Tuesday, April 19, 2011

Celebrate Earth Day - Fly a Jet

Forget the BP oil spill in the Gulf of Mexico. 

When it comes to the environment, airlines are a natural target of public concern about the emission of carbon dioxide (CO2) and other greenhouse gases

Some officials report that the transportation sector contributes 32 percent of all CO2 emissions, 12 percent of which (e.g., 3 to 4 percent of total CO2) are attributable to aviation. 

Statistics aside, "going green" in aviation circles is big business as energy and power are commodities these days.

Specifically, to address climate change and reduce aviation’s “footprint,” European Union (“EU”) regulators have instituted a market-based cap-and-trade and emissions trading scheme (“ETS”).  It goes something like this:

Consider two companies, A and B, both of which emit significant quantities of a given pollutant.  Their emissions may damage air quality, and the relevant authorities may decide that emissions should be reduced by a given amount, say by 10 per cent.  At first glance, the solution seems simple: both A and B cut their emissions by 10 per cent.  But in the real world, this may impose very different burdens on the two companies.  For example, company A may, by the nature of its activities, be able to reduce its emissions by 10 per cent or even more at relatively low cost. Company B, on the other hand, may find this a difficult and costly process.  It is this potential difference in reduction cost between A and B that creates a market opportunity.

The EU’s ETS is controversial.  For example, under ETS, if a U.S.-operated airliner travels from Los Angeles, California, across the entire United States, over the Atlantic Ocean, over Great Britain, and through the airspace over mainland Europe, to its final destination in Ankara, Turkey, only a small portion of the airplane's journey was over Europe, yet it may be taxed over the entire journey.

Meanwhile, here in the United States, airlines such as JetBlue tout green initiatives that invite passenger to do something about the environment -- including a program inviting passengers make a donation to offset the carbon footprint created by their flight, which some services claim to calculate.

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