Towards True Climate Neutrality for Global Aviation: A Negative Emissions Fund for Airlines
1.1. The Urgency of Making Aviation Climate Neutral
1.2. Hypotheses and Methodology
2. Literature Review
2.1. Large and Growing Climate Impact of Aviation
2.2. Long-Term and Short-Term Climate Impacts
2.3. The Possible Contribution of Alternative Fuels
3. Reducing the Climate Impact of Aviation
4. Paying for Negative Emissions
4.1. From a Country to an International Air Transport Perspective
- Growth rate: aviation is projected to continue increasing emissions for decades unless the whole model changes, most likely as a result of change being imposed from outside. Rich countries’ territorial emissions have been falling since at least 2005 and some since 1990, and other countries are expected to peak soon and then start decreasing.
- Non-CO2 climate effects of aviation, on average, triple the climate impact. For countries, this impact is much smaller, a fraction of the impact of CO2, mainly due to methane and nitrous oxide. However, due to their short-lived nature, these non-CO2 effects will have a much lower impact if air travel starts declining, and a disproportionately large impact if current growth continues.
- Territoriality: it is unclear who is responsible for emissions in international airspace or when briefly flying over a third country.
- High-risk business/high default rate: due to high fixed costs, deregulation, cyclicality, and highly variable fuel costs, airlines are a very risky business. Additionally, due to the difficulty of getting creditors to pay across jurisdictions, any payment to a future negative emissions fund would need to happen almost immediately, possibly even as a pre-payment before flights.
4.2. Proposed Concept
- The contraction phase: airlines must contract flights by at least 2.5% p.a. until 2050, as a condition for continued participation in NEFA. The 2.5% figure is the minimum to ensure the short-lived non-CO2 effects balance the CO2 emitted (Klöwer et al. 2021). However, when the contraction phase ends, this effect stops and the long-lived CO2 must still be removed, which is the purpose of the payment into the fund.
- The steady-state phase: after a period of stabilization (which we do not model here), the short-lived non-CO2 effects will stop affecting the climate; only long-lived GHG (in our model only CO2) must be removed.
4.3. Model and Assumptions
- Fund launch 2025.
- 2025 CO2 aviation emissions: 1000 Mt.
- Flights (i.e., RPK) reduction of 7.3% p.a. from 2025 until 2050.
- Flight CO2 emissions reduction of 8.8% p.a. from 2025 until 2050, including efficiency gains of 1.5% p.a.
- Emissions stabilization in 2050 at 100 Mt CO2.
- CO2 payments increase by 5% per quarter from 2025 to 100% in 2030.
- First year of negative emissions: 1 Mt in 2026.
- Annual growth of negative emissions for 10 years: +50%.
- Annual growth of negative emissions after 10 years: +25%.
- Max annual negative emissions available for aviation (cap): 400 Mt.
- Negative emissions cost: $400/t CO2 including project governance, in 2025.
- Negative emissions cost: $250/t CO2 including project governance, from 2050.
- Interest rate: 2.00%.
- All prices and costs are adjusted for inflation (our model uses constant 2021 US dollars).
4.5. Sensitivity Analysis and Robustness
5.1. Country vs. Airline Perspective, Nature of Risks, Role of Markets
5.2. Failure of CORSIA
5.3. History of Broken or Forgotten Promises
5.4. NEFA Governance and Participation Enforcement
6. Discussion and Conclusions
6.1. Can NEFA Be Implemented in the Real World?
6.2. Conclusions—A New Vision for Aviation
Data Availability Statement
Conflicts of Interest
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|Sensitivity Analysis||Range of Parameter||CO2 Price|
|Σ CO2 Removal Payments|
|Removed All Excess CO2 by Year|
|Simulation parameters||Baseline||Min.||Max.||Min. param.||Max. param.||Min. param.||Max. param.||Min. param.||Max. param.|
|Emission reductions p.a.||8.8%||2.5%||10.0%||160||239||9651||2953||2136||2069|
|Reductions, narrower range, p.a.||5.0%||7.3%||196||218||5177||3772||2091||2077|
|Final emissions [Mt/p.a.]||100||50||150||231||227||2979||3717||2069||2076|
|NE growth 2027-36||50.0%||33%||60%||203||246||3326||3217||2078||2068|
|NE growth 2037+||25.0%||10%||50%||204||243||3401||3228||2080||2069|
|Max removals [Mt p.a.]||400||200||800||186||249||4629||2897||2128||2057|
|Removal cost in 2025 [USD/t]||400||300||600||222||245||3173||3422||2072||2072|
|Removal cost from 2050 [USD/t]||250||200||300||190||270||2671||3841||2072||2072|
|Interest rate p.a.||2%||1%||3%||269||196||3256||3256||2072||2072|
|Interest rate, extreme range||0%||4%||314||168||3256||3256||2072||2072|
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Nick, S.; Thalmann, P. Towards True Climate Neutrality for Global Aviation: A Negative Emissions Fund for Airlines. J. Risk Financial Manag. 2022, 15, 505. https://doi.org/10.3390/jrfm15110505
Nick S, Thalmann P. Towards True Climate Neutrality for Global Aviation: A Negative Emissions Fund for Airlines. Journal of Risk and Financial Management. 2022; 15(11):505. https://doi.org/10.3390/jrfm15110505Chicago/Turabian Style
Nick, Sascha, and Philippe Thalmann. 2022. "Towards True Climate Neutrality for Global Aviation: A Negative Emissions Fund for Airlines" Journal of Risk and Financial Management 15, no. 11: 505. https://doi.org/10.3390/jrfm15110505