The Stakes, the Current Situation, and
Possible Options
Institutions and policy makers have only recently launched the international basis for coherent environmental actions. Meanwhile, the increase in the volume of traffic has outstripped technological efforts to reduce emissions. Consequently, the global environmental impacts keep on growing, and the transportation sector is generating significant external [1]costs.
If road occupies by far the first rank in transport externalities, aviation’s share has been growing steadily in recent decades, and projections show that this trend will continue. Among external effects caused by the development of air transport, climate change appears to be the main component. This occurs principally via the production of carbon dioxide, but also of nitrogen oxides and the formation of condensation trails. The International Panel on Climate Change estimated the overall effects of these emissions in terms of radiative forcing[2]. In 1992, the aviation sector was considered responsible for 3.5% of the total radiative forcing effects, and the share was projected to grow to 5% in 2050. Furthermore, as aviation is not covered by the Kyoto protocol, aviation could, depending on the regional emissions repartition, be responsible for much greater shares of emissions in some countries.
Up until now, environmental policies have, with a relative success, mainly focused on “command and control” options to curb these effects. However, the scope of environmental impacts and the increasing trends are such that several measures (technical improvements, direct regulations and economic incentives) will have to be combined for greater efficiency.
In this study, we have reviewed the range of possible economic actions. It appears that the three main candidate options to curb aviation environmental impacts are fuel taxation, emissions trading[3], and environmental charges.
The airline industry’s preference is for emissions trading, the solution which would allow maximum flexibility in the management of externality reduction. While precise means and calendars for implementation are still uncertain, it now seems clear that, the framework set by the Kyoto protocol, the existence of ICAO, and the European Commission's increasing involvement in setting policies for the aviation sector will accelerate the introduction of "mixed" environmental policies.
For further information
please contact Ted
Elliff or Nadine
Pilon.
Society, Environment
and Economics (SEE) Business Area
[1] In economics, the term "externality" is defined as the production, or consumption, of one good by one agent, that affects other agents without any market exchange between both parts. In the case of aviation, aircraft emissions and noise around airports clearly fit in this economic definition.
[2] “Radiative forcing is a measure of the importance of a potential climate change mechanism. It expresses the perturbation or change to the energy balance of the Earth-atmosphere system in watts per square metre (Wm-2). Positive values of radiative forcing imply a net warming, while negative values imply cooling. » IPCC report.
[3] Emissions trading can take two different forms. Either it consists in allowing to exchange polluting permits in a framework capping the global amount of pollution (this is called “cap and trade” scheme). Or, it consists in defining a minimum performance standard (which can be expressed in relative value) where the actors earn polluting permits when they perform better than the standard, and it is then called a “baseline and credit” scheme.