The airline industry doesn’t really have a plan or immediate technological solution to address its climate impact. Currently, flying accounts for only 2.4% of global CO2 emissions. The problem is passenger numbers are projected to double to 8.2 billion by 2037, and at this rate it could consume a quarter of the carbon budgeted to limit the global temperature increase to 1.5C by 2050 (Carbon Brief).

Factors affecting the emissions intensity of an airline include fleet age, seat density/passenger load (well done Ryanair, but you were still Europe’s 10th largest polluter in 2018), and the mix of long-haul versus short-haul routes. Fuel typically comprises 25% of an airline’s operating expense, so there is a massive incentive to increase fuel efficiency. Airlines have managed to make considerable progress in reducing emissions by improving the efficiency of their aircraft, but this is dwarfed by increasing demand.

It’s convenient to dismiss ‘flygskam’ or #flightshame as virtue signalling. But consider how societal concerns regarding plastic have shifted radically and in short order. Air travel is on track to become the new coal within three decades if the predicted cuts in other sectors materialise. Flying accounts for 17% of an average household’s greenhouse gas emissions, but the real problem lies with the 10% of us who take four or more flights each year.

Short-term, the industry is pitching carbon offsets as a partial solution. From 2021, CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) will require participants to offset their emissions. All airlines which operate between two volunteering states will be subject to offsetting requirements.  As of January 2019, 78 countries had volunteered to participate, including the US, UK, and Saudi Arabia (but not China, Brazil or India).  The carbon offsetting business is probably a good place to be right now, though the scientific merit of the approach is often questioned.

Material technological solutions are some way off. Alternative fuels may be part of the solution – fuel-electric hybrid technologies appear closest (late 2020’s) and UBS estimate that fuel costs could be reduced by as much as 40% versus a conventional aircraft, even allowing for higher battery costs and ground handling fees.

We have previously talked about climate tipping points. The industry risks being singled out more and more as other industries reduce their emissions. This probably means greater risk of taxation, a quick and easy solution beloved by governments. France recently imposed a new ‘eco-tax’ on all airline tickets for flights departing from French metropolitan airports by 2020. Aviation is critical in fostering economic growth, connecting businesses and travellers, providing important tourist income and supporting humanitarian missions. But as Richard Gustafson, CEO of Scandinavian Airlines (SAS) recently stated, climate change undoubtedly presents, “an existential question”.

About the author

Ryan Smith is Head of ESG Research. He joined Kames Capital in October 2000 as an SRI analyst and was appointed to his current position in September 2002. He has 18 years’ industry experience*. His role involves managing the team that conducts the ESG screening process for our Responsible Investing funds. Ryan’s team also provides corporate governance screening and research for all equity investments, and conducts research into environmental and social issues. Before joining us, he worked as an environmental chemist for Severn Trent Water. Ryan has an MSc in Environmental Chemistry from Nottingham Trent University and is a CFA charterholder.  *As at 30 April 2019.

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