Connecting the Dots Between Fuel Prices, Carbon Costs and Fuel Efficiency

It’s proving to be a busy year for airlines when it comes to fuel.

In the last 12 months, jet fuel prices have soared 40%. This September, the new CORSIA (Carbon Offset Reduction Scheme for International Aviation) scheme kicks off which will eventually see all major airlines operating international flights move toward carbon-neutral growth. This is all on top of the existing carbon costs for those who may already come under the existing EU ETS (Emissions Trading System).

 

Although aviation only accounts for 2% of global CO2 emissions I, for one, support the idea of our industry taking charge of reducing our impact on the wider environment – we are a highly innovative industry that operates safely on the margins of the possible every day. This is simply a new challenge we can rise to.

That challenge is also an opportunity. These elements combined are a great reason to start connecting the dots between fuel price, carbon costs, and your airline’s fuel efficiency project.

First, fuel prices. They are a hot topic as they are rapidly increasing again. Not quite the $147 a barrel peak in 2008, but they crept close to the $80/barrel mark recently, up from $30/barrel in January 2016.

Take those rising fuel prices and now add CORSIA. If your airline operates internationally, and you’re unfamiliar, now is the time to get educated around CORSIA. This market-based measure is intended to track and offset carbon emissions on a global scale, with a goal of carbon-neutral growth from 2020. With an early pilot phase meaning some countries may require carbon offsetting soon.

For example, 1 unit of fuel equals 3.16 tonnes of Carbon (3.15 under EU ETS!). For every tonne of fuel you use over your baseline you will have to pay. It’s too early to say what the carbon offset price will be, but let’s adopt the current EU ETS allowance cost for now – roughly $20/tonne. Add that to the cost of the fuel burnt above your baseline and with fuel at around $700/tonne that’s a rough order of a 3% increase in fuel costs.

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In reality, the long-term carbon price for CORSIA maybe higher – who knows? But even at 3%, that’s a major shift in your cost base. See how carbon should also be part of your fuel story!

Of course, you can pay to offset, but focusing on reducing fuel use instead is far more sensible. Reducing the amount of fuel your burn has a direct relationship in terms of how much you then have to offset. So anything you do for fuel savings is great for CO2 reduction. Tools like Fuel Dashboard are able to identify an average potential saving of 4.3% thus helping to negate the impact of the new carbon cost.

Since the start of 2018, many of our airline customers that have actively engaged with us on their fuel efficiency project through the use of Fuel Dashboard are now turning to our Emissions Reporter solution to help them economically and easily monitor and report carbon emissions.

Whichever way you look at it, fuel prices are going up. We can help you improve fuel efficiency, cut carbon emissions and reduce costs at the same time.

That’s good for an airline’s finances, but also the environment too. A “win-win” all around.

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