4
Environmental Costs and Benefits

Government-sponsored research and technology programs can provide a solid foundation for defining realistic environmental goals and for the development of environmental policies and regulations to meet such goals. To ensure that the goals and policies for aviation are appropriate, the full extent of environmental costs, the economic benefits of reducing noise and emissions, and the potential of financial incentives to reduce environmental impacts should all be considered.

INCENTIVES

Aircraft and engine manufacturers respond to the aircraft operator and transportation markets they serve. Over the past 20 years, these markets have become less regulated in terms of business activities and more competitive throughout the world. More than ever, manufacturers are called upon to produce aircraft that cost less and are more reliable than their predecessors. At the same time, government intervention is important to encourage manufacturers, operators, and consumers1 to reduce the environmental consequences of aircraft operations. In fact, in competitive markets, aggressive action to address costly environmental problems unilaterally can place an operator at a disadvantage relative to its competitors. This situation is not unique to aviation.

At least since the founding of the National Advisory Committee for Aeronautics (NASA’s predecessor) in 1915, the U.S. government has accepted a role in addressing the environmental consequences of aviation and has developed two approaches for meeting its responsibility. First, it assists the private sector in developing technologies to address the environmental consequences of aviation, and, second, it uses regulations to mandate reductions in noise and emissions, typically through the use of advanced technology made available by the first approach.

The ultimate issue for government in this arena is to decide how and when to use its legislative and regulatory powers to intervene in the market. People and groups who object to the effects of airports on the environment attempt to harness these powers through political action and litigation. One important lever is the process for issuing permits for airport expansions, by which airport expansions may be delayed, reduced in scope, canceled, or modified to include environmental remediation programs. Other tactics include supporting more stringent certification standards for engines and aircraft, establishing new operating restrictions at airports, and opposing the conversion of decommissioned military airports to civilian use. Such efforts reflect both real and perceived problems in local communities and the environment. They impose real costs on operators, manufacturers, airports, and, ultimately, consumers of aviation services, and they sometimes prompt local, state, national, and international government organizations to take action. However, they often involve expensive, lengthy adversarial processes in which both environmental advocates and aviation interests expend a great deal of resources to manage the process, rather than taking direct action to reduce environmental impacts.

Another, nonadversarial approach to reducing the environmental impacts of aviation would be the creation of financial incentives for industry to do more than regulatory standards require. Such incentives would encourage industry to manufacture and operate cleaner and quieter aircraft without waiting for the next round of more stringent environmental regulations. These incentives would also encourage industry to fund the development of environmental technology, thereby leveraging government research funds. Without such incentives, industry will continue to respond to normal business incentives and consumer priorities, which can provide disincentives to invest in advanced environmental technology. For example, airlines currently have a diffi-

1  

In this report “consumer” includes travelers and all others who benefit from a robust air transportation system.



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For Greener Skies: Reducing Environmental Impacts of Aviation 4 Environmental Costs and Benefits Government-sponsored research and technology programs can provide a solid foundation for defining realistic environmental goals and for the development of environmental policies and regulations to meet such goals. To ensure that the goals and policies for aviation are appropriate, the full extent of environmental costs, the economic benefits of reducing noise and emissions, and the potential of financial incentives to reduce environmental impacts should all be considered. INCENTIVES Aircraft and engine manufacturers respond to the aircraft operator and transportation markets they serve. Over the past 20 years, these markets have become less regulated in terms of business activities and more competitive throughout the world. More than ever, manufacturers are called upon to produce aircraft that cost less and are more reliable than their predecessors. At the same time, government intervention is important to encourage manufacturers, operators, and consumers1 to reduce the environmental consequences of aircraft operations. In fact, in competitive markets, aggressive action to address costly environmental problems unilaterally can place an operator at a disadvantage relative to its competitors. This situation is not unique to aviation. At least since the founding of the National Advisory Committee for Aeronautics (NASA’s predecessor) in 1915, the U.S. government has accepted a role in addressing the environmental consequences of aviation and has developed two approaches for meeting its responsibility. First, it assists the private sector in developing technologies to address the environmental consequences of aviation, and, second, it uses regulations to mandate reductions in noise and emissions, typically through the use of advanced technology made available by the first approach. The ultimate issue for government in this arena is to decide how and when to use its legislative and regulatory powers to intervene in the market. People and groups who object to the effects of airports on the environment attempt to harness these powers through political action and litigation. One important lever is the process for issuing permits for airport expansions, by which airport expansions may be delayed, reduced in scope, canceled, or modified to include environmental remediation programs. Other tactics include supporting more stringent certification standards for engines and aircraft, establishing new operating restrictions at airports, and opposing the conversion of decommissioned military airports to civilian use. Such efforts reflect both real and perceived problems in local communities and the environment. They impose real costs on operators, manufacturers, airports, and, ultimately, consumers of aviation services, and they sometimes prompt local, state, national, and international government organizations to take action. However, they often involve expensive, lengthy adversarial processes in which both environmental advocates and aviation interests expend a great deal of resources to manage the process, rather than taking direct action to reduce environmental impacts. Another, nonadversarial approach to reducing the environmental impacts of aviation would be the creation of financial incentives for industry to do more than regulatory standards require. Such incentives would encourage industry to manufacture and operate cleaner and quieter aircraft without waiting for the next round of more stringent environmental regulations. These incentives would also encourage industry to fund the development of environmental technology, thereby leveraging government research funds. Without such incentives, industry will continue to respond to normal business incentives and consumer priorities, which can provide disincentives to invest in advanced environmental technology. For example, airlines currently have a diffi- 1   In this report “consumer” includes travelers and all others who benefit from a robust air transportation system.

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For Greener Skies: Reducing Environmental Impacts of Aviation cult time justifying the expense of optional engine equipment to reduce emissions if standard, lower-cost engine configurations already meet regulatory requirements. If low-emission engines cost more and provide no additional benefits other than low emissions, they make it harder to satisfy the consumer’s desire for low fares. Establishing appropriate financial incentives can be difficult, because government officials cannot easily predict the effects of proposed interventions, especially when they depart from the traditional regulatory approach. Possibilities include the following: adjusting operational costs (such as landing fees, fuel taxes, or fees for air traffic control services) to provide financial incentives to improve system operational efficiency by shifting flights from peak hours and congested airports to off-peak hours and less congested airports (incentives would have to be passed on to consumers through changes in ticket prices to alter consumer behavior in a way that would allow airlines to compete effectively with an altered schedule) adjusting landing fees according to the amount of emissions or noise produced by each aircraft A few airports in Europe are already using the latter approach, but it would be more effective if implemented through international authorities to avoid a patchwork of unpredictable requirements with inconsistent goals. Also, financial incentives should be administered in a revenue-neutral way (i.e., higher fees for some aircraft operations should be offset by lower fees for other aircraft operations) to avoid using environmental concerns simply as a means to raise taxes. COSTS OF NOISE AND EMISSIONS Aviation policy should satisfy national environmental goals and the public’s demand for aviation services. Government policies could be improved if decision makers had a more comprehensive understanding of the societal benefits and costs associated with air transportation, especially with regard to nonmarket factors such as congestion, noise, and emissions. This knowledge would aid in establishing policies (with regard to research, regulations, and financial incentives) that allow consumers, operators, and manufacturers to make individual decisions consistent with government interests in maximizing overall benefits and reducing overall costs. Economic efficiency is already used both in the ICAO’s Committee on Aviation Environmental Protection and in the FAA’s own rulemaking process, which calls for cost-benefit analyses of proposals to issue new or amended regulations, expand airports, or modify airport operating restrictions. For example, Part 161.305 of the Federal Aviation Regulations requires that airport operators proposing aircraft operating restrictions provide evidence that “other available remedies are infeasible or would be less cost-effective” than the policy being proposed. Economic Costs of Noise As discussed in Chapter 2, community resistance to noise begins somewhere between 55 and 65 dB DNL, with the higher level being the current definition for noise-affected populations applied by both the FAA and the Department of Housing and Urban Development and the lower level suggested by the EPA. Existing research has investigated the economic consequences of noise exposure in communities empirically. Several studies have examined the impact of noise on property value, concluding that home prices drop about 0.6 percent per dB of DNL exposure (Schipper et al., 1998). Many of these studies are 20 years old, however, and need to be updated to determine if the tolerance for noise has changed. In addition to property value, another measure of the cost of noise is the willingness of property owners to accept the noise in exchange for payment. Knowing what people would be willing to accept to be exposed to different levels of noise could form the basis for making periodic payments for noise easements (for example, in the form of reduced property taxes). The cost-effectiveness of such payments could be compared with other tools used to address community resistance to noise (i.e., airport operating restrictions, regulations, the purchase of property in noise-affected communities, zoning land for uses compatible with the level of noise, and NASA research and technology programs). Although the acceptability of noise varies from place to place, the aircraft that produce the noise must be accepted everyplace they fly. In the United States, airport noise regulations are the sole province of the federal government. In accordance with Part 161 of the Federal Aviation Regulations, airports and state and local governments may impose new aircraft noise and access restrictions only after demonstrating to the FAA that less-costly alternatives are not available. Since this requirement was established in the early 1990s, no airport or state or local government has met the requirements of Part 161 to impose new restrictions. Noise exposure dropped dramatically during the 1990s in any case, because of the concurrent decision to lower noise standards and phase out older, noisier (Stage 2) aircraft that could not meet the new standards. Economic Costs of Local Emissions The Clean Air Act and FAA certification regulations (Federal Aviation Regulations, Part 34) regulate allowable levels of emissions. When an airport is located in a non-attainment area (i.e., an area that does not meet federally mandated air quality levels), airport expansions can be delayed until local air quality is in compliance. EPA standards are based on the health effects and, ultimately, the economic

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For Greener Skies: Reducing Environmental Impacts of Aviation effects of emissions. Studies provide a wealth of information on the impact of emissions, although not on the specific consequences of aviation emissions. One approach for dealing with the impact of aviation on local air quality would be to include aviation in economywide pollution trading programs. Allowing aviation operators and entities from other industries to trade pollution permits could significantly reduce the total cost of meeting local emissions goals (FESG, 2001). Costs would be reduced because not all polluters or industries have the same technological and economic opportunities to reduce emissions; where substantial differences in cost exist, the lower-cost alternatives should be selected. Pollution trading programs would allow operators and, ultimately, consumers to face the full cost of compliance. It would also provide a framework for operators to benefit from using equipment with lower-than-required levels of emissions, by allowing them to sell their permits to entities with higher levels of emissions. The shortfall in capacity at many airports also directly affects the amount of emissions produced. While FAA flow control programs do a good job of holding aircraft at gates when air traffic delays are building up, in many cases aircraft auxiliary power units continue to operate.2 Also, when aircraft are released from a gate, they are often put into a long line for takeoff. Likewise, arriving aircraft can be sent to holding pens for long periods (with engines running) until gates are released. Automobile traffic can also build up during peak periods. Better matching of demand and capacity at airports would improve the local emissions picture. Economic Costs of Emissions at Altitude The economic consequences of climate change are potentially catastrophic in the long term. However, the contribution that aviation may be making to global warming and climate change is still uncertain. Because these are essentially global issues, they are best addressed through global institutions (i.e., ICAO), as discussed in Chapter 3. SUMMARY Currently, there are essentially no financial incentives for industry to develop and deploy environmental technologies that go beyond regulatory requirements. In fact, spending resources to go beyond regulatory requirements can put airlines at a competitive disadvantage. As a result, NASA research may generate new technology that the private sector has little or no incentive to adopt. Even so, mitigating the environmental impact of a growing air transportation system will require enlightened application of technology—and environmental policies should be framed to encourage industry to develop advanced environmental technologies and use them in operational products as they become available. Finding 4-1. Environmental Impact. The environmental impact of any industry, including aviation, would be reduced if equipment manufacturers, service providers, and consumers directly faced the full costs of their activities, including environmental costs. For air transportation, this would require industry, consumers, and others who benefit from a robust air transportation system to face the full costs of operations. Recommendation 4-1. Considering All Costs and Benefits. To support the formulation of environmental goals and air transportation policies, government and industry should invest in comprehensive interdisciplinary studies that quantify the marginal costs of environmental protection policies, the full economic benefits of providing transportation services while reducing the costs (in terms of noise, emissions, and congestion), and the potential of financial incentives to encourage the development and use of equipment that goes beyond regulatory standards. REFERENCES FESG (Forecasting and Economic Support Group). 2001. Report on Economic Analysis of Potential Market-Based Options for Reduction of CO2 Emissions from Aviation. 5th meeting of ICAO’s Committee on Aviation Environmental Protection (CAEP/5). January 2001. Montreal, Canada: ICAO. Schipper, Y., P. Nijkamp, and P. Rietveld. 1998. Why do aircraft noise value estimates differ? A meta-analysis. Journal of Air Transport Management 4:117–124. 2   Auxiliary power units are small jet turbines that provide aircraft with electrical power when the main engines are shut down and ground power is not connected.