In early September, researchers from the Tyndall Centre in the UK put out a report that said that incorporation of the airline industry into the Emissions Trading Scheme (ETS) will not provide significant incentive to cut emissions. The big polluters today are paying about €20 per tonne for their emissions. When aviation joins the scheme in 2012, this price would add about €5 for a flight to Barcelona. Tyndall argues that the EU and national governments cannot escape the conclusion that the ETS is not enough and that aviation must be constrained by other fiscal or legislative measures as well as by inclusion in the carbon tax net. Tyndall has acquired an excellent reputation for its informed and passionate stance on aviation. Broadly speaking, its view has been that continued expansion of aviation is incompatible with the tight emissions targets that the EU and other bodies have set for the years to mid-century. It has consistently said that by 2050 unconstrained air travel will be using up most of the total carbon emissions that the world can allow itself. Aviation expansion will drown out emissions reductions in other areas.
The new report, commissioned by Friends of the Earth, examines what will happen when aviation is included in the European Emissions Trading Scheme (ETS). The ETS is a 'cap and trade' scheme that has awarded tradeable allowances to major polluters. The cap will be gradually tightened over a period of decades, obliging CO2 emitters either to produce less carbon or buy increasingly expensive additional allowances from the market.
The major conclusion of this month's review could have been predicted from previous Tyndall work. After aviation is incorporated into the ETS, aircraft will emit far more than can be sustained if Europe is to rein in its emissions at a rate needed to meet its share of global reductions. Nobody should be at all surprised by this; at today's carbon prices, the cost of CO2 allowances to cover the flight to Barcelona would be about €5. Even at ten times today's carbon prices of €20 per tonne, air travel growth is going to continue.
But Tyndall's methodology is much more sophisticated than a simple examination of the impact of CO2 pricing on flying habits. In fact, the report is so complex that Tyndall and the Friends of the Earth will not capture many new supporters for their view that aviation must be severely restricted.
This highlights a recurrent dilemma in climate change research. The uncertainties and complexities in good scientific work are almost impossible to summarise accurately for a time-constrained audience. In this case, the assumptions, theories and methods are buried deep. To communicate their research to the widest possible audience the researchers would have benefited from laying out their technique in a flow chart and from providing a summary of their conclusions in a full summary.
With these reservations, let's try to build up the structure of the work.
- Tyndall notes the 6% current annual rise in European air travel and assumes that this will continue until about 2012. It then develops three scenarios for emissions growth beyond this date which reflect increasingly rapid rates of technological improvement in aircraft and slowing rates of passenger growth. In one of these scenarios, European emissions from aviation start to decline by 2017. Tyndall is not actually predicting this is going to happen; it is saying that if Europe is genuinely committed to emissions reduction, then national and international policies will have begun significantly to constrain aviation within a decade. Technological improvements (primarily in fuel consumption per passenger) will mean declining absolute emissions.
- The researchers then examine what level of allowances will be granted to the EU airlines. They argue that giving the industry an initial allowance equal to the 2012 emissions from aviation will mean that the ETS will have very little effect. If the airlines are handed a huge batch of carbon vouchers, the incentives to reduce emissions will be negligible. They will rarely have to buy from the external ETS pool and so ticket prices will not increase much. Perhaps surprisingly, this is a very unconventional way of looking at the issue. The general theory behind emissions permits is that polluters price in the full cost of carbon certificates, even if they haven't had to buy them. For example, most studies have shown that electricity prices around Europe now include the implicit cost of ETS certificates, even though electricity producers have been awarded these allowances at no charge.
- The report then looks at the share of the EU's total carbon allowance taken by aviation in 2050. They show that in some scenarios air travel uses up the continent's entire carbon allowance. The authors point out that:
- even if the industry is properly included in the ETS
- and it achieves major technological advances
- and passenger growth falls to very low levels
aviation emissions will still be higher in 2050 than in 1990, whereas other sectors of the economy are expected to make a 75% to 90% cut. They say that the ETS is not enough – the EU must find other ways of radically restricting aviation growth.
Unsurprisingly, Tyndall shows that if the airlines just include the cost of extra emissions after 2012 in their ticket prices, the impact is extremely limited. At current carbon prices, the additional cost of carbon allowances would add a few Euros to short haul prices.
This is a difficult report and full of interesting assessments. But it does contain some quite striking divergences from the conventional approach to looking at the share of aviation in the total emissions portfolio. Some of these are highly favourable to the airline industry, others are not.
- Tyndall only includes the impact of CO2. Aviation is also responsible for other pollutants which are normally thought to double or triple the effect of the carbon dioxide. The authors clearly want to avoid controversy since the precise multiplier is the subject of huge debate. In particular, no one yet even guesses at the global warming impact of contrails on cirrus cloud formation. The Tyndall assumption is advantageous to aviation.
- By contrast, the authors use a low estimate of the total future carbon budget that the EU will allow itself. They've taken recent and well-respected work by the Swiss scientist Meinshausen as the basis for this view. Meinshausen says that the world will need to keep under 450 parts per million (ppm) of CO2 and other warming gases if it wants to achieve a more than 50% chance of keeping temperature increases 2 degrees below the pre-industrial figure. (So far, we've seen about 0.8 degrees of this rise.) The world is already at 430ppm, and the total is rising at over 2ppm a year. So not only does Meinshausen implicitly say that we need to stop emissions rising soon, but we also need very quickly to cut future emissions to below the rate of natural absorption. She may well be right about this, but the consequences of her work are not yet fully incorporated into the assumptions of governments. Nevertheless Tyndall takes her more cautious view.
- As I said above, Tyndall says that ETS costs will only be reflected in ticket prices to the extent that the airlines have to buy incremental allowances in the market. The conventional view among economists is that this is illogical. Even though electricity producers were given huge allowances for free, they still increased prices because a new generator competing against them would have to be buying allowances. Freshman economics says that it is the marginal or new producer that sets the price. But this may not be important: even if the airlines did incorporate the full value of the ETS allowances in their prices, it would still have a negligible effect on what travellers have to pay.
- The airline industry says it can make substantial technological improvements. Many people doubt whether this will happen. For example, an 'open rotor' jet engine would undoubtedly cut fuel consumption, but only at the price of much higher noise levels. This would, of course, be extremely contentious politically. It might have been better for Tyndall to assume existing technological improvement rates of 1% to 2% per year. This would have made their assumptions more plausible, as they would have known, but only at the risk of making it easier for the aviation industry to attack their work.
- The researchers are also unusually optimistic about the political commitment of the EU achieving real and early cuts in emissions. Once again, the reason is obvious – they did not want the Commission attacking their work for its failure to include the impact of political action. But one does not have to be a cynic to believe that the EU is still wrestling with the problem of emissions reductions and is a very long way from agreeing to rein back the very rapid growth of aviation.
So this is a useful and thorough study. It says again what the Tyndall Centre has said before – rapidly growing aviation and climate stability are incompatible. The additional pillar derived from this study is that the researchers show that current levels of ETS pricing are simply insufficient to dampen air travel growth. The EU needs other packages of measures, such as an aviation fuel tax.
For fuller analysis of aviation and climate change, go here. (I have prepared a much longer briefing document.)