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Airlines and Cap-and-Trade


Airlines and Cap-and-Trade  

Tom Markowitz - Friday, July 29, 2011

Welcome to Enerhope

Airlines and Cap-and-Trade

© Enerhope.com 2011

August 1st, 2011

Since 2003, the European Union (EU) has been planning to require airlines using European airports to participate in EU emissions trading (ET) for greenhouse gases (GHGs).
From the start of 2012, emissions from all domestic and international flights that arrive at or depart from an EU airport will be covered by the EU ET System. The operator of any flight of a large or medium-sized airliner using any airport within the EU must report the airline’s total annual GHG emissions for all flights taking-off or landing at any EU airport, and must retire one EU-approved allowance or offset for each tonne of CO2e emitted during the year.
This requirement to participate in ET applies to flights within the EU and also to international flights to and from EU airports, e.g. from Mumbai to London.

A good starting point for exploring the EU aviation ET scheme is the EU’s own Questions and Answers document,

The 2008 Directive of the European Parliament that established the GHG ET system for airlines can be read at:
The EU intends to create 212.9 megatonnes of EU GHG aviation ET allowances in 2012. This number represents 97% of the average annual emissions by the airlines in EU service between 2004 and 2006. From 2013 onwards, the total will be reduced to 208.5 megatonnes.

Allowance Allocation
In 2012, 85% of the CO2e allowances will be allocated for free to participating aircraft operators, and 15% will be allocated by auctioning.
The free allowances will be allocated according to a benchmarking process which measured the activity of each operator in 2010 in terms of the number of passengers and freight that it carried, and the total distance travelled. The 2012 benchmarks for all 4,000 operators should be published by September 30th, 2011.

Airlines and GHG Emissions
Why did the EU decide to include airlines in its ET system for GHGs?

Airline emissions are a small but fast-growing fraction of total EU GHG emissions.

Between 1990 and 2003, the EU's total GHG emissions from all sectors fell by 5.5%. However, during the same period, CO2 emissions alone from the international aviation of the 25 Member States of the EU increased by 73%

GHG emissions by the airlines targeted by the EU ET scheme represent about 4% of the EU’s total 2008 GHG emissions total.


The EU estimates that airline GHG emissions per passenger, flying from Brussels to New York and return in economy class, are in the order of 800 kg of CO2.

The inclusion of airline emissions in the EU ET system is necessary to reduce total airline emissions, despite increasing numbers of flights and passengers.

International Airline Reaction
The imminent start of the EU airlines ET system has produced furious opposition from international airlines, but some acceptance by IATA, the International Air Transport Association.

On July 5th, the Air Transport Association of America, American Airlines, and United Continental first appeared before the European Court of Justice, seeking an exemption from the EU ET scheme for US airlines flying in and out of Europe.

In the court case, ATA and the U.S. airlines claim that Europe's ET scheme violates international law.

As reported in the New York Times on July 5th, the Convention on International Civil Aviation or "Chicago Convention," states that countries have authority over airlines in their own airspace. Therefore, the ETS can't regulate flights to and from Europe when they're not over Europe, the U.S. airlines argue.

China Daily reported on June 8th that Chinese airlines felt "angry" about the EU's plan that all airlines flying to its member states be included in its ET scheme. The report hinted at the possibility of trade repercussions in China’s major purchase of European Airbus airliners.

On July 28th, Will Nichols of Business Green reported, “US politicians have stepped up their sabre-rattling over the EU's plans to include aviation in its emissions trading scheme, declaring unequivocally that US airlines will not participate.

“The bi-partisan Congressional Transportation Committee introduced a bill last week that would legally prevent US carriers from taking part in the cap-and-trade scheme, which will charge all airlines per tonne of CO2 for all flights in and out of the EU from next year.”


Airline opposition to the EU ET scheme is somewhat compromised. According to Reuters (July 1st), IATA approved in 2007 the concept of an emissions trading scheme for EU aviation greenhouse gases. However, IATA now objects to the imposition of the ET system on foreign carriers, flying in and out of Europe.

Effect on Ticket Prices
Let’s calculate the effect of the EU ET scheme on the ticket price for a passenger flying in 2012 from Brussels to New York and return, economy class. According to the EU (cited above), the carbon footprint of this passenger’s journey would be 800 kg of CO2. At the end of the year, the airline would be required to report the 800 kg emission from this passenger’s round-trip flight. Then, the airline would be required to retire 800 kg of EU-approved allowances or offsets. If the airline’s emissions and efficiency were the same in 2012 as in the baseline year, the EU would already have allocated to the airline 85% of its allowances for free, and the airline would need to purchase the additional 15% of its allowances on the allowance market, at current prices of about 15 € per tonne of CO2e allowances. The total emissions trading cost to the airline of this passenger’s round-trip flight would be:

0.15 x 800/1000 x 15 = 1.8 €

This cost would increase to 12 €, if the free-allocation of allowances were replaced by allocation by auction (assuming an allowance price of 15 € per tonne).

Keep in mind that the purpose of the EU ET system is to pressure emitters (like airlines) to reduce their emissions, not to place all their faith in purchase of additional allowances and offsets.

Can Airlines Reduce their Emissions?
Yes, they can, and have done so for decades!

In the past five decades, airline fuel efficiency has improved enormously. Since 1958, aircraft fuel efficiency per seat-mile has improved by 82%, according to the Beginner’s Guide to Aviation Efficiency,


The Wall Street Journal published, on August 12th, 2010, a summary of the fuel efficiency of US airlines. The major US airline with the best fuel efficiency was Alaska Airlines (75.9 seat-miles per gallon) (new aircraft, short distances, uncluttered flight paths). The major US airline with the worst fuel efficiency was Delta Airlines (60.4 seat-miles per gallon) (older aircraft, long trans-ocean flights, congested airports).

Boeing claims that a 737-900, with 180 passengers, flying 1,000 air miles, will produce a fuel economy of almost 99 air miles per gallon per passenger.

At this rate of fuel consumption, the carbon footprint for each passenger in the Boeing 737-900 on this 1,000 mile journey would be 100 kg CO2.

According to the Beginner’s Guide to Aviation Efficiency, cited above, airlines will become more and more fuel efficient, through a combination of new technology, improved operational practices, infrastructure improvements, and, yes, positive economic measures. The increasing price of fuel provides a powerful economic incentive for greater efficiency.

Several positive developments in airline efficiency:
• More efficient engines
• Lighter weight airframes
• Higher occupancy rates
• Improved air traffic control
• More efficient on-the-ground practices
• Biofuels for aviation

At the same time, some airlines are wasting fuel and creating unnecessary emissions through practices that should be stopped. Enerhope’s “Golden Wings of Lead” trophy goes to Emirates Airways for equipping each A380 with not one but two showers for first-class passengers.
This must stop!


Marble counter tops, on an airliner?

Is this really necessary on an airliner? Think of the wasted weight, fuel, and emissions! Couldn’t the first class passengers use the showers at the airport? Why not remove the showers, reduce weight, add more seats, and present each first class passenger at the beginning of the flight with a box of baby wipes and a plastic bag, in a really fancy package?

Showers on an airliner is a good example of a wasteful practice that could be eliminated because of the pressure exerted by emissions trading. In the next few years, Emirates Airways will need to decide whether to eliminate the showers, or make reductions elsewhere, or buy additional allowances, at increasing prices, for retirement. Notice that emissions trading gives the airline many options for its operations, while the overall goal of emission reductions will be achieved.

A Good Policy?
The EU ET system for GHG emissions by airlines passes four of the five criteria of good policy.

The new EU aviation ET system:
must achieve its objective.
A well-designed, well-administered ET system for airlines can achieve significant emission reductions at minimum cost to the economy.
must send a clear message.
The new ET system will send a clear message to the airlines and passengers to reduce their emissions.
must not hurt vulnerable people.
Costs can be minimized through intelligent emission reductions. Vulnerable people will not be hurt by the new system.
must be easy to administer.
Airline flights and fuel use are already centralized and recorded at government-owned airports.
must be compatible with existing jurisdictions, laws and regulations.
The new EU ET system for airlines fails on this criterion.

The right of the EU to demand retirement of allowances for airline emissions outside EU airspace is being challenged before the European Court of Justice.

The Need for Large-Scale Policies and Planning

The EU should not depend solely on ET to reduce emissions from air travel.

In the EU ET system, airlines may find that the restrictive environment of the highly-regulated airline industry prevents individual airlines from implementing the innovative emission reduction measures favoured by ET systems.

e.g. What would happen if a certain airline decided to reduce its fuel consumption by towing each flight from the terminal building to the runway, behind a vehicle? Fuel savings and emission reductions would be significant, because being towed behind a vehicle is more energy-efficient than taxiing along the tarmac.

Would the airport allow that airline to tow each flight from the terminal building to the runway? The towing would be a change from established procedures for all airliners at that airport. In the restrictive airport environment of regulations, codes and standard practices, the airport may forbid the airline from towing its aircraft.

Thus, an airline which attempts to implement an innovative technology or activity to reduce its emissions may be blocked by regulations or codes or standard practices. Major improvements, e.g. replacing the old, radar-based air traffic control system with a new, satellite navigation-based system, cannot be implemented by one airline alone, and must be implemented across all airlines and all nations at the same time. The EU authorities must realize that broad-based policies including codes and standards, command and control are still necessary to reduce airline emissions.

The EU must examine all modes of transportation, when attempting to reduce airline emissions. A policy to promote high-speed rail travel for short and medium distances would achieve much greater emission reductions than an emissions trading system for airlines.

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