Even before the United Nations summoned the world to Kyoto in Japan three years ago for its landmark summit on climate change, the aviation industry was under notice that it would have to tackle the issue of engine emissions.
The Kyoto Protocol which emerged from that meeting has raised the temperature. As the International Civil Aviation Organisation (ICAO) comes under pressure to show results, it seems that market-based, rather than technical solutions, are being seen as the answer.
Kyoto broadly calls for all industrialised economies to reduce greenhouse gas emissions by an average of 5-6% by 2008-12, but the exact targets vary by country and the treaty has yet to be fully ratified around the world.
The international nature of the airline industry adds another complication when it comes to working out who is responsible for making reductions across national boundaries. With a US-built, German-operated aircraft flying between Singapore and Australia, carrying mostly Japanese passengers, things get complex.
Each Kyoto signatory also committed to compile national inventories of their emission sources. Domestic flights are considered to be part of the relevant country's inventory. However, the problem of how to allocate emissions from international flights to national inventories has yet to be agreed.
As a result, the movement towards agreement has been painfully slow. In contrast, air traffic continues to grow at a rate of around 5%a year, warns the International Panel on Climate Change (IPCC).
Rapid increase
The incredible pace of this increase means that it is unlikely that technological improvements alone can reduce the total amount of emissions from aircraft. The Association of European Airlines (AEA) warns that "a fuel reduction of 1.1% per annum during the 22 years of the Kyoto period [1990-2012] already requires extra efforts and investment, well beyond any business-as-usual fleet renewal". The IPCC estimates that total aviation fuel use will increase by 3% a year between 1990 and 2015 - presuming unconstrained growth.
It is not that nothing is being done on the technical side. For example, the European Integrated Aeronautics Programme, which is part of the European Commission's latest research and technology effort, aims to develop technology that will lead to a 15-20% reduction in carbon dioxide (CO2) emissions by 2015.
However, as it takes time for technical improvements to feed through into airline fleets, the AEA warns: "The next generation of technology will be unlikely to make a significant impact within the Kyoto timeframe."
At Kyoto, ICAO was given the role of providing a framework for Annex I (ie ,industrialised) countries to "pursue limitation or reduction of greenhouse gases from aviation bunker fuels".
ICAO asked the IPCC to prepare a special report looking at aviation and the global atmosphere to provide a basis from which to work. The IPCC estimated that aircraft are responsible for 3.5%of total radiative forcing (ie, global warming) of all human activity on the planet.
CAEP hopes
Using the IPCC report as its basis, ICAO's Committee on Aviation Environmental Protection (CAEP) has a series of working groups tackling environmental issues. One of these groups, which met at the end of March, is looking into the market-based options, including emission-related levies, emissions trading and voluntary agreements. Given how unlikely it is that enough technical advances will be made within the Kyoto timeframe, market-based solutions are seen by many as the most suitable way forward for the airline industry.
Although the IPCC report covered a number of different types of emissions, ICAO has decided to focus on CO2 at this stage because including other types of emission was seen as too complicated. For example, there is uncertainty about the effect of nitrogen oxides (NOx) at cruise altitudes, as they have both warming and cooling effects. There are also trade-offs between reduction of NOx and fuel efficiency, and between the noise and NOx generated by an aircraft on departure. The possibility of including other types of emission at a later date has been left open.
ICAO is initially concentrating on two targets for emission reductions. The first reflects the first commitment period for Kyoto, which is around 5% below a baseline year of 1990 by 2008-12. The second target is rather more complex, but reflects a target of roughly half the projected aviation growth rate in that period.
ICAO is also looking at two different geographical scenarios. One would involve a worldwide implementation, and the other would be restricted to the developed world. On this basis, ICAO is looking at three main areas - emission-related levies, emissions trading and voluntary agreements.
Work on this is in progress, but whether the originally agreed timescale can be met is open to question. Under Appendix F of Resolution A-32-8 of ICAO, the council, through CAEP, is requested to "study policy options to limit or reduce the greenhouse gas emissions from civil aviation, taking into account the findings of the IPCC special report and the requirements of the Kyoto Protocol, and to report to the next ordinary session of the assembly." This would be the 33rd Assembly pencilled in for autumn 2001.
Before then, CAEP/5 is due to meet at the start of next year to formulate its position for the next assembly. There is a feeling among many of those involved that this timescale is going to be exceedingly tight.
On the question of an emission levy, although the airline industry is generally suspicious of any form of charge, there is a definite preference for a form of emission-based charge rather than a tax. This is reflected through ICAO, which prefers the former rather than the latter.
The main voice for a form of taxation comes from Brussels - though not necessarily from the Transport Directorate. In a communication last year, Transport said a kerosene tax which applied only to European Union (EU)carriers would put them at a great disadvantage, deciding that "any effective approach would necessitate a system that allows for taxing/charging all carriers operating out of Community airports."
This would seem to rule out an intra-EU tax, and the Transport also seems to have doubts about an internationally agreed tax, noting it "would require fundamental changes to existing policies at ICAO-level and, in particular to existing bilateral air service agreements".
Excise duties
The Transport Directorate's position is to fall back on a November 1996 report which said excise duties should be extended to aviation "as soon as the international legal situation allows the EU to levy such a tax on all carriers, including those from third countries." Some see this as putting the idea on the back burner.
However, last month's council meeting of Ecofin - made up of EU finance ministers - recommended the establishment of a framework for member states to levy tax on aviation fuel used on domestic flights, or by bilateral agreement on intra-EU flights. Ecofin also called for member states to "intensify their collaboration within the ICAO framework on the introduction of taxation on aviation fuel".
The Permanent Representatives Committee and the Working Party on Tax Questions are now examining the issue and will submit their conclusions to the forthcoming Ecofin council meeting. Many in the industry see this as the financial ministers muscling in on transport territory and some member states are lukewarm about the idea.
ICAO options
CAEP, meanwhile, has been studying four possible levy systems - fuel, ticket, route and an airport levy. Preliminary studies suggest that a route or fuel levy would be most effective for addressing global problems, while an airport levy would be most suitable for reducing local emission problems. "However, many practical problems need to be addressed and consequently much further work needs to be undertaken before any firm policy conclusions can be reached," ICAO states.
Emissions trading is a relatively untried science, but one which has generated much interest in the aviation world. This involves different industries being given permits based on greenhouse gas emissions which can then be traded. For example, an industry which was struggling to meet its Kyoto targets could purchase permits from an industry which was finding it easier, so making up any shortfall.
CAEP is looking at either a closed system - one which operates within the airline industry - or an open one across all sectors. John Crayston, co-ordinator of air transport and environment programmes at ICAO, says "some industries will find it much easier than others to meet the targets," adding that as there are likely to be a number of industries more able than aviation to reduce emissions, an open system may turn out to be the best option for the airline industry. However, this would be reliant on other industries also establishing emission trading systems.
Like emissions trading, the idea of voluntary agreement is at an early stage. CAEP is trying to establish a template for such a system. "The question here is: could we design a model that industrial countries and the airline industry could use?" Crayston asks.
There are a number of industry bodies, such as the AEA, promoting the idea of voluntary agreement as the best way forward. ICAO is aiming for a reduction measured in CO2 per unit of traffic, with various options depending on the parties involved and the reductions sought.
However, Leonie Dobbie, director, environment, at the International Air Transport Association, which is involved in the CAEP talks, says: "The targets are very much up in the air at the moment," adding that "unrealistic" figures are being filtered out.
Hybrid options
CAEP is also considering hybrid options drawing on elements of all three methods under consideration (levies, emissions trading and voluntary agreements).
Getting detailed policy proposals on these ideas is some way off and the target for some form of agreement at next year's ICAO assembly is looking ambitious. If this proves to be the case, the first Kyoto target date of 2008 is also in danger of slipping.
Market-based options for emission reduction under study by ICAO
Emission-related levies
a fuel tax, with revenue used by government to offset other taxes. a revenue neutral charge based on aircraft efficiency, with higher charges on less fuel-efficient aircraft offset by lower charges on more fuel efficient ones. an en route emissions charge, with revenues recycled to the aviation sector (for environment enhancing purposes, such as support for early retirement of aircraft). an en route emissions tax, with revenues being used to offset other taxesEmissions trading
an open system, in which emissions from all aviation sectors (domestic and international) are treated identically to other emissions, and trading may take place between the aviation sectors and other sectors a closed system, in which international aviation emissions may only be traded within the aviation sector, with a fixed cap. This would leave domestic emissions subject to national emissions trading rules. International emissions would be ring fenced and treated separately an en route emissions tax, with revenues being used to offset other taxesVoluntary agreements
agreement between industry (airlines and aircraft manufacturers) and authorities (individual governments, groups of governments or international organisations).They would aim for a specific target for reducing emissions, measured in grams of CO2 per unit of traffic. hybrid option drawing from elements from each of the three elements under consideration (levies, trading and voluntary agreements)Source: Airline Business
