million and €123.7 million in 2011, growing to between €426.2 million and €2,186.6 million by 2022."
The European aviation industry is calling on the EU Council and Parliament to revisit some of the flawed assumptions of their own impact statement and further urged them to address aviation emissions within the framework of the ICAO.
While Europe focuses on establishing emissions trading schemes (ETS), the U.S. is only now examining what it needs to do. Different proposals are circulating on Capitol Hill. However, they are only in the formative stages, said ATA’s Young, who added, to date, the industry has had nothing specific to analyze.
Europe’s proposed ETS has already launched an international controversy on whether or not international carriers could be forced to comply. Young argues such an action contravenes current international law under the Chicago Convention. The proposals also have European airlines crying foul in the face of its environmental achievements since the 1970s, which go unrecognized in the schemes.
Young expressed concern that any regulatory structure would set an across-the-board target which does not take into consideration either the differences in industries. “To apply the same target means that we are not getting the credit for the progress we’ve made over 40 years,” she said. “Any measures need to be calibrated to take into account the contribution aviation has already made as well as the contribution to the economy. We are obviously watching with intense concern what Congress is doing. In the meantime, we are working with ICAO as they consider what may be done about aviation’s emission of green house gases.”
Clearly, airlines have been one of the few good corporate environmental citizens in the past few decades. While they may want to tout that, their goals were not to altruistic but were aimed at lowering costs through increased fuel efficiency and lowering noise footprints, rather than any lofty, industry-wide effort to save the planet. Still aviation deserves a great deal of credit – literally – for what has been accomplished; something the industry wants everyone to understand before regulatory targets are established.
“If you impose charges or emissions trading, where is the money going to come from to upgrade our fleets,” said Young. “Such schemes actually reward industries who have been less efficient. She explained that their allowances, because of their historical inefficiency compared to the aviation industry, will be much higher than those for aviation. Thus, as they improve, they will be able to sell off excess allowances.” While this could be used to subsidize their modernization, airlines would have no such windfall because it has and is continuing to fund its own progress.
In Europe, the benchmarks are being set so as to ignore decades of industry progress. “Unfortunately, everything achieved doesn’t count for much,” said ERA's Director Infrastructure & Environment Simon McNamara. “The debate started after the developments were made. Until about two or three years ago, the focus was on noise which is now trumped by emissions. The perception is that air transport is still for the elitist few, not a form of public transport. Today the emphasis is on unnecessary flights such as holidays and second homes and does not offset it with the benefits. The trading scheme will increase costs to regionals and lead to the closure of some routes. The likelihood is the people in the regions, who are not on major routes, will suffer. While airlines may not go out of business, it will certainly be a case of restructuring route networks which will be detrimental to regional services. Some even want to put health warnings on air tickets.” McNamara said while it is unlikely that ETS will lead to massive fleet restructuring, it will tip the scales toward turboprops, already used more in Europe than in the U.S. because they are more economical, conserving more fuel and emissions than regional jets.
Young acknowledged just how tough addressing other industries will be. “It is hard to crack the auto industry to some degree because it comes down to the consumer wanting to drive their cars. It is a harder regulatory regime for elected officials to do. Can the average consumer conserve by doing an emissions trading scheme? We are encouraged by Congressional focus on auto fuel efficiency. You must understanding that airlines have an incentive to be fuel efficient and manufacturers have an incentive to help them do it with more efficient aircraft. The auto industry doesn’t pay for the fuel so they have not been thinking about fuel efficiency, relying instead on consumer demand, as much as aircraft manufacturers do. Congressional efforts to increase fuel efficiency are consistent with what we’ve been driving to do anyway. It benefits the consumer and the overall footprint.”
Even so, with 600 million cars worldwide, likely to double to 1.2 billion by 2037, according to forecasts, the impact of 22,000 airliners pales in comparison to what is, and will be, produced by cars. In addition, automobile manufacturers have far more opportunities to address emissions, considering individuals keep cars an average of seven year to the airline industry’s turnover every 20 to 25 years.
The Airline Carbon Footprint
To illustrate just how little aviation’s footprint is, IATA said if all air transport worldwide were grounded, emissions would drop only two percent. In addition, 80 percent of aviation emissions are related to flights over 1,500 km for which there is no alternative transport.
For their part, regional aircraft are as environmentally advanced as any network carrier, according to Regional Airline Association President Roger Cohen. “The practices of major carriers to reduce emissions goes arm in arm with their regional partners,” he said. “You can’t segregate out one from the other. At the same time you can’t stick your head in the sand. We are facing a tsunami of environmental consciousness out there. You can either try to hold it back or embrace the tide. You have to be out in front. The real small operators, such as Commutair and Cape Air, have a minimal footprint.”
In its testimony, ATA indicated that U.S. commercial aviation contributes about two percent of domestic U.S. GHGs compared to power plants which produce about a third of all GHGs. Begging the question of why, with such good statistics, aviation is being picked on, ATA added that cattle and other livestock around the world account for 18 percent of GHG emissions
While aviation is responsible for two percent of GHGs, it contributes eight percent to global GDP, an angle ignored in discussions abroad, said ERA's McNamara. In fact, he said, the biggest difference between U.S. and Europe is the attitude toward air transport. Europe does not see its economic contribution as relevant to its environmental efforts, whereas the US understands the role aviation plays in the economy with some government policies reflecting efforts to safeguard it as much as possible.
ATA recounted its contribution during its testimony saying U.S. commercial aviation is directly or indirectly responsible for 5.8 percent of gross output, 5.0 percent of personal earnings and 8.8 percent of national employment. This equaled $380 billion in earnings, 11.4 million jobs and $1.2 trillion in U.S. output in 2004.
“Placing our economic output side by side with our GHG output, it is clear that we are extremely carbon efficient,” said ATA President James May. “EPA recently observed that ‘[w]hile CO2 emissions from commercial aircraft grew approximately 14.8 percent…from 1990 to 2005, passenger miles traveled increased by 69 percent over the same period.’ In other words, our productivity grew 4.7 times faster than our CO2 emissions from 1990 to 2005. In contrast, freight trucks showed the reverse trend – with GHG emissions growing faster than vehicle miles traveled. Passenger vehicles also have lagged far behind aircraft in efficiency.”
Air Traffic Management to Yield Progress
Airlines want legislators to allow them to focus on accelerating technological advancements and work on potential alternative fuels for aviation as the primary means to address aviation’s greenhouse gas emissions. In addition, IATA is calling on governments, airports and air navigation service providers “to put their full weight behind further infrastructure improvements, which could yield fuel efficiency benefits of up to 12 percent worldwide.” In the U.S. alone, such initiatives would yield a 10 to 15 percent improvement.
Perhaps the biggest gains can come from air traffic management. McNamara said a Eurocontrol study indicated that inefficiencies in air traffic management contribute 10 to 12 percent to fuel burn. With the advent of a Single European Sky, scheduled for completion in 2020, air traffic capacity is expected to double.
U.S. airlines and FAA are already working on procedures that will help. This includes the reduction of vertical separation minima and continuous descent approaches (CDA), as well as implementing ADS-B capabilities. One initiative – required navigation performance (RNP) systems – saves fuel with very precise approach paths. Airlines have already committed hundreds of millions of dollars to retrofit aircraft with equipment necessary to take advantage of RNP.
RAA’s Cohen noted that implementing new, fuel savings procedures is often easier at regionals than major carriers who are less nimble than their regional partners. RAA does not have to staff to devote to environmental issue, preferring to ride on the Air Transport Association coat tails for the heavy lifting since their positions are so similar.
“Implementation of satellite-based navigation technology will improve fuel efficiency and reduce GHG emissions by 10 to 15 percent,” said May, calling on Congress to play its part by funding research programs. “Advancements in aviation technology that will further improve carbon efficiency will come only with reinvigorated investments in basic aeronautics research and development programs at NASA and FAA. The nation as a whole benefits from this research, thus general funds should be used. In addition, we ask Congress to take steps to further provide incentives for the development of infrastructure for the commercial deployment of alternative fuels.”
Without such government-funded research, further gains in airframe and engine technology as well as operational procedures, will only be evolutionary rather than revolutionary, said ATA. “There will be no revolutionary change in the next 10-15 years,” said Young, explaining a lot of R&D funding has been diverted to the space program instead of fundamental aviation research and development. “The only way you will see that is if public/private partnerships between the industry, FAA and NASA continue as well as the partnership between Airbus and the European space and regulatory authorities. Aeronautical research and development programs require government investment which support military and civil applications and the U.S. gets the technological benefits from it.
“We are pushing for the development of alternative fuels as well as the infrastructure to deliver those fuels,” she continued. “We want to stimulate commercially viable environmentally friendly fuels and drive through the technology and innovation to make that happen.” She acknowledged Embraer’s Ipanema saying the combustion technology exists and can be used although is has yet to be made viable at the commercial airline level. She also pointed to South African Airways in which half its fuel is synthetic. She indicated that resulted from fuel shortages and does not provide the same environmental benefit for which the industry is pushing.