The aviation industry is in for an interesting year as the European Union kicked off 2008 by agreeing on a system that forces airlines flying to and from Europe into a cap-and-trade system for greenhouse gas emissions.

The EU system proposes to cap carbon dioxide emissions for European and foreign airplanes alike, while allowing airlines to buy and sell pollution credits on the EU carbon market. The EU would require airlines traveling to any of the 27 member countries to buy 10 per cent of the required permits under an auction system, and then distribute the rest for free.

Final approval by EU governments is expected by the end of 2008. The target date for implementation for the program is 2012.

Many airlines both in Europe and elsewhere oppose the idea, claiming that the answer to reducing greenhouse gas emissions from civil aviation lies in better technology and changed operating practices that would promote greater fuel efficiency and reduce flying times.

Flight reactions
No one disputes the fact that civil aviation contributes to degradation of the earth's atmosphere. Airline emissions were not part of the Kyoto Protocol's targets for reducing each nation's output of greenhouse gases, but the International Panel on Climate Change (IPCC) estimates that aviation is responsible for around 3.5 per cent of anthropogenic climate change when atmospheric chemical reactions are taken into account, the number will rise to 5 per cent by 2050.

The high temperatures of fuel combustion associated with aviation combined with nitrogen oxides (NOX) produces ozone in the troposphere. Ozone and NOX are greenhouse gases and NOX is a component of photochemical smog.

When injected together into the icy atmosphere, the mix of exhaust gases - including water vapour, unburned hydrocarbons, particulates, sulfates, nitrogen oxides and carbon dioxide, produces clouds that have two to three times the warming effect of carbon dioxide alone, the Massachusetts Institute of Technology reported last year.

Carbon dioxide has the same effects on the climate no matter when or where it is injected into the atmosphere. But other aircraft emissions – such as NOX - have potent, climate-changing effects because of the elevation at which they are released. Over the short term, they more than double the effects of the CO2 alone. In time these other pollutants disappear, but the carbon dioxide remains aloft capturing heat for decades.

Regardless of fuel efficiency, there is no current way of preventing this reaction from occurring in the atmosphere during a flight. The airline industry sees growth of about 4.4 per cent a year, which is outpacing the fuel economy gains of about 1.3 per cent a year.

The new approach
What prompted the EU to consider such a broad legislated approach to curbing airline emissions stems from the simple fact that while at present the civil aviation sector accounts for less than three per cent of anthropogenic CO2, the EU claims it will contribute disproportionately to climate change since: for the foreseeable future there is no alternative to fossil fuels for aviation; air travel is forecast to more than double over the next 15 years; prospective major improvements in fuel efficiency have been largely exhausted; aircraft are thought to create a highly disproportionate effect on global warming through water vapour condensation from fuel combustion, in addition to CO2; and, as noted, at typical and most efficient cruising altitudes, the effect on global warming is aggravated as aircraft emissions of NOX increase tropospheric ozone and deplete stratospheric ozone.

But questions remain as to whether a cap and trade system will be effective in reducing emissions. Many industry observers argue that the EU approach is unusually aggressive and will only aggravate an already difficult environmental situation and will cause major economic disruptions in an already troubled industry. Airlines believe that there are different ways to reduce emissions such as improvements to operations and technology.

The US Federal Aviation Administration argues that improvements in air traffic control will reduce emissions per flight, by letting airplanes fly on more direct routes and at altitudes that are more efficient for their engines. Europe's airline industry has suggested that the EU could reduce airline emissions 12 per cent simply by putting its single market under a single sky of air traffic control. Some experts however argue that improvements will allow more traffic, driving total emissions higher.

Airlines have also been stressing technology as a way to cut emissions per flight. For example, the jumbo Airbus A380 is supposed to burn 17 per cent less fuel per seat than a Boeing 747-400. And the Boeing 787, which is supposed to begin test flights next year, is expected to burn 30 per cent less fuel than an average aircraft consumes today. These new aircraft use new lighter materials such as composites that reduce operating costs as well as new engine technologies that reduce fuel burn and corresponding harmful emissions.

"The green cycle now starts at the drawing board and ends with the disposition of the aircraft," said Chris Jones, vice president marketing for Airbus in the Americas.

Courier services which account for most of the air travel throughout the world are already using significant amount of green technology. Beginning in 2009, FedEx will begin acquiring 777 freighters for international service. The 777 will provide 18 per cent greater fuel efficiency than the other aircraft in the international fleet. " These moves will save money and make us a better environmental steward for our operation," said Jackson.

Airline plans
Many airlines also plan to retire older, less fuel efficient planes and use new planes as much as possible. For example, Air France was, until over a year ago, operating as many as 12 747-200s freighters. All those aircraft have been retired since the end of December 2007 and are being replaced by more efficient 747-400 extended-range freighters. Introducing new long-range aircraft to replace the older aircraft will reduce fuel consumption and CO2 emissions by 20 to 30 per cent, said Jean Claude Raynaud, a spokesman for Air France.

These examples are just the tip of the iceberg. Dozens of other case studies exist for courier and airline companies that suggest technological innovation may be the best answer to curbing airline emissions.

"What has changed is the pressure that many of our airline customers have come under and the increasingly stringent demands for environmentally progressive products and services that can further minimize aviation's impact on the global ecosystem," said Jeanne Yu, director of environmental performance for Boeing Commercial Airplanes.

Regardless of what is the best answer for curbing airline emissions, the EU decision has put considerable pressure on the global airline industry and starting in 2008 changes will inevitably occur as a result.

The airline industry forcefully lobbied against the EU legislation, calling it an ineffective regional attempt to tackle a problem that requires a global solution. Airline lobbyists warn that the Europeans risk a trade war with the US if they insist on moving ahead without an international agreement.

American officials have also said that the Europeans could violate international aviation rules if they forced non-European airlines into the system. If the EU proceeds along its current path, the US may attempt to charge the EU with unfair trade practices before the World Trade Organisation.

The United States engineered an agreement among the majority of countries in the International Civil Aviation Organisation, aviation's global rule-making body, against any unilateral actions such as the EU plan. California and several other states rushed to the EU's defence. California asserts that the right of countries to regulate greenhouse-gas emissions from foreign aircraft operating within their airspace is consistent both with international law and obligations under the UN Framework Convention on Climate Change.

Regardless of the legality of the plan, "any limits on airline carbon releases should be negotiated through the International Civil Aviation Organisation", said Daniel K. Elwell, assistant administrator for aviation policy planning and environment at the Federal Aviation Administration.

Open skies?
The EU decision could also undermine "Open Skies", one of the more significant developments for global business travel. The program will launch in March 2008, when a new aviation agreement between the United States and Europe officially comes into force. The plan promises roughly $7bn worth of cost reductions and a boost in transatlantic travel by up to 24 per cent.

"Open Skies is good news for most airlines and travellers," according to a statement by Hogg Robinson Group CEO David Radcliffe. "It should increase travel options for our corporate travel customers, and greater competition is likely to generate lower fares - particularly welcome in the current price-sensitive climate," argues Robinson whose travel management company has studied the likely impacts of the EU plan on the aviation industry.

Radcliffe also noted a side effect from Open Skies, which would be directly caused by the EU carbon permits. The plan would also bring more aircraft into EU, allowing for more potential emissions and would likely result in more congestion which would work against the organisation's agenda of emissions reduction.

Aage Dünhaupt, a spokesman for Lufthansa, indicated that because of the existing congestion which requires circuitous flight paths and sometimes puts planes into holding patterns while awaiting clearance for landing, that the EU proposed rules would be unfair to airlines. The situation forces carriers into unnecessary emissions which would cost airlines additional money in carbon permits. Airlines say the EU cap-and-trade system could cost billions of dollars and increase ticket prices for travellers.

Carl Burleson, the director of the office of environment and energy at the US Federal Aviation Administration, said of the plan, "This doesn't go along with what the world community agreed to, which is that you should undertake this on the basis of mutual agreement."

There are several other problems with the plan that many have begun to point out. Other pollutant emissions from airplanes - water vapour, contrails or nitrogen oxides - aren't included. The cost implications for travellers are uncertain, but could result in fare increases ranging from 3 to 15 per cent. With 90 per cent of the pollution credits being free, it could mean windfall profits for companies that can afford emissions reductions and major losses for others those that cannot.

Counter arguements
Environmentalists suggest that by limiting the auction to 10 per cent and allowing the trade of carbon credits across other sectors would result in insignificant emission reductions.

"We want a world wide system as soon as possible," said Peter Liese, a German member of the Parliament who helped to guide the legislation through the assembly, which met in Strasbourg, France. "There must be an end to the status quo that nothing is done in the aviation sector."

In all there are many uncertainties associated with the EU plan and serious doubts about whether it would actually reduce emissions. One study suggests the true market price for permits to achieve Kyoto-equivalent CO2 reductions within the aviation sector likely will be much higher than what is being proposed by the EU's general cross-sector trading scheme. The important implication of this finding is that it would be more cost-effective to seek CO2 reductions in other sectors (on average) than in the aviation sector.

But while this may appeal to economists, the political acceptability of such a move is clearly unacceptable to the EU. For the moment it appears cap-and-trade is a reality the aviation industry must learn to live with, whether or not it actually improves the earth's atmosphere.

This article appeared at Globe-Net.com and at GreenBiz.com