Four key strategies for overcoming carbon challenges in the Aviation industry

1. Market-based measures – primarily the ICAO agreement and EU ETS;
2. Improved operating procedures and efficient air traffic management;
3. New engines, with improved fuel efficiency, and new aircraft technology; and
4. Development of sustainable aviation fuels.

Further to our briefing dated 31 October 2016 on the historic ICAO agreement to curb aviation emissions, we set out in a brief update on that agreement and the EU Emissions Trading System (EU ETS) as it applies to aviation, as well as a short consideration of moves in the UK to encourage the production and use of sustainable aviation fuel.    

Market-based measures  

Following ICAO's adoption of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) on 6 October 2016, the European Commission published a proposal on 3 February 2017 which envisages continuing with the current approach for aviation under the EU ETS from 2017 to 2021. This means that intercontinental flights departing from or landing in the EU would continue to be exempt from the EU ETS.  

It is not yet clear how many of the elements of CORSIA will work in practice. ICAO is currently developing a monitoring, reporting and verification system, as well as criteria for emissions units and emissions registries in time for 2021. Furthermore, we are yet to find out how compliance and civil sanctions will be measured and enforced from 2021, or how non-CO2 emissions from aviation which are currently excluded from CORSIA will be regulated.  

The Commission proposes to carry out a review once there is more certainty about the implementation and scope of CORSIA. In the meantime, any ETS amendment must be in force by 30 April 2018, with any new regulation applying retrospectively to emissions from 1 January 2017. The Commission's proposal is still being debated at the European Parliament.

Sustainable Aviation Fuel

There are barriers to the introduction of sustainable aviation fuel. These include the higher cost of the fuel and development of production plants.  Industry is calling for long-term policy commitment and support from government – both in the form of subsidies for production of sustainable fuel and rewards for its use.  In return, there should not only be a reduction in aviation emissions but also economic advantages from an increase in jobs and revenue through production of the fuel.

In the UK for instance, the Government recognises that aviation is a difficult sector to decarbonise and seems generally supportive of sustainable aviation fuel. There appear to be two main initiatives:

• The Autumn Statement 2016 announced that the National Productivity Investment Fund will invest £20million in the development of alternative aviation and heavy goods vehicle fuels; and
• A consultation issued by the Department of Transport (closed on 22 January 2017) proposed amendments to the Renewable Transport Fuel Obligations (RTFO) Order to allow rewards for sustainable renewable aviation fuel use.  The Government is currently analysing responses to this consultation, although the changes are expected to be made this year.  In summary, the proposal would allow renewable aviation fuels that meet sustainability criteria to be rewarded with Renewable Transport Fuel Certificates (which have a market value due to the Renewable Transport Fuel Obligation).  Renewable aviation fuels that do not meet the sustainability criteria will not receive a reward and will be subject to an obligation under the RTFO.  The consultation does not propose an obligation to supply a certain level of low carbon fuel (the Government believes this would put the UK aviation sector at a commercial disadvantage).  

It is clear that market mechanisms are being favoured by both governments and the aviation sector itself as a means to limit and then reduce aviation emissions. However, such mechanisms are not straightforward and there are many complexities associated with monitoring, reporting, enforcement, etc. – it is difficult to implement an effective and fair system. Additional strategies (including sustainable fuels and improvements in aircraft and operating procedures) are essential if industry targets for greenhouse gas emissions reductions are to be met. We will keep you updated as industry and others seek to overcome the carbon challenges faced by the aviation sector.