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CAN AVIATION TURN THE SKIES BLUE?
Fawzy Salarbux
Global head of consultant relations at Candriam
“Blue skies smilin’ at me, nothing but blue skies do I see” – sang Ella Fitzgerald in 1958.
Through responsible capital allocation decisions, investors can help ensure that our finite CO₂ budget is spent to maximise inves- tor return and benefits for all stakeholders – and perhaps even turn the skies blue again. The Covid-19 crisis has created a once-in-a-generation window of political opportunity to tackle other global issues with bold and far- reaching measures.
The predicament of the airline industry is a case in point. As air- line companies line up to receive state aid, governments are in a strong position to ensure that financial support is conditional on reducing greenhouse gas emissions (GHG). Governments around the world are providing aid or even (re)-nationalising airlines, such as in Italy. In late April, France’s government linked financial support for Air France-KLM to climate goals. The Dutch and Aus- trian governments are also expected to make reducing emissions a condition of airlines receiving state aid. At the same time, the US government did not impose any conditions. Analysts estimate that the Covid-19 crisis will result in a 5% drop in global CO₂ emissions in 2020. Sadly, this decrease is not structural; it is entirely the result of political decisions around the world to sus- pend economic activity to slow the spread of the virus. Air transpor- tation contributed at least 2.5% of global CO₂ emissions in 2019. This figure is merely emissions from aircraft engines measured at ground level; recent studies warn that aircraft contrails at cruising altitude could double the impact. Under even the rosiest scenario of energy efficiency and progress in other areas, annual global air transport’s CO₂ emissions will be 50% higher in 2050. Air passenger growth is forecast at 3.5% annually over the next two decades, per IATA. Experts think this could be partially offset by about 1% in annual energy efficiency. Such continued rapid growth in passengers would likely result in continued growth in airline industry CO₂ emissions. A simple model of net CO₂, that is emis- sions expected from air passenger growth compared to reductions arising from future improvements in aircraft efficiency, demon- strates that much bolder measures are required for the sector to decarbonise.
A European citizen flying from London to New York roundtrip causes as much CO₂ emissions over his 12 hours of flying (2.4 tons) as a family car will over an entire year. This one roundtrip flight is roughly the total GHG budget for each European for the year 2030, to meet the 2-degree global warming goal.
16 May 2020 portfolio institutional roundtable: ESG
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