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Sustainable AviationDr. Michael W. Tretheway

InterVISTAS Consulting Inc.

Canadian Airline Investment 2007 8 June 2007

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The Emerging Importance of GHGE

"Making selfish choices such as flying on holiday or buying a large car are a symptom of sin.”– "Sin is not just a restricted list of moral mistakes. It is

living a life turned in on itself where people ignore the consequences of their actions."

» Richard ChartresBishop of London

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Impacts

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Aviation Share

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Historic EU GHG Emissions

EU GHGE grew by 87% (1990 - 2004)

Emissions from other sectors declined.

Source: Commission of the European Communities, Summary of the Impact Assessment: Inclusion of Aviation in the EU Greenhouse Gas Emissions Trading Scheme (EU ETS), December 2006.

Development of EU-25 international aviation GHG emissions

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Measuring GHGE of Aviation

Various figures exist, ranging from 1.5% to 8%CO2 is not the only GHGNOX is a particular problem for aviation– higher engine temperature improves efficiency– but at a penalty in terms of higher NOX– NOX counts at 310 times CO2

Aviation has a higher ‘radiation forcing’than CO2 alone would suggest

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Aviation Made Major Improvements

Aircraft today are 70% more efficient than original jetsFuel economy better than family car– AirNZ: 3.5 litres per 100km (pax kilometres)

Aviation: – 8% of world economy– 2% of emissions

787 / A350 will improve 20%– 3.0 litres/ 100 RPK

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But Some Don’t Buy the Good News

The comparison to 3.5 litres assumes car has one occupant

Aviation based travel is longer distance

CE-Delft found, that after adjustments– long haul air travel uses 50% more fuel than family car– short haul air 300% worse than car

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Europe Will Drive the GHGE Agenda

The Challenge– Aviation is reducing emissions per passenger-

kilometre at 2% per year, and this may increase to 3%• new technology in engines and airframes• increased load factors• less use of hubs• more direct flight paths

– But aviation is growing at 5% per year– Thus the total GHGEs of aviation will increase,

even with major reductions in emissions per pax

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European Emissions Trading System

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Europe Will Drive the GHGE Agenda

The European Commission has a draft regulation which will impose carbon limits on aviation– Aviation was excluded from Kyoto– The EC draft is less onerous to the industry

than if Kyoto applied to the aviation– European carriers are not debating whether

GHGE limits will apply to aviation– The only issue is when and how

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Inclusion of Aviation in the European Emissions Trading System

December 2006 proposal adopted – to include carbon dioxide (CO2) emissions from civil

aviation into the EU Emissions Trading SchemeIntroduction in two phases:– Phase I (2011) – all intra-EU flights– Phase II (2012) – all international flights to/from EU

airports

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Inclusion of Aviation in the ETS

An Impact Assessment of the Emissions Trading System concluded that:– Costs for airlines will likely increase– The impact on profitability is expected to be marginal

• as costs are expected to be passed on to consumers

– Ticket prices are not expected to rise significantly, even in costs are passed on

• €2 to €9 return intra-EU • €8 to €40 return London-NY

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Inclusion of Aviation in the ETS

An Impact Assessment of the Emissions Trading System concluded that:– The study expects higher prices to only have a small

effect on traffic levels• paradoxical, as goal of many is to reduce travel• this outcome is unlikely

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Inclusion of Aviation in the ETS

Total number of allowances to be based on average emissions level for 2004-2006Individual airlines to receive tradable CO2 allowances per year based on historic traffic share:– Able to purchase extra allowances

if emissions increase– Able to sell surplus allowances if emissions decrease

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Offsets vs Reductions

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Offsets versus Reductions

The challenge:– Even with excellent reduction of aviation GHGE/pax– Aviation GHGE will grow due to 5% annual growth

EC is proposing that aviation purchase carbon offsets to compensate for the gap

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Offsets versus Reductions

But many feel that offsets are not a solution Research by Joe Kelly (InterVISTAS) and others, indicate that travellers are willing to purchase offsets– to many, travel is a right and is highly desirable– “I will offset my travel impact by reductions elsewhere

in my lifestyle”

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Behavioural Assessment of Carbon Offsets

“Destination Carbon Offsetting: A Behavioural Assessment”– Dr. Joe Kelly, Peter Williams, Wolfgang Haider

Assessed willingness of tourism travellers to participate in tourist funded carbon offsetting program– Site: Whistler BC resort

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Key Results

45% would participate

Willingness to pay– local visitor: $9– regional (800km) $20– transcon $17– overseas $10

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Key Results

Participation more likely for– larger party sizes– overnight visitor (vs day trip)– higher education– those motivated to travel for social, cultural or

environmental purposesLess likely for luxury seeking tourists

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Key Results

Reasons for non-participation– 39%: costs too high– 36%: concerned that funds would not be used

effectively– 23%: offset projects might not be effective– 6%: offsets not needed– 2%: payment should be mandatory for all,

not voluntary

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Some Key Lessons

High willingness to volunteer to purchase offsetmust address scepticism on – use of funds– effectiveness of projects

very limited awareness of opportunities to purchase carbon offsets

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Offset Examples

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Click here to book WestJet,

and receive full carbon

offset

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Opportunities to Reduce Emissions

Free flight– expected to reduce GHG in Europe by 12%

Eliminate noise abatementPoint to point service– potential to reduce GHG by 25%– direct services from secondary markets such as YWG

are part of the green solutionNew aircraft– Next generation (737 replacement)

may offer even greater improvement

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Opportunities to Reduce Emissions

Increased load factors?– can be get beyond 80%?

Reduced non-revenue Flights?Add on technology (5-8%?)– e.g., winglets

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Concluding Comments

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Economics

Carbon offsets will raise price of travelTravel has high elasticityThus a disproportionately high impactTourism and other travel dependent sectors will experience large negative impacts

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Combine technology, offsets, economics

Technology may cover 2-3% of growth– perhaps higher for next generation aircraft

Offsets are appropriate solutionVoluntary offsets will mitigate negative economic impacts– most price sensitive will not volunteer

Voluntary offsets by modest number of travellers can fully close the gap

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The Next Generation Aircraft

737/A320 replacement– likely in 2013-2020 period– largest portion of global fleet– likely a major step beyond newest technology

• Each 797/A390 will carry 7.5 million pax over its life

– Saving half of a $10 emission charge:• $38 million life cycle savings per aircraft• $13 billion for a fleet of 350 aircraft

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The Next Generation Aircraft

737: 6,000 orderedA320: 5,000 orderedA design that reduces emissions by half (from present levels) would have a $400 billion life cycle advantage to the manufacturerWe should not underestimate the ability of the industry to rise to the challenge

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Thank You

www.InterVISTAS.com