People in business often speak of NGO's in a kind of wide eyed way, a mixture of fear and curiosity, but most vastly under estimate their capability. Granted, NGOs are as diverse as businesses - some are hopeless, some perform magnificently. For illustration of the latter & the potency of a sophisticated and intelligent NGO, then look no further than the work of London based The Climate Group on aviation.
The Climate Group has only gone and peeled away British Airways, Cathay Pacific, Air France / KLM and Virgin Atlantic from their industry associations and instead helped forge a more progressive response from these cariers on climate change. The so called Aviation Global Deal (AGD) group now risks leaving their representative bodies and especially their US competitors looking a little out of touch on climate change. This is all happening at crucial moment in time where it is hoped a global deal on CO2 to replace the Kyoto framework will be agreed in Copenhagen in December. This week at a Bonn conference of UN climate change negotiatiors the AGD outlined the following proposal:
- international aviation CO2 emissions should be addressed through a global sectoral agreement rather than a patchwork of regional initiatives, in order to avoid carbon leakage and maintain a level playing field
- a global target is set for the sector, to ensure it plays its part in global CO2 emissions reductions
- this is achieved through a ‘cap and trade’ emissions trading mechanism, where the sector has open access to global carbon markets
- an airline’s CO2 emissions is based on the carbon content of its annual fuel purchases and the use of sustainable, lower life-cycle carbon alternatives are incentivised
- an international body administers the system
- any revenue generated from auction of a proportion of CO2 allowances is used for climate change adaptation and mitigation activities in developing countries and also research into greener aviation technology
A global deal on carbon emissions has been elusive with each nation fearing market distortion and carbon leakage in this most international of international businesses. Mind you the European carriers have incentive here to level the playing field since the EU Emissions Trading Scheme is set to extend to aviation from 2012. Individual European carriers have shown individual leadership with Virgin running trials on alternative fuels and British Airways set itself a target to reduce net emissions by 50% by 2050.
I spoke to Nancy Young, Vice President of Environmental Affairs at the Air Transport Association which is the designated mouth piece for all the US carriers on this issue. Her organisation cannot endorse the idea of mandatory emissions reductions through economic instruments such as emissions trading. Her view is that the airline industry is already incentivized to save fuel & reduce costs so no additional measures are needed. And with ATA claiming 8% of GDP attributable to aviation compared to the industry 3% share of greenhouse gas emissions, well, the industry group feels it has already done its fair share of the heavy lifting. At any rate, ATA members have committed themselves to improve fuel efficiency by a further 30% by 2025.
Nancy is right in so much as the industry world wide has seen a real step change in operating efficiency through fleet renewal to more modern and efficient craft. The trouble is that whilst emissions per flown mile has fallen, the actual flown miles has exploded. The EU estimates that whilst EU emissions overall between 1990 and 2002 have fallen by 3%, emissions from aviation over the same period grew by 70%:
Even though there has been significant improvement in aircraft technology and operational efficiency this has not been enough to neutralise the effect of increased traffic, and the growth in emissions is likely to continue in the decades to come.
Just how far the Obama administration is willing to go to protect US carriers from a global deal which might restrict aviation growth and cheap fares for the masses remains to be seen. But it does not look promising if we pay heed to the words of Todd Stern, Obama's special envoy on climate change as reported in the FT yesterday during his visit to the same conference in Bonn this week
.....high carbon goods and services will become untenable....How good will the business judgment of companies that make high carbon choices now look in 5, 10 or 20 years....?
The aviation industry groups seem to be caught behind the eight ball on climate change without consensus and the US carriers maybe playing a wait and see game. Meanwhile The Climate Group, with this initiative, has opened up a flank and just played a blinder. The only way now to reach consensus is for the rest of the industry to step forward as it is hardly feasible for the AGD group members to climb down.
And that is what NGO's do best, find the critical margin and drive it to tipping point. The champagne is bound to be flowing around Waterloo after this master stroke.