This month’s United Nations agreement to limit greenhouse
gas emissions isn’t likely to have a major impact on airline ticket prices,
according to IATA.
Meanwhile, the key provisions that will determine its
effectiveness must still be mapped out.
“The devil is in the details,” said Fred Dahlmann, a
professor at the Warwick Business School in England who has researched carbon
emissions and the aviation industry.
The agreement will require carbon-neutral growth for the
majority of the world’s air carriers, including commercial and cargo airlines.
Air carriers that see emissions rise above their average
level in 2019 and 2020 will have to purchase carbon-offset credits to mitigate
that increase. The regulations won’t apply to domestic air travel, which is
regulated by individual countries.
The plan, which was finalized at the International Civil
Aviation Organization (ICAO) meeting in Montreal on Oct. 6, will take effect in
2021 with a voluntary phase that lasts through 2026.
Some 65 countries, representing close to 85% of the
international aviation activity, have so far agreed to participate in that
phase, including the U.S., the member-states of the EU and China. The most
prominent holdouts are India and Russia.
The mandatory phase of the emissions plan will last from
2027 to 2035.
Among the biggest supporters of the agreement were the airlines
themselves. In a paper produced ahead of the ICAO assembly, IATA noted that
implementing the agreement will be less expensive for airlines than what would
likely have come in its place, a patchwork of carbon taxes and emissions
schemes implemented on a country-by-country basis.
IATA’s estimates of the cost of the offset scheme are quite
broad, coming in somewhere between $2.2 billion and $6.2 billion industrywide
in 2025, then rising to between $8.9 billion and $23.9 billion in 2035.
Each airline will determine what portion of the cost of
carbon offsets it will pass on to customers.
But in hypothetical
calculations using high-end figures, IATA estimates that the cost to an airline
would go up just $1,497 to fly a Boeing 787-800 Dreamliner on the 3,318-mile
route between Frankfurt and Addis Ababa, Ethiopia.
Assuming a typical Dreamliner configuration, that would
amount to $5.50 per passenger.
John Hansman, director of the MIT International Center for
Air Transportation and a participant in a related ICAO initiative to develop
emission standards for airline fleets, said the airline industry understands
that it has much to lose if it doesn’t address climate change. Aviation
accounts for approximately 2% of global greenhouse gas emissions.
“In my view, global warming is probably the biggest
existential threat to global aviation,” Hansman said. “If it becomes socially
unacceptable to fly because of concerns of environmental impact, that will
significantly change the business.”
With international aviation expected to grow at
approximately 5% per year after 2020, Hansman said that the ICAO chose to
implement the market-based carbon offsets approach because stakeholders
understood that the growth of emissions couldn’t be eliminated in the
foreseeable future through improved fuel efficiency alone.
Carriers sometimes use aircraft for 20 years, so even as
more efficient planes become available, they take over the market slowly. In
addition, jet biofuel technologies are in their infancy, and even when more
fully developed, use of biofuel will be limited by practical considerations. It
would take 9% of American cropland, Hansman said, to supply U.S. aviation alone
Still to be worked out are the specifics of the offset scheme.
Brad Schallert, a deputy director for the International
Coalition of Sustainable Aviation, which sat in on the Montreal negotiations
this month, said it will be essential that rules are set in such a way that
carbon offsets are properly valued and that only useful offsets are allowed.
For example, he said, it’s easy to track the carbon impact
of a project in which trees are planted. But it is more challenging to track
the value of a project in which an airline pays money in order to prevent land
from being logged.
“It can be very difficult to prove they would have cut them
down,” Schallert said.
As such, the criteria for offset projects must be carefully
The ICAO also has yet to set transparency guidelines related
to offset purchases.
Schallert said he wants to be able to see online the
specifics of each offset purchased by airlines.
“It has to be very, very transparent for the market to
operate effectively,” he said.