Tuesday, November 21, 2006

New Flight Plan

As one of my readers likes to remind me periodically, those of us who worry about energy consumption and greenhouse gas emissions tend to give air travel--and its growing consumption of jet fuel--a free pass. Whether that has been due to the lack of practical alternatives to burning petroleum distillates in jet engines, or simply the strong relationship between air travel and economic growth, it looks set to change. The proposed European Union plan to cap the greenhouse gas emissions of all airlines flying on its territory represents the first effort to make commercial airlines accountable for environmental impacts other than noise. This milestone should not come as a surprise, given the EU's consistent responses to climate change. As the Wall Street Journal indicated, the aviation emissions cap is shaping up an another trans-Atlantic dispute, but I would not bet on the EU backing down, here.

The impact of all this on the structure of the airline industry is uncertain, affecting startups and incumbents unevenly, and creating further advantages for companies with newer fleets. Since emissions follow fuel consumption in direct proportion, the new regulations could hasten the adoption of the latest generation of ultra-efficient aircraft. Both Airbus and Boeing have been reducing per-passenger fuel consumption by employing fewer, more efficient engines and by replacing aluminum with composites to cut aircraft weight. These strategies have already paid dividends during the last couple years of high fuel prices, but the new 787 and struggling A380 represent the current limits of these trends. Focusing on aircraft emissions may stimulate interest in even more exotic airframes, such as the flying wing described in a recent Economist article, but such changes are more fundamental than even the switch from propellers to jet engines.

Details matter. If the EU draws the envelope solely around airline emissions, as seems the case for at least the initial phase--eliminating the possibility of emissions trading with other sectors--then the cost of reducing aircraft emissions will be needlessly steep. Once the maximum practical efficiency of seat-miles per gallon has been reached with the existing fleet, further cuts must come from either reducing seat-miles traveled, or turning over airline fleets. If a doubling of jet fuel prices since 2003 hasn't been sufficient to achieve this, then the effective jet-emission credit price necessary to clear the market could prove to be much higher than the $20-30/ton CO2 we've seen for the reductions required in other sectors, such as utilities and heavy industry.

The US government's response isn't any more surprising than the EU's move to impose an emissions cap on air travel. Rather than trying to block the effect of this change on US airlines, however, we should be working with the EU to improve the design of its cap mechanism, to make it as efficient and low-cost as possible. The clock is running out on attempts to block measures to combat climate change, but that doesn't mean we should accept a high-cost solution.

No comments: