In for the long haul

3rd May 2017

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Juliet Yates

Aviation has long been climate change's bogeyman. Does a new agreement show the industry is tackling its impacts?

If the economics of sustainable jet fuel suggest an industry without a future, the optimism displayed by Maarten van Dijk may seem foolhardy – or perhaps audacious, depending on your viewpoint. But the chief executive of biofuels provider SkyNRG dismisses short-term pessimism and points to a tenfold rise in demand in 2015-16 for its products, which are sourced from manufacturers and made from waste cooking oil and non-food crops.

Despite this apparent boom, the pessimists will remind van Dijk that last year his firm provided only ‘a few thousand tonnes’ of biofuels to Los Angeles, Oslo and Stockholm airports – enough for about 150 long-haul flights. Moreover, a report by the University of Utrecht published in February estimated that biofuels will cost on average €762/t more than conventional jet fuel between 2020 and 2030. That is equivalent to €242/t of CO2 saved, far above the prevailing EU carbon price of around €5/t. If industry subsidies are not forthcoming, only 13,000 tonnes will be used in European flights in 2030, the report says – just 0.02% of all fuel.

Industry of the future?

Van Dijk swats aside that assessment: ‘We know this is a long-term industry, but we are moving to a bio-based economy and there is a greater realisation that what’s important is how you use those resources. Many people are now seeing aviation as the key area because there are no other ways for it to lower its emissions.’

He points to a programme with Dutch airline KLM that allows corporations and government ministries to buy biofuel to add to an airport’s general fuel supply rather than use it for specific flights. Last year it had 12 clients, a statistic that van Dijk confidently believes is an indicator of future growth.

At the same time the aviation industry appears finally to be waking up to the impact of climate change, an epiphany that reinforces van Dijk’s optimism. The sector has long avoided climate action, even being excluded from the Paris agreement as well as the UK’s policies despite producing 2% of global emissions. The independent Committee on Climate Change says aviation emissions will be responsible for the UK exceeding its carbon budgets until 2050 unless biofuels are used and growth capped.

However, last October, the International Civil Aviation Organization (ICAO), the UN body that governs the industry, agreed a plan to tackle the sector’s emissions. From 2020, airlines will counter any growth in emissions by buying carbon offsets, a step towards a longer-term aim to halve emissions by 2050 compared with 2005.

The agreement was the result of four years’ work, which started after the EU tried to place all flights to and from airports in the bloc under its emissions trading system (EU ETS). The ICAO agreement was hailed as ‘historic’ when signed and it does appear to be having an impact already.

In February, Heathrow published a sustainability strategy called Heathrow 2.0. It includes an ‘aspiration’ to offset all emissions from its planned third runway, including those during its construction. Heathrow would achieve this largely using the ICAO agreement – other measures include offering the best landing slots to the most fuel-efficient planes.

Van Dijk does not expect the agreement to have a direct impact on his firm. ‘People will buy cheaper offsets rather than our fuel because the price gap is too high,’ he says. But even for him, the agreement has already had benefits: ‘A week after it was signed, I got a phone call from Turkish Airlines. They didn’t buy anything, but they’d never called before.’

Taking off

Whether the ICAO accord does mark a new era for the aviation industry depends on to whom you talk. NGOs are cautious. ‘It’s likely to be a measure that ends up so weak that it would be better if the EU acted alone and put aviation fully under the EU ETS,’ says Andrew Murphy, aviation manager at Transport & Environment. Industry feels differently.

‘This is the best way we’ll get to see the aviation industry tackling carbon,’ says Andy Jefferson, programme director at Sustainable Aviation, whose members include all parts of the UK industry, from airports to plane manufacturers. ‘The challenge is whether it is robust enough. Is it setting itself strong enough targets quickly enough? I imagine NGOs would say no, but aviation is global and you need a way to get everyone involved.’

The idea behind the ICAO agreement, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), is to deal with the emissions that cannot be tackled by other means.

Engineering advances in new aircraft are expected to reduce aviation’s emissions 40% by 2050, according to Sustainable Aviation. Operational improvements, such as changing flight paths and reducing taxiing times, should account for a further 10%. Biofuels could deliver a further 24% saving. However, even if all that is achieved, industry emissions would still rise. Under CORSIA, airlines will buy offsets to deal with any such increase.

However, the scheme contains several concessions that could undermine its effectiveness. The initial plan was for it to be mandatory from 2021, but opposition from low-income countries delayed that requirement until 2027. Only 66 countries have so far agreed to take part in the voluntary phase. That includes all EU member states, the US and China, but not Brazil, India or Russia. There is no penalty if a country withdraws. From 2027, the smallest countries – typically small island states and any country with a small amount of international air traffic (proposed at less than 0.5% of global traffic) – would remain exempt.

Another weakness is that airlines will not have to purchase offsets based on their actual emissions until 2030. At first, the requirement will be based on the ‘average emissions growth rate of the entire sector’.

In February, the International Council on Clean Transportation produced a blunt report on the likely success of CORSIA, and concluded that its loopholes, if exploited, would limit offset to only 73% of expected emissions growth to 2035. The agreement’s aim ‘is not expected to be met, regardless of low-carbon fuel use or operational and design improvements’, it stated.

CORSIA is also unlikely to push any airlines to increase their investment in energy efficiency measures. Buying offsets would cost firms only 0.4% of fuel prices in 2025, rising to 1.1% in 2030. Fuel price variability already offers a bigger driver. There is also concern over the type of offsetting the agreement will cover. The ICAO has started discussing the rules, but Murphy says some airlines and countries are pushing for the broadest range of offsets to be included such as controversial forestry schemes.

Transport ministries are leading the negotiations and are trying to avoid adding costs to airlines. ‘They see their role as to encourage more flights, and that argument always seems to win out – and that’s global, not just in the UK with Heathrow,’ Murphy says. ‘The climate ministries just hold up their hands [in disbelief].’

The EU appears to have recognised the limits of the agreement, announcing that it plans to continue to include under the ETS flights that take off and land within Europe.

Surmountable problems

Industry seems to think these problems will soon be overcome. ‘CORSIA is definitely a step forward,’ says Matt Gorman, Heathrow’s director of sustainability. ‘But it’s like any UN process involving more than 190 member states; it’s a first phase that will need to be continually improved.’

Sustainable Aviation is open about that need for improvement. ‘The biggest challenge the sector faces is that it has talked about a long-term aim of halving emissions by 2050,’ says Jefferson. ‘CORSIA is only talking about stopping emissions growth, so there needs to be a conversation about how to achieve that.’

The group is lobbying on that point and is trying to ensure the rules underpinning the first stage are strong. ‘It would be a shame if the scheme doesn’t promote opportunities to reduce aviation’s emissions directly using things like sustainable fuels,’ Jefferson says. ‘But if it costs only $20 to buy a forestry offset and $200 for a fuel project, that could be a deal breaker. So how can we have a scheme that does the more expensive stuff? We are having those discussions and I’m hopeful [something will be agreed].’

There are two types of aviation projects that the UN has already approved to generate carbon offsets: installing electric power systems in aircraft to avoid using fuel while taxiing; and installing solar panels at airports to power at-gate operations and run air-conditioning. But there is no guarantee airlines will buy such credits. Heathrow’s sustainability strategy outlines a different approach. It wants CORSIA to promote ecosystem restoration, and plans to pilot a project to restore British peatlands. Gorman says such schemes could be cost-effective, but exact costs need to be calculated before airlines can be encouraged to purchase any offsets generated.

New fuels needed

Regardless of the offsetting, a long-term change in aviation’s emissions will occur only if planes are moved away from burning fossil fuels. Airplane manufacturer Airbus is working on electric and hybrid propulsion systems, but says electric flight represents ‘one of the biggest industrial challenges of our time’. In March, the US start-up Wright Electric said it would launch short-haul electric flights in a decade, but admitted they would only be possible if battery technologies continued to advance at their current rate. It has yet to design a plane.

This is why SkyNRG and their sector contemporaries are still attracting significant interest despite the current poor economics. Some airlines are even working on their own biofuel projects. This includes British Airways who, in January 2016, scrapped plans to build a waste-to-fuel plant in east London. That project’s failure was blamed on the falling oil price and a project partner filing for bankruptcy. But BA is in talks with other companies on a similar idea, according to Jefferson.

The UK government is also taking small steps to increase demand for sustainable jet fuels. The Department for Transport will soon open to aviation its Renewable Transport Fuels Obligation, which was intended initially to promote road biofuels. That could provide a small cash boost to projects.

The Netherlands has already done this. The EU will also allow aviation biofuels to contribute towards its 2030 renewables targets. However, such measures will not close the current cost gap.

Van Dijk says nobody will order airlines to use a rising percentage of biofuel: ‘I don’t see that happening. Nobody dares upset the aviation industry by imposing extra costs.’ The more likely way forward is for a country to part-fund a plant to manufacture aviation biofuels, he says. ‘I can see a member state developing a policy supported by the EU that would work a bit like a wind power subsidy: “Here’s $1bn. Who can give us the most fuel for that?” The member state would have to guarantee the fuel would be used,’ he adds.

The University of Utrecht report raises another option. The cost of sustainable fuels is a modest, between €900,000 to €4.1m on a per passenger basis. A feed-in tariff to cover costs that way could work, it believes. However, it is hard to see any country promoting such a measure at a time of austerity.

Going it alone

Perhaps an airport could go it alone, as has happened in the case of SkyNRG’s projects with Oslo, Stockholm and Los Angeles recouping the costs in landing and other fees. However, this might not work in all cases. Heathrow’s new strategy, for example, will ensure sustainable aviation fuels are considered in all relevant infrastructure projects, but the airport operator does not own the refuelling infrastructure at the airport so says it cannot force biofuel use.

It seems that companies like van Dijk’s will have to be patient to see whether the aviation industry truly wants to transform itself and deal with its climate impacts by adopting new fuels, or whether it wants to simply rely on others by buying offsets instead. Many will expect airlines to take the second option, but van Dijk at least believes airlines will take the first. ‘We are just getting started,’ he says.


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