November 2008
Issue: 5
The Interplay of Economic and Environmental Issues
 
A few months ago, it seemed pretty clear how a President Obama might lead environmental policy: fast action on cap and trade for green house gas (GHG) emissions. With the economy now taking center stage, it is less certain how this scenario will play out. By watching the discussions regarding aid to the auto industry one can see how policy makers (if not the captains of industry themselves) are directly linking actions on the environment with boosting the national economy by tying financial assistance (and saved jobs) with more aggressive progress on automotive fuel economy. This theme is likely to be repeated as economic/environmental policies of the new administration take shape. Indeed, Barbara Boxer, Chairman of the Senate Environment and Public Works Committee, held a press conference in late November in which she told of her plans to introduce two pieces of legislation in January 2009. The first would create a $15 billion grant program to promote clean energy (including "advanced" biofuels). The second would direct the EPA to develop a national cap and trade program. This second bill would basically supercede the Warner/Lieberman bill that was previously the focus of Senate discussions. She also announced that the first hearing that her committee would hold in 2009 would be entitled "How Fighting Global Warming is Good for the Economy and Will Create Jobs".

We can expect similar, aggressive action in the House of Representatives as Congressman Henry Waxman takes over as Chairman of the Energy and Commerce Committee. Waxman is widely viewed as being more "pro" environment than the previous chairman, John Dingell. While concerns for the economy would tend to encourage legislators to be cautious in implementing regulations for GHG, the combination of successfully linking economic benefits with dealing with global warming and a newly emboldened team of legislators could mean quick action on GHG regulations. The auto executives have learned that this new economy/environment linkage means fewer executive jets.

Hopefully the rest of us can be more proactive in how we deal with aviation/environmental issues. Perhaps by being "carbon neutral"?
 
Jeff Witwer Signature
News from the US US Map

California took the next step in implementing its AB32 by releasing the Proposed Scoping Plan in October. The next step in implementing this plan will be a public hearing scheduled for December 11. The elements of this current plan that could most likely impact aviation directly are those contained in its "low carbon fuel standard", but the details of this component are yet to be worked out. Also, the plan contains provisions for a "cap and trade" program, that would include carbon offsets. Such provisions could be applied to aviation but these are yet to be defined and would not likely become a factor for several years into the program. These California regulations are widely viewed as a model for those that might be adapted at the national level. This logic is even stronger now that two Californians are in position to lead congressional environmental actions (Senator Boxer and Congressman Waxman), and with Mary Nichols, head of the California Air Resources Board, on many short lists to head the EPA.

Take this as a sign that at least some markets are working: with the softening economy, the cost of carbon offsets has been falling. As companies cut back, they reduce their energy use, so that those that are managing their GHG require fewer offsets. In contrast, the supply of offsets is, at least in the short term, relatively inelastic as projects continue to generate offset credits. As a result, the price of exchange-traded offsets in the US has fallen over the past few months. On the Chicago Climate Exchange, the price has fallen from about $5.00 per metric ton this past summer to about $1.50 today.



News from Overseas Globe

The transport ministers of the European Union are scheduled to meet on December 9 to decide how airlines will participate in Europe's Emission Trading System (ETS). Starting in 2012 airlines would be required to purchase permits equivalent to 15% of their emissions based on an allocation using average traffic data from 2004-2006. These permits, referred to as EU emission allowances (EUAs), currently sell between $20 to $25 per metric ton. The main issue that the airlines face is how rapidly the percent of required purchases will grow. The environmental ministers of the European Parliament want the airlines to purchase 100% of their permits by 2020. One airline, Air France, has claimed that this will cost them over $1 billion per year by 2020 ... money that could otherwise be invested in more efficient, lower polluting aircraft.

How these rules would apply to business aviation is even more contentious, as they could apply to even single trips from the US to Europe. A good summary of the complexity and potential cost of these regulations is found in the October issue of Business and Commercial Aviation.


Aviation Technology Jet Engine 100

In mid October, the EPA issued new regulations covering lead in the atmosphere, reducing the allowable level to one tenth its former level. This rule by itself would not need to have significant impact on GA, since probably all airports would remain in compliance. (The rule applies to regional air quality, not the exhaust pipe of emitters.) Nevertheless, this development at the least can create yet another environmental problem for GA in the minds of the public. A positive result of this event is that it further increases interest in finding an long-term alternative to 100LL.

While it does not directly address the avgas issue, progress continues in developing JetA replacement fuels from non-food bio-feedstock. Two companies have recently announced that their fuels meet ASTM standards for aero turbine fuel. This standard is important because it means that the resulting fuels can be blended and shipped with traditional crude oil-based JetA, thereby simplifying their introduction. Solazyme, a California-based startup, uses enhanced biological processes to break down a variety of bio-feedstocks, including algae, switchgrass, and bagasse. UOP, a subsidiary of Honeywell, was founded in 1914 and has extensive experience in developing new processes for the oil and chemical industries. A 50/50 blend of its fuel, which also meets ASTM standards, will be tested in an Air New Zealand 747 on December 3. UOP's fuel is derived from the oil of jatropha plants, which can be grown in arid climates.



In This Issue
News from the US
News from Overseas
Aviation Technology
Feedback
Carbon Neutral Plane in the News


Our analysis of GA's shrinking carbon footprint was quoted in the December 2008 issue of Flying Magazine.

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