Thoughts on climate change and impact on aviation

5th November 2021

When forecasting future demand for air travel it is now more important than ever to recognise that the issue of climate change could have a significant impact on the aviation industry.

Aviation emissions have doubled since 1990 to 1 billion tonnes and account for 12% of all transport emissions. In September 2021 IATA announced that its goal was to be net-zero by 2050 despite forecasting that annual traffic will grow by 2.6% CAGR from 4.5 billion passengers in 2019 to 10 billion in 2050.

In the short term, the recovery from Covid-19 will likely have a larger impact than sustainability issues on air travel demand and where the traditional correlation between air transport and GDP growth will be more nuanced.

However, in the next decade decisions made by governments and global corporations will be critical in determining the sustainability of the global economy.

On 3rd November 2021, at the COP26 climate summit in Glasgow, the UK Chancellor Rishi Sunak announced that 450 companies controlling 40% of global financial assets – equivalent to $130tn (£95tn) – have agreed to commit to limit global warming to 1.5C above pre-industrial levels.

The aviation industry will need to be resolute in finding and mapping out the effective ways of decarbonising with a scalable increase in the use of sustainable aviation fuel (SAF) and developing new technologies including hydrogen and electric fuel cells. IATA’s strategy to achieve net zero emissions requires SAF to contribute two thirds of the reduction in emissions together with carbon off-setting, new aircraft technologies and efficiencies in operations and infrastructure.

While cost of air travel will likely increase in the future, the absolute demand level could be expected to continue to increase. However, policymakers and regulatory authorities will need to ensure that aviation demand can continue to grow sustainably.

If the timeline of measures towards the net-zero path proposed by the aviation industry is delayed, this could see the introduction of demand management policies or regulation in the form of taxation (binary or hypothecation) in the future, which could risk suppressing long-term air travel growth.

Long-term air travel demand forecasting will need to be scenario-based, looking at traffic and destination mix on an airport level driven by the traditional macroeconomic drivers as well as incorporating the dynamic impact of market-based environmental taxes, fuel and other potential cost of implementing the new technologies in the future.

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