Academic journal article Journal of Business and Educational Leadership

Airlines and the European Union Emissions Trading Scheme: A Marketing Solution

Academic journal article Journal of Business and Educational Leadership

Airlines and the European Union Emissions Trading Scheme: A Marketing Solution

Article excerpt

INTRODUCTION

This study examined public demand as it relates to reduced emissions in air travel. Specifically, the goal of this study was to determine to what extent the leisure traveling public in North America and Europe will support reduced emissions air travel.

The use of fossil fuels as a source of energy is contentious on several points. The main environmental concern with the use of fossil fuels is the increase in the average temperature of the Earth from the release of carbon dioxide (C02) and concentration of other greenhouse gases in the atmosphere (Collins, Colman, Haywood, Manning, & Mote, 2008). Evidence concerning global warming in on the increase, and research suggests that conditions such as the number, strength, and duration of heat waves not predicted for three decades, may be commonplace much sooner (Fischer, 2010). A second concern regarding the use of fossil fuels is the desire for energy independence and dwindling supply. Overall, it is widely accepted that fossil fuels are a finite resource, and humanity's transition to alternative energy is inevitable

On February 2, 2009, the Aviation Emissions Directive of the European Union (EU) Emissions Trading Scheme (EU ETS) came into effect (Laborde, 2010). This directive added airlines serving Europe to the Kyoto Protocol. The Kyoto Protocol, signed in 1997, is an international agreement linked to the UN Framework Convention on Climate Change. The major feature of the Kyoto Protocol is that it sets binding targets for 37 industrialized nations for reducing greenhouse gas emissions (UNFCCC, n.d.). The Kyoto Protocol, as it relates to airlines serving EU destinations, caps total airline emissions from aircraft at 97% of the average C02 emissions from 2004 through 2006 starting in 2012 (EurActiv, 2008). This emissions cap will be gradually stepped down over the years, and on threat of fines will increase the pressure on airlines to produce fewer C02 emissions. The United States is not a signatory of the Kyoto Protocol however; the EU ETS will apply to all airlines serving the EU regardless of country of origin.

PURPOSE OF THE STUDY

How can airlines positively respond to the increased regulatory pressure of reduced emissions short of rate increases? To answer this question, this research sought to determine if air travelers in Europe and North America would be willing to pay for the difference, and if these populations significantly differ from one another.

Woodcock, Banister, Edwards, Prentice and Roberts (2007), referenced a study by the Intergovernmental Panel on Climate Change (IPCC), stating that the aviation industry was likely responsible for 3.5% of human-induced global warming in 2001; a number on the rise that could reach 15% by 2050. Woodcock et al. stated that "aviation is believed to have a greater effect on climate change than its carbon emissions alone" (p. 1079). Ecosystem Marketplace in their yearly publication "State of the Voluntary Carbon Markets 2010" explained that "while voluntary carbon market transaction volumes remained relatively small, the marketplace thrived as an incubator of innovative protocols, registries, alliances, and project types (Hamilton, Sjardin, PetersStanley, & Marcello, 2010, p. i)."

Lufthansa, on its booking website, has given the option for environmentally concerned passengers and businesses to compensate for the C02. A passenger can donate to Lufthansa's environmental partner, myclimate.org. For example, a round trip from Frankfurt, Germany to John F. Kennedy Airport in New York produces 1.214 tons of C02 per seat, and to compensate for that, customers can donate 24 Euro and travel with a clear conscience (myclimate.org, 2007). Other airlines such as United Airlines have similar carbon offset programs.

METHODOLOGY

The objective of this study was to determine if North American and European air travelers are willing to pay more for air travel on greener airlines; and if the level of that value is significantly different between these two populations. …

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