Airline Response to Greenhouse Gas Airline Response to Greenhouse Gas EmissionsEmissions

A Crucial Issue in the 21st Century

Northwestern University Department of Aeronautics

May 12, 2009Prepared by:

Donald P. Schenk: dpschenk@aca-assoc.com

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Background Background –– The Green PerspectiveThe Green Perspective

• Aircraft CO2 emissions have increased by 87% since 1990• Rise in aircraft emissions will accompany rise in passengers unless

something is done– 228 million passengers in 2005– 465 million passengers in 2030

• Aviation impact on global warming over 3.5% (high altitude emissions are more harmful than ground based emissions)

• Post “An Inconvenient Truth”, public sees global warming as a grave threat to their children’s future

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The ProblemThe Problem

Aircraft Pollute More Than Any Other Mode of Transportation per Passenger

Aircraft Car Train

191 grams of CO2 143 grams of CO2 43 grams of CO2

Source: Condon & Forsyth

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Airline ManagementAirline Management’’s Perspectives Perspective–– What Problem?What Problem?

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U.S. Airline ResponseU.S. Airline Response

• Noise– Resisted regulation post Stage 3– U.S. led the global effort (ACA participated by estimating the impact on aircraft

values)– Rules tabled based on cost to industry

• Global Warming – try the same approach– Argue global warming is not real– Airlines only contribute 2% of CO2, so anything we do makes no difference– Use international treaties to stonewall changes– Mobilize trade associations to lobby U.S. government

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Problem with Airline Problem with Airline Response to Global WarmingResponse to Global Warming

• Gore’s 2006 “An Inconvenient Truth” changed U.S. public perception of global warning

• Airlines failed to distinguish between public’s perception of noise and global warming– Noise is an annoyance with limited impact– Global warming will kill our grand children

• Today, public perception may be reality– For consumer products, perception is reality– Airlines are doing nothing to positively influence public perception

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The ResultThe Result

• Green advocates hold high ground and define the terms of the debate

• Politicians respond to the public/voters– EU will include aviation in carbon trading– UK doubles airline passenger tax - “green tax”– California passes AB32– EPA declared CO2 (& 5 other heat-trapping gases) pollutants that endanger

public health and welfare• May lead to their regulation for the first time in the U.S.• Impact on alternative fuels uncertain

• Public distrust of airlines grows– Can airlines do anything to change this?– This is more than a PR problem

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Little Known FactsLittle Known Facts

A failure to communicate

• Airlines invest more of their income in green equipment that any other industry

• Aerospace companies invest $ billions annually in new green technology– A380, B787, PW1000G (geared turbofan)

• NextGen air traffic management will reduce fuel burn 10-15%

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Industry Attitude Changed 2007/2008 Industry Attitude Changed 2007/2008

New Initiatives

• Boeing

• Commercial Aviation Alternative Fuels Initiative (CAAFI)

• Aviation Global Deal Group (2009)

• SynFuels Consortium (2007)

• Airlines test biofuels

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BoeingBoeing

Publicizes its corporate response to global warming• Improve manufacturing technology

– Reduced energy use– Recognizes CO2 content in materials (life cycle cost)

• Airline operational efficiency– Advocates for speedy introduction of NextGen– Examines scheduled refueling stops to minimize fuel burn on long haul routes

• Public Policy– Supports sound public policy– Advocates for single global solution– Supports Aviation Working Group Environmental Subcommittee – No support for energy tax

• Develop new technologies to reduce aircraft fuel burn– Composites, winglets, engines

• Develop alternative fuels (bio fuels)

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The Challenge The Challenge

• Not possible to become carbon neutral with new technology and operational improvements

• Use of Biomass to F-T Fuel in addition to operational and technological improvements offer real promise

Source: CAAFI

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Alternative FuelsAlternative Fuels

• Biomass to F-T Fuel almost zero carbon emissions

Source: Heilman, MIT

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CAAFI OverviewCAAFI Overview

Industry group focusing on speeding development of alternative aviation fuel

• Research & Development Panel – Generate ideas• Environmental Panel – Assess impact• Business & Economics Panel – Generate demand & target funding• Certification-Qualification Panel – Enable supply• Sponsors:

– FAA, supporting Environment and Certification-Qualification– ACI, supporting Business & Economics– AIA, supporting R&D (Boeing)– ATA, supporting Business & Economics (US Airways)

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CAAFI AchievementsCAAFI Achievements

• Gained active involvement from all affected stakeholders• Engine manufacturers support testing results from American society of

Testing Materials• Aligned aviation interests with agricultural interests

– USDA now provides grants, loans and guarantees• Obtained USAF commitment to buy alternative fuel in 2010• Facilitated user support

– U.S. airlines– USAF

• Increased U.S. government support– May 5, Presidential memo– FAA, USDA, DOE, DOD

• Tentative consensus on life cycle analysis• Agreement to avoid food stock

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ProgressProgress

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Aviation Global Deal Group

• Air France/KLM, British Airways, Cathay Pacific, Finnair, Qatar, Virgin Atlantic

• Support’s ICAO Group on International Aviation and Climate Change (GIACC) for developing global sector approach to emission reduction

• Backs global airline emissions cap

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Global Warming Options• Internalize externalities

– Problem is identifying and costing externalities• Global energy tax

– Effective where used in automobiles– Unacceptable in U.S.

• Global Cap and Trade CO2 emissions– Hybrid of internalizing externalities and taxation– Marginal impact on cost of travel and behavior

• Improve operational efficiency– Inexpensive compared to new equipment

• Support development and introduction of fuel efficient aircraft– Muddle suggests removing aircraft before new aircraft can be delivered

• Develop bio-fuels– Can achieve zero carbon growth – Long term

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What Role Will Oil Price Play?• Are global warming solutions and fuel prices related, and how?• What are oil prices likely to do over time?• History of fuel prices• Our economic future• Break even price for alternative fuels

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Oil Price History

World Oil Consumption

Oil

Pric

e

Source: New York Times, Nov 9, 2007

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Economic Future & Energy NeedsIncreasing role of China and India

• Demand– Fuel for automobiles– Electricity generation– Industry power sources– Hydrocarbon for industrial products

• Supply– Has oil production peaked?

• U.S. Dollar Price of oil– Future value of US$ will surely fall

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Behavior of Informed Investors

• Oil company investments in upstream capex down $170 billion to $400 billion (IAE)

• Oil sand development in Canada down. Breakeven $50-$60 per barrel

• China buying up oil reserves and investing in new oil fields

• Global usage will fall 3% in 2009 (IAE estimate)

• Futures prices (5/20/2009)– 5 year ~ $75/bl– 9 year ~ $80/bl

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Oil Price /Biofuel Viability

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The EnvironmentThe EnvironmentIs In Your HandsIs In Your Hands