Emissions trading for international aviation—an estimation of the economic impact on selected European airlines

International aviation is responsible for between 2.5% and 3% of anthropogenic carbon dioxide (CO₂) emissions that are partly held responsible for climate change. International aviation is not subject to any regulatory framework for the limitation of these emissions. From an economic point of view, the introduction of an emissions trading scheme would be an appropriate instrument to limit these emissions. This paper outlines the possibilities on how aviation could be included in existing emissions trading schemes and gives an overview on the current political discussion. It continues with an empirical estimation of the impacts on operating costs and transport demand for low cost, full service, holiday and regional airlines taking Ryanair, Lufthansa, Condor and Air Dolomiti as examples, under three different design options for an emissions trading scheme. Finally, conclusions about the impacts on intra-European and worldwide airline competition are drawn.     

Including aviation emissions in the EU ETS: Much ado about nothing? A review

The European Community, motivated by the rapid growth of the aviation industry and related impacts on climate change, has decided to include aviation in the European Emissions Trading Scheme (EU ETS). Mitigation policies such as the EU ETS are considered to be necessary in order to change travel behaviour and induce operational and technological changes in the aviation industry that will result in lower environmental impacts. This paper reviews the available impact assessments of the proposed emissions trading scheme for airlines published between 2005 and 2009. It analyses the methods used and finds that the models used are often over-simplified, omitting important variables or that the reliability and robustness of the modelling results are reduced by linking models that are based on different assumptions. The paper also summarises the possible environmental (CO₂ emissions) and economic (air fares, demand for airline services, supply of airline services, competitiveness, GDP, carbon price) impacts in the studies reviewed for the year 2020. Overall, the effects are found to be small: for example, CO₂ emissions are expected to decline by a maximum of 3.8% and the maximum impact on GDP in the EU was found to be ?0.002%. The reasons for these insignificant impacts are analysed in this paper; it is also found that there are some positive aspects of including aviation in the EU ETS.     

Aviation and the environment in the context of the EU–US Open Skies agreement

We examine the impacts of the EU–US Open Skies agreement on the environment on emissions from the aviation sector. We use the Hamburg Tourism Model of domestic and international tourist numbers and flows, to estimate these impacts. The Open Aviation Area will result in increased competition between carriers and falls in the cost of transatlantic flights. This will not only have implications for the size and structure of the industry but also for climate policy. The paper assesses what effects the expected increases in passenger numbers will have on CO₂ emissions and tests whether this increase in travel will result in a corresponding rise in emissions. Simulations show that passenger numbers arriving from the US to the EU will increase by between 1% and 14% depending on the magnitude of the price reductions because of substitution between destinations, the percentage increase in global emissions is much smaller (max. 1%) than the increase in cross-Atlantic traffic.     

Incentive-based regulation of CO2 emissions from international aviation

We explore the possibilities of using incentive-based environmental regulations of CO₂ emissions from international civil aviation. In theory incentive-based instruments such as an emission charge or a tradable emission permit system are better regulations than so-called command-and-control regulations such as emission limits or technology standards. However, the implementation of these instruments is a complex issue. We therefore describe and discuss how an emission charge and a tradable emission permit system for international aviation should be designed in order to improve efficiency. We also compare these two types of regulations. In brief, we find that an emission charge and a tradable emission permit system in which the permits are auctioned have more or less the same characteristics. The main advantage of a tradable emission permit system is that the effect, in terms of emission reductions, is known. On the other hand, we show that under uncertainty an emission charge is preferred. The choice of regulation is a political decision and it does not seem likely that an environmental charge or a tradable emission permit system would be implemented without consideration of the costs of the regulation. Revenue-neutral charges or gratis distribution of permits would, for this reason, be realistic choices of regulations. However, such actions are likely to result in less stringent regulations and other negative welfare effects.     

Integrated airline productivity performance evaluation with CO2 emissions and flight delays

This paper evaluates the airline productivity change by applying a modified global Malmquist productivity index (GMPI) model, incorporating both CO₂ emissions and flight delays. Statistical inference is also performed on the GMPI results using the bootstrapping method. Empirical research was conducted on 15 international airlines during 2011-2017. The obtained results showed that the productivity of all airlines had been fluctuating and experienced a slight increase over 2011–2017. Most of these 15 airlines made more progress in managing punctuality than CO₂ emissions. High punctuality policy may not be the best choice for all airlines when considering financial constraints, while airlines in more liberalized aviation markets are more likely to improve productivity by reducing flight delays. Efficiency change and technological change were the major driving factors for the growth of airline productivity. European and US airlines benefitted more from superior technology, while most Asian and Oceanian airlines still benefitted from the advantage of efficiency. Based on the findings, specific management advice was given.     

The potential for European aviation CO2 emissions reduction through the use of larger jet aircraft

There is increasing pressure to reduce global CO₂ emissions, with aviation targeted as an industry with high future expected growth and limited potential for reduced emissions. In Europe, air transport is likely to be included in the Emissions Trading Scheme from 2012, allowing open trading with other sectors. The proposed scheme may be economically efficient but will it do much towards curbing aviation emissions? A number of papers have looked at the ETS impact on air traffic growth rates, and others have forecast the rate of likely future fuel efficiency gains. This paper examines the potential for greater fuel efficiency through the use of larger aircraft and different patterns of operation. Fuel efficiency was found to be related to aircraft size with more benefit from trading up with short/medium-haul than with long-haul aircraft. This relationship only held for long-haul aircraft if those aircraft with two main decks were removed from the sample (these types showing inherently lower fuel efficiency). Combining these findings with manufacturers' and other forecasts of average aircraft size suggests that less than 1% a year of fuel efficiency gains will be available from this source over the next 20 years.     

Including aviation in the European emissions trading scheme: Impacts on the industry,CO2 emissions and macroeconomic activity in the EU

In July 2008, motivated by the expected high growth of aviation and the related impacts on climate change, the European Parliament adopted a directive to include airlines in the European Emissions Trading Scheme. This paper discusses possible impacts of this inclusion on the aviation industry in terms of CO₂ emissions and the macroeconomic activity in the EU. The analysis uses the Energy–Environment–Economy Model for Europe, a dynamic simulation model to investigate impacts of the European Emissions Trading Scheme on air transport. The impacts on air transport output and the macroeconomic effects are estimated to be small. This was robust to varying the carbon price. However, air transport CO₂ emissions were expected to decrease by up to 7.4%, which is more than that estimated previously and stems mainly from the supply-side reaction of the industry.     

CO2 emissions associated with hubbing activities in air transport: an international comparison

Hubbing is an important operational practice in air transport. Many studies have been conducted to examine the benefits and impacts of hubbing from an economic perspective. However, its impact on CO₂ emissions, especially across different air spaces, is not well understood. This paper explores the impact of hubbing activities in air transport from an environmental perspective. With a detailed methodology and data from the Greek and Hong Kong/Sanya flight information regions (FIRs), three levels of CO₂ emissions are estimated: airport-based, airspace-based and flight-based. After contrasting the CO₂ emission efficiencies of Athens International Airport (AIA) and the Hong Kong International Airport (HKIA), aircraft type and flight distance are examined to explain their emission efficiency differences. It is found that HKIA is associated with poorer CO₂ emission efficiency at the airport and airspace levels because of the larger aircraft and longer flight distance. However, when CO₂ emission efficiency at the flight level is considered, HKIA, with a higher passenger load factor, performs better. Major international hub airports should implement additional environmental measures to minimize the impact of hubbing activities on CO₂ emissions at the airport and airspace levels.     

Policy clash: Can projected aviation growth be reconciled with the UK Government's 60% carbon-reduction target?

In 2004, the UK's aviation industry emitted an estimated 9.8 MtC; a figure that, without direct intervention, is projected to rise to 16–21 MtC by 2030 according to the UK Government. As the UK's 60% carbon-reduction target approaches, so aviation is likely to become a dominant carbon-emitting sector. This paper calculates the proportion of carbon emissions resulting from the Government's projected aviation growth in relation to a contracting carbon budget. It concludes that the Government must urgently address today's very high levels of growth in emissions within the industry, and ensure future growth can be reconciled with the Government's own carbon targets.     

An analysis of the greenhouse gas emissions profile of airlines flying the Australian international market

International commercial flights (with the exception of flights between countries in European Union including Iceland, Norway and Liechtenstein) are currently not subject to greenhouse gas emission reduction regulation. To formulate effective and efficiency policy to manage greenhouse gas emissions from air transport, policy makers need to determine the emissions profiles of all airlines currently flying into their country or region. In this paper, we use 2012 data on airlines' aircraft characteristics, passenger load and cargo load (obtained from statistics reported by Australian Government Bureau of Infrastructure, Transport and Regional Economics) to estimate the volume and carbon efficiency on each international route flying to and from Australia. This is the first study to use actual passenger and cargo load data to determine the greenhouse gas (specifically CO₂) efficiency of airlines operating in the Australian international aviation market. Airlines' CO₂ emission profile is dependent on many factors including but not limited to the aircraft used, payload, route taken, weather conditions. Our results reveal that the airlines’ CO₂ emission profile is not only dependent on the aircraft used and the number of passengers but also the amount of cargo on each flight.     

Using GIS tools to estimate CO2 emissions related to the accessibility of large retail stores in the Oulu region, Finland

Everyday traffic accounts for a significant share of overall greenhouse gas emissions, in particular carbon dioxide (CO₂). While several solutions have been proposed for decreasing the emissions, a new kind of land use planning is required in order to achieve long-term effects. This study focuses on the effect of large retail store locations in the urban structure on overall CO₂ emissions, by using the Oulu region, Finland, as a case study. The aim was to utilize GIS tools to assess store locations in terms of CO₂ emissions from private cars used for consumer traffic. In this case, not only are the locations of the existing and planned retail units investigated with respect to population distribution and car ownership, but the analysis is also carried out by regarding any location within the study area as a hypothetical site for a large retail unit. According to the applied method, CO₂ values are lowest near the centre of the studied region, the region with the highest population density, although the city centre itself did not turn out to be the most optimal location for a retail store in terms of CO₂ emissions. Nevertheless, by generally reducing trip length, a compact urban structure is an important way of achieving long-term cuts in CO₂ emissions.     

The emission reduction potentials of First Generation Electric Aircraft (FGEA) in Finland

Under the looming climate crisis, aviation needs to find new solutions to cut its greenhouse gas emissions. One pathway towards zero emissions is the use of electric aircraft. While current battery technology will not allow for medium and long-haul flights at full capacity, on short-haul routes First Generation Electric Aircraft (FGEA) could play a significant role in the near future. Current FGEA under development could carry 9–19 passengers on distances of 400–1046 km by 2025. This study focuses on the emissions reduction potentials of FGEA in Finland. It compares the carbon dioxide equivalent (CO₂-eq) emissions and real travel times (RTT) from door-to-door of FGEA on 47 routes with existing aircraft, train and car transport modes, as well as with proposed high-speed rail (HSR) and electric vehicle implementation. The study found that replacing all existing aircraft with FGEA can clearly be recommended as it would result in a reduction of CO₂-eq emissions and RTT. Existing cars should only be replaced by FGEA on routes beyond 170 km. The replacement of existing trains by FGEA under the current energy mix is not recommended. However, once electricity could be provided from renewable energy sources exclusively, it would become feasible to replace existing trains on distances beyond 170 km and HSR beyond 400 km with FGEA.     

Supporting the needs of special assistance (including PRM) passengers: An international survey of disabled air passenger rights legislation

Passengers who require special assistance at airports and on aircraft represent one of the fastest growing demographics for aviation worldwide. At some airports, annual growth in PRM (persons with reduced mobility) traffic is six times greater than the overall rate of passenger growth yet barriers to accessible air travel remain and disabled passengers continue to exhibit a lower propensity to fly than other travellers. In an attempt to aid disabled passengers’ accessibility to air travel, countries have introduced dedicated air passenger rights and consumer protection legislation which seeks to specifically address the needs of disabled travellers. These regulations typically state minimum service standards and levels of service provision that must be provided by air transport operators to enable disabled travellers to access air travel on an equal basis to other passengers. These legal interventions, however, have been developed on a country-by-country basis and this has created a lack of international regulatory alignment. This paper reports on the findings of an international survey of disabled air passenger rights legislation in 47 countries covering 20 aviation markets (the single market in the European Union and 19 other States). It identifies the differences in regulatory frameworks, highlights their implications for consumers and ultimately concludes by recommending the formation of more harmonised global policy making to better support the needs of special assistance passengers and facilitate their greater mobility by air.     

Transport and climate change: a review

Transport accounts for 26% of global CO₂ emissions and is one of the few industrial sectors where emissions are still growing. Car use, road freight and aviation are the principal contributors to greenhouse gas emissions from the transport sector and this review focuses on approaches to reduce emissions from these three problem areas. An assessment of new technologies including alternative transport fuels to break the dependence on petroleum is presented, although it appears that technological innovation is unlikely to be the sole answer to the climate change problem. To achieve a stabilisation of greenhouse gas emissions from transport, behavioural change brought about by policy will also be required. Pressure is growing on policy makers to tackle the issue of climate change with a view to providing sustainable transport. Although, there is a tendency to focus on long-term technological solutions, short-term behavioural change is crucial if the benefits of new technology are to be fully realised.     

Aeropolitics in a post-COVID-19 world

We review selected aeropolitical issues that may impact the international aviation sector post-COVID-19. Consideration regarding ICAO's role in coordinating safety provisions using existing frameworks will be important. Issues relating to national airline bailouts and recapitalisation as well as international ownership are also explored. We offer several further, as yet unanswerable, questions about future aeropolitical issues, including how ICAO will continue to address the crisis, implications for air services capacity restrictions, the impact of deglobalisation and the question of state aid for national carriers and other parts of the aviation system.     

What role for offsetting aviation greenhouse gas emissions in a deep-cut carbon world?

The long-term goal of containing average warming below the 2 °C limit requires deep cuts in emissions from all sectors. The fast growing global aviation industry has committed to reduce carbon emissions. Carbon offsetting is an integral element of the sector's strategy. Already, airlines offer voluntary carbon offsetting to those customers who wish to mitigate the impact of their travel. To ensure carbon offsetting can make a meaningful and credible contribution, this paper first discusses the science behind ‘carbon offsetting’, followed by the associated policy perspective. Then, against the context of different aviation emissions pathways, the paper provides empirical evidence of current airline practices in relation to offsetting mechanisms and communication. Building on these insights, the challenges of reducing aviation emissions and using carbon credits to compensate for ongoing growth are discussed. The paper concludes by proposing five principles of best practice for carbon offsetting that airlines can use as a basis to develop credible emissions strategies, and that could inform the sectoral framework currently being developed by leading aviation organisations.     

The evolving landscape of Chinese aviation policies and impact of a deregulating environment on Chinese carriers

This paper examines the recent developments of China’s aviation polices focusing on airline consolidation, the opening up of the domestic aviation market, and the adoption of more liberal international aviation policy. It then goes onto assess the impacts of the above policies on the industry structure, the performance of major airlines, and the competitiveness of Chinese airlines in international markets. The study shows that the industry became more competitive following the opening up of the domestic aviation market. Although major airlines saw an increase in passenger volume and an improvement in load factors, the falling yield and rising costs make them difficult to grow profitably. Moreover, Chinese airlines largely failed to capitalise on building an international network and the majors were weak in international competition. Strategic use of aviation policy to build a strong and profitable airline industry is still a formidable task lying ahead for policymakers.     

Dynamic linkages between tourism transportation expenditures,carbon dioxide emission,energy consumption and growth factors: evidence from the transition economies

Tourism transport profoundly affects economic growth, energy consumption and carbon dioxide emissions. This study is an attempt to examine the impact of international tourism transportation expenditures, energy demand, foreign direct investment inflows, trade openness and urban population on carbon dioxide emission and per capita income for the panel of 11 transition Economies, over the period of 1995–2013. The results show that per capita income escalates the carbon dioxide emission (CO₂), which deteriorates the natural environment. International tourism receipts and international tourism expenditures for travel items are associated with the intensifying CO₂ emission and per capita income in the region. The study confirmed the energy-led emissions, FDI-led emissions, FDI-led growth, income-led emissions, income-led energy demand, trade-led growth and trade-led energy demand. The causality results further substantiate the the tourism-led growth and FDI hypothesis in the region. Finally, the variance decomposition analysis confirmed the following results, that is, (i) per capita income is the contributor that least influences CO₂ emissions, (ii) urban population influences per capita income and (iii) international tourism transportation expenditures will influence CO₂ emissions and per capita income for the next 10-year period.     

Transport and climate change: Simulating the options for carbon reduction in London

Transport is a major user of carbon-based fuels, and it is increasingly being highlighted as the sector which contributes least to CO₂ emission reduction targets. This paper reports on the findings of the VIBAT London study (www.vibat.org) which considers the role of the transport sector in reducing CO₂ emissions in London.The analysis develops a transport and carbon simulation model (TC-SIM) for London. Within this, users are able to consider the implementation of a series of potential policy packages—low emission vehicles, alternative fuels, pricing regimes, public transport, walking and cycling, strategic and local urban planning, information and communication technologies, smarter choices, ecological driving and slower speeds, long distance travel substitution, freight transport and international air. They can select variable levels of application to help achieve headline CO₂ emission reduction targets. The roles of carbon rationing and oil prices are also considered. TC-SIM can be played in different user modes: as ‘free riders’, ‘techno-optimists’, ‘enviro-optimists’, ‘complacent car addicts’ and other typical travel market segments, including a ‘free role’. Game playing or scenario testing such as this helps to highlight perceived levels of homogeneity of views within certain cohorts, the development of entrenched positions and the likely success in achieving objectives.The paper develops various policy packages, scenarios and pathways aimed at reducing transport CO₂ emissions. It argues that strategic CO₂ emission reduction targets are very ambitious relative to current progress, and that we need to act more effectively across a wide range of policy mechanisms, with a ‘high intensity application’ of many of the options, to get near to achieving these targets. A critical issue here will be in communicating and gaining greater ‘ownership’ of future lifestyle choices with stakeholders and the public, and participation tools such as TC-SIM could become increasingly important in this area.     

Evaluating energy efficiency for airlines: An application of VFB-DEA

In this paper, the energy efficiency of airlines has been studied with number of employees, capital stock and tons of aviation kerosene as the inputs and Revenue Ton Kilometers, Revenue Passenger Kilometers, total business income and CO₂ emissions decrease index as the outputs. A new model, Virtual Frontier Benevolent DEA Cross Efficiency model (VFB-DEA), is proposed to calculate the energy efficiencies of 11 airlines from 2008 to 2012. Spearman correlation coefficient is applied to validate the applicability of the new model. The results indicate that capital efficiency is an important factor in driving energy efficiency, and the American financial crisis had a significant influence on the change in energy efficiency during this period.