Carbon Trading in Aviation Birth of a New Market by GlobalData

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Carbon Trading in Aviation: Birth of a New Market

Summary

The European Union has made waves in the carbon trading industry by including the aviation sector under emissions trading. This is accompanied by carbon emission efforts on part of airlines and airports in the Western world. Many airports and airlines are coming to the forefront of the climate change battle. A large number of airlines and airports in the US and Europe now offers carbon offset programs and several other schemes to minimize carbon footprints. Most European and American airports and airlines are proactively investing and working on fuel-efficiency, waste management, water conservation, green buildings, recycling, hybrid vehicles, solar energy installations, cogeneration plants etc. In fact, Manchester airport is one of the 66 organizations that have received Carbon Trust Standard, a certification for having genuinely reduced carbon emissions and also being committed to curb emissions in the future. Many airlines in the Western world have serious emission targets which they plan to achieve its goal by investing in alternative fuels, cleaner aircrafts, smart routings and also by carbon trading. The entire aviation sector has come a long way in awareness about the need to limit their carbon footprints, as is evident from their carbon schemes. Nevertheless, what spurs them into action is the financial benefit that comes as a result of energy efficiency. This marks the beginning of a large market for carbon trading in aviation.

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									Carbon Trading in Aviation: Birth of a New Market
Reference Code: GDAE0056VPT Publication Date: JUN 2009

Alternative Energy Viewpoint
© GlobalData This brief is a licensed product and is not to be photocopied Source: www.alternativeenergyetrack.com

GDAE0056VPT / Published JUN 2009 Page 1

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Table of Contents
List of Tables List of Figures

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GlobalData Viewpoint
Summary

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Carbon Trading in Aviation: Birth of a New Market
Europe Spearheads the Carbon Battle in Aviation High-riding on Controversy The US Stand Yet Unspecified Proactive Airports Technology Focus What is carbon trading? Where is the profit potential? Aviation and Kyoto Conclusion

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Appendix
Methodology About GlobalData Contact Us Disclaimer

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Alternative Energy Viewpoint
© GlobalData This brief is a licensed product and is not to be photocopied Source: www.alternativeenergyetrack.com

GDAE0056VPT / Published JUN 2009 Page 2

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Table 1:

List of Tables
The Global Aviation Market, Carbon Saving Initiatives by Airports, 2008 ................................................................9

Alternative Energy Viewpoint
© GlobalData This brief is a licensed product and is not to be photocopied Source: www.alternativeenergyetrack.com

GDAE0056VPT / Published JUN 2009 Page 3

Table of Contents

1.2

List of Figures
The Global Aviation Market, Technology Focus, 2009.............................................................................................10

Figure 1:

Alternative Energy Viewpoint
© GlobalData This brief is a licensed product and is not to be photocopied Source: www.alternativeenergyetrack.com

GDAE0056VPT / Published JUN 2009 Page 4

GlobalData Viewpoint

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GlobalData Viewpoint
Summary
The European Union has made waves in the carbon trading industry by including the aviation sector under emissions trading. This is accompanied by carbon emission efforts on part of airlines and airports in the Western world. Many airports and airlines are coming to the forefront of the climate change battle. A large number of airlines and airports in the US and Europe now offers carbon offset programs and several other schemes to minimize carbon footprints. Most European and American airports and airlines are proactively investing and working on fuel-efficiency, waste management, water conservation, green buildings, recycling, hybrid vehicles, solar energy installations, cogeneration plants etc. In fact, Manchester airport is one of the 66 organizations that have received Carbon Trust Standard, a certification for having genuinely reduced carbon emissions and also being committed to curb emissions in the future. Many airlines in the Western world have serious emission targets which they plan to achieve its goal by investing in alternative fuels, cleaner aircrafts, smart routings and also by carbon trading. The entire aviation sector has come a long way in awareness about the need to limit their carbon footprints, as is evident from their carbon schemes. Nevertheless, what spurs them into action is the financial benefit that comes as a result of energy efficiency. This marks the beginning of a large market for carbon trading in aviation.

Alternative Energy Viewpoint
© GlobalData This brief is a licensed product and is not to be photocopied Source: www.alternativeenergyetrack.com

GDAE0056VPT / Published JUN 2009 Page 5

GlobalData Viewpoint

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Carbon Trading in Aviation: Birth of a New Market
The aviation industry entering the ETS scheme is expected to open up a huge carbon trading business and enormous profit for participants. The aviation industry could reap rich dividends from selling their carbon credits. Airlines are likely to pass on the charge of purchasing credits to their customers – and this would amount to a very small increase in ticket prices for the average flier. Airlines would normally purchase enough and more credits to compensate for their entire emissions. The excess credits would be traded and this is likely to bring a windfall to industry operators. In case of other industries, trading excess credits itself became a lucrative business. This is likely to happen with the aviation sector as well. This is also likely to result in more expensive international flight tickets to Europe, especially in the short-term. Britain is expected to benefit the most out of increased revenues due to the large number of international flights, followed by Germany and France, as per the IHT. Reduced operational costs due to fuel efficiency and consequent fall in airline ticket prices is likely to take many years to materialize. This is because technological advancement, like aircraft redesign, energy efficient systems etc may take many years to develop and be successful commercially. Increase in air travel and airports expansion are likely to further fuel the aviation ETS market and open up new avenues for investments.

3.1

Europe Spearheads the Carbon Battle in Aviation
The European government has been the most proactive one in trying to include the commercial aviation sector in the carbon market. In 2007 the EU environmental ministers planned to bring all airlines in Europe under carbon trading by 2012. Airlines from across the world operating the EU were required to abide by this lest their most lucrative flights be cancelled.

Nevertheless, the loophole in this scheme, as pointed out by the chief economist of British Airways in 2006 was that, airlines would simply purchase carbon credits and the real ‘job’ of curbing emissions would have to be done by industries on the land. Environmental groups were of the opinion that, aviation being a fast-growing industry, ETS would not really reduce the world’s carbon footprint. This made the EU environmental panel think about a special scheme for airlines instead of including them among all emitters in general. This scheme was planned to have airlines competing with each other for reducing emissions, and this was expected to make significant contributions in curbing emissions. This proposal was vehemently opposed by the EU aviation industry. Thus Europe came up with a new proposal palatable to European airlines.

The European ETS scheme for aviation came to force on February 2, 2009. This requires the industry to curb its emissions to 3% less than the average emission level during 2004-06 by 2012 and 5% of the same historic average by 2015. Emission allowances would be auctioned, the revenue of which would be used for climate change mitigation, low-emission transport, researching on clean aircrafts, anti-deforestation and so on.

Alternative Energy Viewpoint
© GlobalData This brief is a licensed product and is not to be photocopied Source: www.alternativeenergyetrack.com

GDAE0056VPT / Published JUN 2009 Page 6

GlobalData Viewpoint

This is expected to cost airlines around $2.5 billion by 2013 and $3.5 billion by 2015. Member countries of the EU have been put in charge to administer airlines which operate in their countries. The UK was highly interested in making the aviation sector come under the ETS. According to this directive, all airlines departing from or arri
								
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