Emissions Trading & Sustainability

1. Emissions Trading & Sustainability Sam Barone, President & CEO Air Transport Association of Canada September 16, 2007 ICAO-McGill University Institute of Air and Space Law Aviation Safety, Security & The Environment: The Way Forward Conference Montreal, Quebec

2. Presentation Outline • Aviation and the environment: Clearing the Air • Operational Measures to consider before ETS • ETS & Sustainability: The need for Balance • ETS: Considerations for Public Policy makers • Conclusions

3. Aviation and the Environment: Clearing the Air • The air transport industry is under attack by environmentalists. • Exaggerations of our industry’s role in climate change abound – Bishop of London has said flying is a sin. • Aviation’s environmental impact is small, but increasingly in the spotlight. • Response is to tax and ground aviation, with no regard to financial, social and economic impacts or sustainability!

4. Aviation and the Environment: Clearing the Air (2) • Fuel has become airlines’ largest operational cost, creating a strong incentive to: • Operate modern aircraft and accelerate technological progress. • Shorten air routes, open new ones i.e. polar direct tracks. • Aviation needs international standards and global policies, not unilateral, piecemeal short sighted fixes. • In Canada, Transport Canada and ATAC have a voluntary agreement for fuel efficiency gains and Greenhouse Gas reductions.

5. Operational Measures Before ETS • Aviation industry committed to reduce environmental impacts by improving operational efficiency and harnessing future technologies. • Before considering ETS, need to harness the scope in better ATC management at national, regional and local levels to generate efficiencies. • Better routings, result in better aircraft utilization and less fuel burn and emissions.

6. Operational Measures Before ETS (2) • Aviation needs better infrastructure enhancements – fuel is wasted on the ground. • Congestion and capacity shortages hamper environmental improvements • Flying greener approaches i.e. Continuous Decent approaches • Continue R&D in aircraft technologies – power plants and materials. • Alternative fuel development – PROSENE; Synthetics, Hydrogen based fuels.

7. Sustainability A Need for Balance • Sustainable development calls for a balance and is linked to economic, social and environmental sustainability.

8. Sustainability A Need for Balance (2) • Sustainable development calls upon aviation to meet the growing demands of our customers in a sustainable manner, balancing economic progress, with social development while being environmentally responsible. • Policy makers need to recognize the role of aviation in a sustainable economy.

9. 9 Sustainability Juggling Impacts NOx Emissions Airlines Noise Fuel Cost GHG Emissions Canada and the World Airports ANS Providers Local Communities Transport Canada Economic, Social, Environmental

10. ETS: Public Policy Considerations • ETS impact assessments may not reflect market realities. • Airlines are already treated as cash cows. Assumption that airlines can pass on costs to its customers without affecting demand is not accurate. • Cannot compare ETS economics of aviation with other regulated or unregulated sectors of the economy. • Airline profitability will also be impacted because of reduced demand and increased costs of ETS.

11. ETS: Public Policy Considerations (2) • In general, consumers will also be impacted. • Less choice, service limitations, frequency reductions, reduced range of services. • Service to northern and remote airports may be compromised. • ETS could lead to market distortions.

12. ETS: Public Policy Considerations (3) • For Canada with its vast territory service to northern and remote points is essential. • Cannot transplant EU solution to Canada, with small population and vast territory. Inter-modal substitution is not an option as in EU. • Economies require connectivity, ETS could reduce or even eliminate connectivity and positive economic impacts. • Puts sustainability at risk from economic and social perspective i.e. Tourism and regional development

13. The Way Forward • Many Policy Options being considered • Options include Economic instruments to tackle climate change impacts of aviation: Fuel taxes, emissions trading, emission charges, air passenger duties. • Canadian industry view is that we should exhaust other avenues before we undertake another cash grab from an industry treated as a cash cow.

14. The Way Forward (2) • Industry advocates technological solutions to develop more fuel efficient aircraft and engines with lower emissions. • Operational measures such as better routings and ANS. • Carbon offsetting where Passenger decides to mitigate the environmental footprint of their travel. WestJet and Air Canada have implemented different forms of this.

15. The Way Forward (3) • All aviation industry players must work together to : • Agree on a global approach to further improve environmental performance; • Better communicate their environmental achievements and commitments; • Improve public acceptance; and • Drive proactive, voluntary and innovative solutions.