Carbon abatement in UK aviation

85 Pages·2017·1.28 MB·English

Carbon Abatement in UK Aviation
Final Report
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Report for Department for Transport
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ED 10281 | Issue Number 1 | Date 17/10/2017
Ricardo Energy & Environment Carbon Abatement in UK Aviation | i

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Gareth Horton, Sam Levin, Elena Guidorzi
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Michael Mann, Bethan Owen, David Lee,

Margaret-Ann Splawn

Approved By:
Sujith Kollamthodi
Date:
17 October 2017
Ricardo Energy & Environment reference:
Ref: ED10281- Issue Number 1

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Executive summary
A study has been performed by Ricardo Energy & Environment, together with our partners SYSTRA
Ltd., Gaia Capital Ltd., Michael Mann, Bethan Owen and Prof. David Lee, to assess policies that
could be used to reduce carbon in UK aviation and to provide the cost and abatement data needed for
DfT to produce updated marginal abatement cost (MAC) curves for the UK aviation sector.
This is the final report on the study.
The aim of the study was not to recommend future Government policy, but to assess a range of
measures that could be implemented in the future depending on the aims, objectives and priorities of
the Government at the time. Although the report considers polices that are considered technically
feasible, based on discussions with DfT and other Government Departments, and a high level
description of each is provided, detailed consideration has not been given to the precise mechanisms
by which they would be implemented.
The assessment of the abatement produced by the policy measures used the DfT aviation modelling
framework. The assumptions included in the baseline calculations (those representing the case in
which there is no further policy action) were reviewed and recommendations were made for updates
to be made to the calculation. These were implemented by the DfT and the updated model was used
for the baseline and policy measure calculations using the model.
Three baseline calculations were used in the study, based on low, central and high forecasts of oil
and carbon prices, as published by BEIS.
A number of policy measures were considered for this study. They were assessed for their feasibility
and those that were considered feasible were taken forward to the quantitative analysis. In each case,
three levels of policy ambition (low, mid and high) were assessed. The policy measures analysed in
this manner were:
 Increased R&D in more efficient engines and aircraft
 Early fleet replacement with more fuel-efficient aircraft
 Improvements to the ICAO CO emissions standard
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 Reduced aircraft cabin weight
 Regulation of aircraft types operating from UK airports
 More efficient ground movements
 Increased use of biofuels
The potential impact of these policy measures on the CO emissions from flights departing from the
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UK was identified and supplied to DfT for inclusion in the aviation modelling framework. The model
then calculated the emissions in future years so that the abatement could be derived.
The approach to implementing the impact of the different policy measures included changes to the
assumed fuel efficiency of future aircraft types, changes in the assumed retirement ages, changes to
the years in which aircraft types were phased out of UK operations and changes to the CO factors
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applied to the fuel consumption.
The calculation of the costs of the measures included implementation costs (such as the cost of the
increased R&D or the increase in aircraft acquisition costs), the change in fuel costs and the change
in the costs of carbon. In most cases, the policy measure led to a reduction in fuel consumption,
giving negative changes in fuel and carbon costs.
The CO abatement, implementation costs and fuel costs were used to calculate cost effectiveness
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values for each policy measure. Following guidance published by BEIS, the reduction in the costs of
carbon was not included in the calculation of cost-effectiveness. The cost effectiveness values were
based on total (discounted) values between 2017 and 2065.
The increased R&D measure was found to have a poor cost-effectiveness. This is primarily due to the
UK bearing all the costs of the measure, but only identifying a small part of the benefits (as the more
efficient aircraft types would be sold and used globally).

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The early fleet replacement and regulation of aircraft types policy measures also gave high cost per
tonne CO saved values, due to the high costs incurred by airlines in acquiring additional aircraft. The
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abatement under the policy measure for the regulation of aircraft types was the highest of all the
measures considered, but the airline costs were also very high.
The policy measure related to the increased use of biofuels was found to have a good cost
effectiveness if the reduction in the costs of carbon was included in the calculation, but was less good
when it was not (in line with BEIS guidance). This was because the biofuels were assumed to be
more expensive than fossil-fuel-based kerosene, but they were also assumed to be exempt from
carbon pricing.
The policy measure related to an improved ICAO CO standard was found to have a good cost-
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effectiveness, but there is considerable uncertainty regarding the ability of the UK to unilaterally cause
such an improved standard to be agreed.
The policy measures on reduced cabin weight and more efficient ground movements were also found
to have good cost-effectiveness as the overall costs are low (or even negative due to the savings in
fuel cost) and the abatement of CO emissions is similar to most of the other measures.
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As well as having different values of cost-effectiveness, as calculated using the assumptions
employed in this study, it is clear that there are differing levels of uncertainty around the
implementation and results of the policy measures. The implementation of the increased R&D policy
measure would depend on the research community and aerospace industry responding to the policy
and increased funding, giving an uncertainty around the ability to implement the aims of the policy.
Equally, research is an uncertain process and it is not certain that an increase in research efforts
would necessarily deliver the desired improvements in fuel efficiency.
The policy measures that would be implemented through action by airlines, such as the early fleet
retirement or the reduced aircraft cabin weight measures, could bring challenges in implementation,
especially as many of the airlines that would be affected are not registered in the UK.
Other policy measures, such as the more efficient ground movements or increased biofuels
measures, are more likely to deliver the expected results in reduced fuel consumption and/or reduced
net CO emissions when implemented. They are also likely to be easier to implement through
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unilateral policy action by the UK, as they depend less on international collaboration
The cost and abatement results from the analyses have been supplied to DfT for incorporation into
updated MAC curves. These updated MAC curves will be reported separately by DfT in a forthcoming
report.
This study was guided by a steering group that consisted of members of the DfT and other
Government departments and a team of independent peer reviewers. The steering group provided
regular feedback on the direction of the study, the policy measures selected, the analysis
methodology and the results obtained, as well as on the preparation of this report.

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Table of contents
1 Introduction ................................................................................................................... 1
1.1 Study quality assurance ..................................................................................................... 1
2 Marginal Abatement Cost Curves ............................................................................... 2
3 DfT’s aviation modelling suite ..................................................................................... 3
3.1 Model baseline assumptions review .................................................................................. 5
3.2 Aircraft-level fuel burn modelling ........................................................................................ 6
3.3 Baseline definition .............................................................................................................. 8
3.4 No policy-action baseline ................................................................................................. 12
4 Policy measures ......................................................................................................... 14
4.1 Increased R&D in more efficient engines and aircraft ...................................................... 15
4.2 Early fleet replacement with more fuel-efficient aircraft ................................................... 22
4.3 Improvements to the ICAO CO emissions standard ....................................................... 26
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4.4 Reduced aircraft cabin weight .......................................................................................... 30
4.5 Regulation of aircraft types operating from UK airports ................................................... 34
4.6 More efficient ground movements .................................................................................... 38
4.7 Increased use of biofuels ................................................................................................. 43
5 CO abatement results ............................................................................................... 49
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6 Policy measure costs ................................................................................................. 52
6.1 Implementation costs ....................................................................................................... 52
6.1.1 Central fuel price scenario....................................................................................... 52
6.1.2 Low fuel price scenario ............................................................................................ 53
6.1.3 High fuel price scenario ........................................................................................... 53
6.2 Fuel and carbon price costs ............................................................................................. 53
6.2.1 Central fuel price scenario....................................................................................... 54
6.2.2 Low fuel price scenario ............................................................................................ 54
6.2.3 High fuel price scenario ........................................................................................... 55
7 Cost-effectiveness results ......................................................................................... 55
8 Policy measure interactions ...................................................................................... 59
9 Conclusions ................................................................................................................ 62
A.1 Annex 1 – Analysis of baseline assumptions ................................................................... 64
A.2 Annex 2 – Maps to EMEP/EEA aircraft types .................................................................. 68
A.3 Annex 3 – Additional policy measures ............................................................................. 72
A.3.1 Retrofitting ............................................................................................................... 72
A.3.2 Advances in communication technology and demand management ...................... 73
A.3.3 Changes to Air Traffic Management Systems......................................................... 73
A.3.4 Consumer offsetting ................................................................................................ 74
A.3.5 Passenger carbon tax ............................................................................................. 75
A.4 Annex 4 – Aircraft list price assumptions ......................................................................... 75
A.5 Annex 5 – Aircraft price discounts .................................................................................... 77

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1 Introduction
Ricardo Energy and Environment, supported by our partners SYSTRA Ltd., Gaia Capital Ltd., Michael
Mann, Bethan Owen and Prof. David Lee, have been contracted by the Department for Transport
(DfT) to assess policies that could be used to reduce carbon in UK aviation and to provide the cost
and abatement data needed for DfT to produce updated marginal abatement cost (MAC) curves for
the UK aviation sector1.
The aim of the study was not to recommend future Government policy, but to assess a range of
measures that could be implemented in the future depending on the aims, objectives and priorities of
the Government at the time. Although the report considers polices that are considered technically
feasible, based on discussions with DfT and other Government Departments, and a high level
description of each is provided, detailed consideration has not been given to the precise mechanisms
by which they would be implemented. This would be for policy makers and other stakeholders to
decide should they wish to purse any of these measures.
A previous study in 20112 examined a range of policy measures to reduce emissions from UK aviation
and generated a set of MAC curves for DfT. This represented a first application of MAC curves to
policy measures, rather than technology developments, for the UK aviation sector.
The request for the current study was to provide detailed descriptions of potential policy measures,
together with their abatement potential and costs, for an updated set of MAC curves. The updated
MAC curves were to be developed by DfT and, as for the previous study, the CO emissions from UK
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aviation were to be calculated using the DfT air passenger demand and CO forecast model.
2
The study includes both technical (e.g. increased research and development of fuel-efficient aircraft)
and non-technical (e.g. increased use of biofuels) measures. The policy measures investigated were
intended to focus on options that could be pursued unilaterally by UK Government policy action.
However, aviation is an inherently international business and it was assumed that UK action would
also encourage similar action by other, European and non-European, countries. These aspects are
discussed later in the report.
The requirements for the definition of policy measures include:
 Feasibility and capacity to be applied unilaterally by the UK;
 Policy levers that could be used to incentivise/regulate the application of the measure;
 Who is responsible for implementing the measure/lever (‘who pulls the lever?’);
 What would different policy-level abatement scenarios look like;
 Main cost/benefit impact areas;
 Barriers to take up and the cost of overcoming them;
 The timeframe over which the measure would be expected to have an effect;
 Potential for carbon leakage.
1.1 Study quality assurance
The study that culminated in the production of this report was reviewed regularly by a steering group,
consisting of members of the DfT and other Government departments and a team of independent
peer reviewers. The steering group provided direction to the study, reviewed the policy measures
selected, the analysis methodology and the results obtained. Feedback from the steering group was
used when preparing this report.

1 These will be presented in a separate DfT report, subsequent to the publication of this document.
2 Holland, M., Mann, M., Ralph, M., Owen, B., Lee, D., Horton, G., Dickson, N., Kollamthodi, S., “A marginal abatement cost curve model for the
UK aviation sector”, Contract PPRO 4/8/56, 09/08/2011 https://www.icao.int/environmental-
protection/Documents/ActionPlan/UK_AbatementModel_en.pdf

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2 Marginal Abatement Cost Curves
The concept of marginal abatement cost (MAC) curves has been developed as a means of comparing
and contrasting the costs of different options for reducing emissions. In most cases, though not
necessarily all, the emissions that are to be abated are greenhouse gas emissions, most commonly
carbon dioxide (CO ). MAC curves have been applied to the comparison of different technologies and
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different policy options to achieve the goal of reduced emissions.
The inclusion of the term “marginal” in the MAC curve indicates that it compares the additional costs
of achieving additional levels of abatement; therefore, most forms of presentation of MAC curves
show the cumulative costs (usually in the form of cost-effectiveness, e.g. in £/tonne CO abated) as
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further abatement measures are added.
An example of a MAC curve for the UK aviation sector is presented in Figure 2-1
Figure 2-1 Example of policy-related MAC Curve

Source: Holland M. et al. A marginal abatement cost curve model for the UK aviation sector. Technical report:
Final, PPRO 4/8/56, 20113
In Figure 2-1, the horizontal width of each “box” represents the additional abatement of each measure
when added to that achieved by the preceding measures. Thus, the right hand end of each box
represents the total abatement achieved by all the measures to that point. Similarly, the vertical height
of each box represents the total cost (in £/tonne CO ) of achieving the abatement represented by all
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measures to that point.
As shown in Figure 2-1, it is possible for an individual measure to have a negative cost effectiveness.
This occurs when the overall effect of a technology or policy measure is to reduce costs as well as
emissions. This may occur, for example, when the (up-front) implementation costs of the measure are
small, but its effect is to reduce fuel consumption and hence operating costs over time.
As the MAC curves present the total abatement (and cost) of the set of measures up to, and
including, each one, the order in which the measures are presented is important. Conventionally, they
are presented in order of decreasing cost-effectiveness. Therefore, the first measure (in the far left of
the chart) has the lowest cost per tonne of CO abated, even if the abatement potential of that
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measure is much smaller than other measures (in which case the width of the box would be small).
The last measure (at the right-hand end of the chart) has a high cost per tonne, although it may have
a high abatement potential.
When identifying the abatement potential of each measure for presentation in a MAC curve, it is
important that they are calculated taking account of the other measures implemented previously. For

3 https://www.icao.int/environmental-protection/Documents/ActionPlan/UK_AbatementModel_en.pdf

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example, in Figure 2-1, the dark blue box, representing “operational incentives” was calculated
assuming that all five measures to the left of it on the chart were already in place. Any interactions
between measures (e.g. the amount of CO emissions that might be saved through “operational
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measures” may depend on the impact of the biofuels-related measures that were also implemented)
need to be considered when deriving the abatement and costs. In many cases, the measures may be
technologically independent, so their percentage emissions reduction is calculated (when the
measure is applied in isolation) and that percentage reduction is applied to the emissions that remain
after the preceding measures have been implemented.
It is possible for some pairs of measures, both technologies and policies, to be mutually exclusive (i.e.
the two measures may not be applied together). In such cases, it is not possible to include both
measures in a single MAC curve and multiple MAC curves are required to illustrate the full range of
technologies or policies under consideration.
MAC curves are usually derived to cover a specific period of time; for example, from the present day
to 2050. The abatement and costs calculated are the total costs through the period, with the costs
usually being discounted to take account of preferences regarding spend over time and to present a
net present value of those costs. When considering results presented in a MAC curve, it is important
to note that emissions abatement may continue for some time after the costs finish (for example, the
costs for developing a fuel efficient aircraft type will primarily occur before it enters service, while the
abatement will occur during the time the type remains in service, which may be 30 years or more). It is
also important to note that a key operating cost (particularly in the aviation sector) is the fuel cost and
that reductions in fuel consumption (through fuel efficient technologies) reduce operating costs as well
as abating emissions. Under scenarios in which carbon costs may be significant in the long-term (as
in the assumptions for this study), those carbon costs may also be expected to reduce in line with fuel
consumption. However, in their guidance for the evaluation of energy use and greenhouse gas4, the
Department for Business, Energy and Industrial Strategy (BEIS) specify that such reductions in
carbon costs should not be included in cost-effectiveness calculations. Therefore, a similar approach
has been adopted in this study.
This report presents the methodology used to estimate the cost and abatement impact of the policies
that have been assessed. These will be used by DfT to produce a forthcoming report presenting
policy MACC curves for the UK aviation sector.

3 DfT’s aviation modelling suite
As noted in the introduction, the CO emissions for the study were calculated by the DfT using the
2
modelling system that is used for the air passenger demand and CO forecast analyses. To calculate
2
the CO abatement from the different policy measures, the modelling system was used to calculate
2
future emissions under both baseline (no further policy action) and policy scenarios. The DfT
modelling suite is illustrated in Figure 3-15.

4 Valuation of energy use and greenhouse gas – Supplementary guidance to the HM Treasury Green Book on Appraisal and Evaluation in Central
Government, March 2017, available at https://www.gov.uk/government/publications/valuation-of-energy-use-and-greenhouse-gas-emissions-for-
appraisal
5 Extracted from the DfT UK Aviation Forecasts, 2017, available athttps://www.gov.uk/government/collections/uk-aviation-forecasts

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Figure 3-1 Illustration of the structure of the DfT modelling system

Before commencing the assessments, the baseline assumptions in the DfT model, particularly those
related to the Fleet Mix Model (FMM) and the calculation of CO emissions from aircraft, were
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examined and recommendations made to retain or modify those assumptions. The conclusions from
this review are presented below.
In addition to the review of the baseline assumption, a detailed review of the FMM was also
undertaken. The FMM is a key element in the modelling system, as it defines the aircraft types used
to perform the air traffic movements in future years. The review encompassed the aircraft types
included in the model (including generic future types), together with the methodology and
assumptions used when populating the future fleet (such as aircraft retirement ages).

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