World Economic Forum report identifies biofuels as the ‘game changer’ to achieve aviation emission targets

Date added: 25 May, 2011

The report says it is unlikely that governments will be able to provide all the
necessary funds for the implementation of the necessary technological and infrastructure
improvements and it will require the involvement of capital markets, private equity
and, for developing countries, the multilateral development banks to fill in the
financial gaps.

“Significant leadership opportunities need to be taken by the industry to ensure
it can grow and still reach its CO2 targets,” says the report.

It advises the industry to inform and educate policy-makers on the criticality
and urgency of implementing aviation infrastructure improvements such as the US
NextGen and the Single European Sky air traffic management projects. Industry
should also work with policy-makers to develop financial and legal incentives
to increase investment into incremental R&D for radical new aircraft technologies
and to drive vertical partnerships with stakeholders along the entire biofuel
value chain.

It also calls for industry to actively engage and support governments working
with ICAO in the development of a global sectoral approach on market-based measures
for aviation through partnerships with experts from the carbon finance community,
and ensure that any measures that are developed focus on incentivising the parties
best placed to make the CO2 abatement investment.

Positive fiscal incentives are seen as having the most potential to increase
investment in reducing carbon by the aviation industry. Given that the report
had a considerable input from airline and aviation interests, it unsurprisingly
rejects green taxes and levies that are currently being implemented or discussed
in different countries. It cautions that “taxes usually result in a net outflow
of funds from the industry that inhibits investment in CO2 reduction projects.”

The report argues that only a limited indirect effect on emissions reduction
is likely to occur with such measures through the cost increase of air travel
if carriers pass costs on to customers and the resulting likely slight decrease
in air traffic. “In addition, the potential macroeconomic effect of more expensive
and thus reduced air travel on GDP and economic development must be considered,”
it says, adding that aviation is an important enabler for the trade of goods,
tourism, services and the socioeconomic development of nations.

“The sector’s move to biofuels requires significant investments to achieve a
quantum leap in technology and increase production,” he said. “The necessary market
dynamics will only develop if governments set the right incentives for the agricultural
sector, energy producers and the airlines to incubate a global aviation biofuel
production system. Due to the early stage of development and high risks involved
with aviation biofuels, a new innovative approach of all involved stakeholders
is required.”

The Geneva-based World Economic Forum said it hopes the report will lead industry
and government stakeholders to engage in a wider discussion among themselves and
with non-governmental communities to “build a practical enabling environment that
should be conducive to catalysing a step change in private sector action to decrease
aviation CO2 emissions, develop and deploy revolutionary existing and new technologies,
and provide sustainable investment choices at scale and speed.”

The report is the outcome of a year-long collaboration among leaders in the aviation,
energy and financial services industries, governments, universities and international
organisations.

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Posted: Wednesday, May 25th, 2011. Filed in Biofuels News.