Carbon Order


Figure 2: Fuel prices; an issue here to stay

Figure 2: Fuel Prices: an issue here to stay

Figure 3: Air travel remains a growth market

Figure 3: Air travel remains a growth market

Figure 4: Urbanisation: The engine for economic growth

Figure 4: Urbanisation: The engine for economic growth

Figure 5: China, India and the USA - the most urbanised countries

Figure 5: China, India and the USA - the most urbanised countries

Figure 6: 'Global middle classes' expected to rise to 4.9billion people by 2030 with 66% in Asia

Figure 6: 'Global middle classes' expected to rise to 4.9 billion people by 2030 with 66% in Asia

Figure 7: 87 Aviation 'mega-cities' in 2030

Figure 7: 87 Aviation 'mega-cities' in 2030 

Figure 8:  2010 Aviation Mega-cities: 3 cities with more than 10,000 daily long-haul passengers

Figure 8:  2010 Aviation Mega-cities: 3 cities with more than 10,000 daily long-haul passengers

Figure 9:  2030's Aviation Mega-cities: 87 cities with more than 10,000 daily long haul passengers

Figure 9:  2030's Aviation Mega-cities: 87 cities with more than 10,000 daily long haul passengers

Figure 10: Long-haul traffic on routes linking the emerging regions will triple over the next 20 years

Figure 10: Long-haul traffic on routes linking the emerging regions will triple over the next 20 years

Figure 11: Emerging economies expected to account for 56% of world economic growth from 2010 to 2030

Figure 11: Emerging economies expected to account for 56% of world economic growth from 2010 to 2030

Figure 12: Airlines domiciled in 'Emerging Economies' expected to account for 55% of world traffic growth

Figure 12: Airlines domiciled in 'Emerging Economies' expected to account for 55% of world traffic growth

 Figure 13: Airlines domiciled in

Figure 13: Airlines domiciled in "Advanced Economies' to account for 50% of world traffic by 2030

Figure 14:  Asia-Pacific to lead in world traffic by 2030

Figure 14:  Asia-Pacific to lead in world traffic by 2030

 Figure 15:  Since 2000, air travel has grown 45% the growth in fuel demand and therefore CO2 was relatively flat

Figure 15:  Since 2000, air travel has grown 45% the growth in fuel demand and therefore COwas relatively flat

Figure 16: Emissions Projections

Figure 16: Emissions Projections

Fuel efficiency of new aircraft: flattening of curve indicates increasing challenge of further technological improvement. Vision 2050, IATA, February 2011


For the airline industry to become truly carbon-neutral, an additional element of carbon-reduction would be required.  Because, under the above scenario, CO2-only emissions would already have been reduced to  zero, any further reduction must be carbon-negative, involving the sequestertaion of CO2 underground.  This can be undertaken at a cost per tonne of CO2 of 50c-$2, in addition to DAC capture costs. The calculation follows.

i.   CO2 component: 2% of global emissions
ii.  Conventional multiplier for CO2 at ground level: 1.5 (4,6 op.cit), producing a CO2 plus multiplier impact of 3%
iii. Deducting this from 4.9% (the updated multiplier at altitude  (4,8 op.cit) produces a figure of 1.9% being the unaccounted for non-CO2 multiplier impacts
iv.  Expressing this as a percentage of multiplier-adjusted CO2 effects (ie 1.9/3.0) produces an increase of 63%.


 Figure 1: Higher fuel price, higher share of airline costs

Figure 1: Higher fuel price, higher share of airline costs


Table 1: Aviation fuel costs as a percentage of overheads (Airbus figures extrapolated from $50-100/bbl range, Airbus Industries 2011; and IATA figures extrapolated from $0-120/bbl from IATA 2009

 Table 1: Aviation fuel costs as a percentage of overheads (Airbus figures extrapolated from $50-100/bbl range, Airbus Industries 2011; and IATA figures extrapolated from $0-120/bbl from IATA 2009

Figure 18: Fuel costs as a percentage of airline overheads relative to oil price: seperate Airbus an IATA 'base-line' projections, together with trajectories for low-carbon (EOR) or zero carbon (sequestration) assuming a $50/bbl premium


Figure 19: Averages of Airbus and IATA base-line and premium trajectories

For the airline sector, the key cost calculations for jet fuel derived from DAC CO2 EOR are:

1. 1.5 tonnes of CO2 injected for EOR (including 1 tonne of atmospheric CO2) lifts 3bbl. No carbon-reduction credit is taken for the injection of the geologic CO2, but the 1 tonne of atmospheric CO2 is considered sequestered (consistent with EOR practices of recycling co-produced CO2, and capping the reservoir at pressure at end of project). When these production phase impacts are accounted for, as well as oilfield operations and energy use, refining, transport, and combustion, a much lower life-cycle carbon intensity is realised.

2. Carbon Engineering’s modeling efforts with leading consultants, Life Cycle Associates, have shown that this DAC-EOR carbon intensity is roughly 45 g/MJ with model parameters at baseline values. This is 53% lower than conventional fuel, which is roughly 95 g/MJ. These calculations were performed for a fuel intermediate known as CARBOB, but a similar percentage reduction can be expected for Jet A.

3. Assuming income of $160/tonne for profitable operation of a 1m tonne/year Carbon Engineering plant (it is possible that through capital cost-reductions and financing enhancement that this could be bettered at scale), and $60 generated from the commodity value of the CO2, this leaves $100 to be earned from the carbon–negative ‘environmental value’.

4. By charging $100/ton for the environmental benefits (note that EOR producers already pay the $40/bbl commodity cost and do not pass that on to consumers), and producing 2 bbl/ton CO2, the DAC-EOR production phase adds $50/bbl to the cost of fuel. Over an oil price range of $10-100/bbl, fuel costs as a proportion of overheads, using an average of the Airbus (1% and 37% respectively) and IATA (3% and 44% respectively) are 2% and 33%. Deducting these average figures from the percentage of overheads represented by the base oil price plus $50/bbl (obtained by reference to the percentage of overheads represented by fuel costs at $60 and $150 i.e. 22%-2% and 42%-33%) equates to 20% to 9% respectively (average 15%). of $55/bbl). Including allowance for the $50/bbl low-carbon premium, fuel costs average $105/bbl). At long-run profit margins of 0.1%, airline revenues are effectively equivalent to overheads.

5. Adopting the average fuel price increase of 15% (range 20%-9% for per bbl oil price of $10-100) and fully charging this to ticket prices would add 15% for a 50% CI reduction, or 10% for a 33% reduction. Including provision for multiplier impacts at high altitude increases these figures to 25% and 16% respectively. For every $100m in ticket sales, a $50/bbl premium raises overheads to $22-42m (for a range of $10-100/bbl oil price), or an average of $32m. By vertically integrating DAC within its value chain, airlines can improve their profitability against long-run and ‘record year’ performance according to the table below.  Adopting an oil price of $105/bbl (the average over the range $60-150/bbl, including allowance for the $50 low-carbon premium), this results in spend on fuel costs of $32m per $100m of overheads (or revenue). Expenditure of $32m on fuel at $105/bbl enables the purchase of 304,761 bbl of fuel, representing 131,656 tonnes CO2 at 432 kg/bbl, i.e. 13.2% of the capacity of a 1-million tonne CO2/year DAC plant. This equates to $2.64m in year 1, rising to 6.6m in year 25, improving long run profitability of 0.1% by 27-67 fold, and a 82.5-206% improvement on record year profitability of 3.2%. Assuming long-run jet fuel market costs of $130/bbl, this represents a 38.5% increase. By so doing, DAC-EOR has produced a fuel that is 53% lower in carbon intensity. For a 50% lower CI, the increase would be 36.3%.

DAC Economics For Aviation: Sequestration

1. Ignoring the likelihood of a global price on carbon, assume that the $120/tonne costs of carbon sequestration must be met entirely from a surcharge on ticket prices CO2 emissions per bbl of oil are around 432 kg. At $120/tonne, this equates to roughly $50/bbl Whereas the previous EOR calculation related to a 50% reduction in carbon Intensity, sequestration can achieve 100% at approximately the same cost. Over an oil price range of $10-100/bbl, the increase in fuel costs as a proportion of overheads (using an average of the Airbus and IATA curves) is 20% to 9% respectively (average 15%, equating to an oil price in the order of $55/bbl). With a $50/bbl surcharge representing the low-carbon premium, fuel costs increase to $60-150/bbl (average $105/bbl).

2. At long-run profit margins of 0.1%, airline revenues are effectively equivalent to overheads. Adopting the average fuel price increase of 15% (range 20%-9% for an oil price of $10-100 per bbl) and fully charging this to ticket prices would add 15% for zero-carbon designation, excluding multiplier impacts at high altitude. Including these raises the costs to a surcharge of 25% on ticket prices. Amortised over 34 years, these equate to a premium on fares of 0.44-0.74%/year. Thus, as previously, for every $100m in ticket sales, a $50/bbl premium raises overheads to $22-42m (for a range of $10-100/bbl oil price), or an average of $32m. By vertically integrating DAC within its value chain, airlines can improve their profitability against long-run and ‘record year’ performance according to the table above.

3. For lesser reductions in carbon intensity, the DAC-EOR fuel can be diluted with conventional fuel. For a blend with 33% lower carbon intensity for example, the cost premium would be (33%/53%) x 38.5% = 24%.

4. Now, adopting the industry yardstick of fuel costs representing 33% of ticket prices, a ticket for a seat with 50% lower carbon emissions would be 36.3 x 33% ie a 12% increase, and for a 33% reduction in CI, the ticket price would be higher by 8%. The previously referenced standard plant economics analysis assumed a 75:25% debt to equity ratio. However, combining a forward contract with an oil major to both supply CO2 and purchase the resulting processed jet fuel would potentially enable 100% debt funding of DAC plants owned by the airlines themselves through leveraging their substantial fuel purchasing power to securitise long term supply contracts.

5. For every $100m in revenue, given that fuel costs are circa a third of total operational costs, a 36.3% increase raises fuel costs by $12m to $45m, representing 40% of increased sales revenue of $112m (assuming the low carbon surcharge was 100% laid off through increased ticket prices). As explained above, a 1m tonne CO2/year DAC plant lifts 2m bbl of oil at a cost of $180/bbl at a reduced CI of circa 50%. If, for every $100m of revenue, an airline is spending $40m on 50% CI jet fuel, this would purchase 222,222 bbls representing 11% of a 1m tonne DAC plant capacity (at a 1t CO2: 2bbl lift ratio).

6. Assuming, as per the foregoing, that the premium for 50% fuel is fully compensated for in increased ticket prices, the financial benefit to the ailine (as the owner of the DAC plant) from the DAC plant revenue stream is initially $20m in year one, rising to nearly $50m in year twenty-five (average $35m/ year). Per $100m of sales revenue, this equates to an additional $2.2m/year initially (representing a 170% improvement in profitability even in the best year of 3.2%, rising to $5.45m in year 25 (a 270% improvement). Compared to a long-run performance of 0.1% per annum over the last four decades, profitability improves by an average 36-fold over the life of the plant.


The airline sector is facing a triple whammy of carbon constraints, growing fuel volatility, and low-margin business models vulnerable to market and economic turbulance. IATA has called for new thinking on a partnership-based approach across the value-chain.  The emergence of commercial-scale direct air capture (DAC) offers exactly that opportunity – and addresses all of the challenges in a single set of solutions.  Not only can it achieve decarbonisation by 2050 with a nominal increase in ticket prices over 30 years (2020-2050) but, by integrating DAC within the aviation value chain, the airline sector could multiply its profitability over the last four decades up to 60-fold – transforming its return on invested capital (ROIC), as well as enhancing fuel security in a world of tightening carbon limits.

Carbon Order is advancing the proposition that airline companies take a financial stake in the construction and operation of direct air capture (DAC) plants. DAC is a commercialization-ready technology that can absorb CO2 directly from the air for the production of drop-in transportation fuels that have ultra-low carbon intensity. Dramatic cost reduction in solar energy generation for hydrogen production, combined with emerging commercial-scale direct air capture, will enable production of zero-carbon fuels for $1.00/litre by 2020 – comparable with the pre-tax costs of their fossil-fuel equivalent today.

Airlines should take the initiative to produce their own low-carbon fuels and achieve carbon reduction goals that until now have been largely aspirational in nature. Further,  through involvement in DAC – and thus fuel production – airlines can act across more of the value chain as a means of reducing exposure to fuel volatility and increasing financial returns.

Carbon Order is seeking to assemble a consortium of public and private aviation interests to advance carbon-reduction strategies in their sector through commissioning of an independent third-party study to examine the feasibility of airline involvement in DAC fuel production.



Global climate policy is trailing climate reality to an increasing degree, such that the process of climate change itself is accelerating faster than humanity’s ability to address it. In consequence, the world is shoring up ever greater challenges to effective intervention, in terms both of growing climate impacts and rising thresholds for mitigation. Despite an irrefutable scientific case for urgent remedial action and the exhaustive efforts of climate leaders to secure meaningful commitments, anthropogenic carbon emissions have not only been growing year after year, but until recently their rate of growth has been accelerating, with the highest increase on record in 2013 (1).The stalling of emissions  growth in the three years 2014-2016 could indicate some level of decoupling from economic growth, but such a conclusion may be premature based only on three year’s data (2).

International aviation (along with shipping) was excluded from the 2015 Paris Accord, but in October 2016 the ICAO’s 101 member states agreed to implement a Carbon Offsets and Reduction Scheme for International Aviation (CORSIA), which aims to stabilise emissions with carbon-neutral growth (CNG) from 2020. The agreement is voluntary from 2021-2026, but mandatory thereafter. Sixty-five states have signed up for the first phase, representing around 80% of projected global growth (3). Unfortunately, the agreement will accomplish very little in terms of emissions-reduction. Not only is it voluntary and, by some estimates, less than 70% of the intended geographical coverage, but it is silent on essential environmental rules to guarantee any climate impact, and it is exclusively reliant on carbon offsets, which are banned by Europe as a means of meeting its 2030 Paris target. The global ban on fuel taxation — worth some $65 bn per annum — stays, while a demonstrably suspect offsetting scheme will cost carriers less than $2bn a year (3a).

In short, this is not only environmentally unsustainable, but politically insupportable. Unchecked, aviation will alone occupy the entire carbon space by 2060, and it is inconceivable that the progressively more radical emissions-reduction regimes now necessary in all other sectors will bypass aviation whilst avoiding inconvenient questions on fuel tax, VAT exemptions, state aid, national carrier subsidies and institutional (ECB) investments in this most intensive of fossil fuel-subsidised industries.


At the same time, recent sharp declines in oil prices due to increased production and a slowing global economy are masking longer-term economic and geo-political fundamentals pointing toward supply constraints. Although unconventional sources (non-crude liquids, including shale oil, oil sands and NGLs) have been growing rapidly (5), these are not equivalent to crude, are generally less useful and more expensive, and are only marginally viable at current oil prices (6). Some 37 countries are already post-peak, and global conventional production is declining at 4.1% a year (7). The International Energy Agency (IEA) in their 2014 World Energy Outlook (8) has cautioned that the fundamentals are simply being disguised by the US shale boom and its impact on market dynamics. The report estimates that energy demand will grow 37% by 2040, and expresses doubt as to whether the necessary level of investment commitment is available to meet this.

The IEA 2016 Energy Report (9) reinforces this message, noting that:

Declines in production from existing conventional crude oil fields are equivalent to losing the current oil output from Iraq from the global balance every two years, providing a powerful underlying stimulus for the current rebalancing of the oil market. Yet there is also a risk of over-correction: the volume of conventional crude oil resources receiving development approval in 2015 fell to its lowest level since the 1950s and the data for 2016 show no signs of a rebound. There is scope to recover from one or two years of suppressed project approvals, but with the level of demand growth seen in the New Policies Scenario, prolonging this into 2017 or beyond could lead to more volatile oil prices and a new boom-and-bust cycle for the industry.

The IEA projects oil demand in 2040 to be 103 Mb/d (36.7 billion barrels or Gb/year). Existing wells are declining by 4.3% a year, which amounts to 45.5 Mb/d by that date. Committed oil development projects are estimated to deliver 5.8 Mb/d in 2020, but by 2040, production will have declined to 1.4 Mb/d. Thus an additional 40.3 Mb/d of new oil production is required from projects not yet approved for development, with 14.5 Mb/d from fields not yet discovered. Yet, in 2015, only 2.5Gb were found against 8.5Gb expected. IEA discovery expectations for 2016 are, again, 8.5Gb, declining to 6.9Gb in the 2020s, but reverting to 8.5Gb in the 2030s. Clearly this is unrealistic. In addition, other analysts estimate that, of the 25.8 Mb/d projected from discovered fields on which development decisions have yet to be taken, production is likely to be limited to 15 Mb/d (9a)

If these sources do not materialise in the next ten years, the IEA predicts that Peak Oil will occur even if oil from fracked tight sources, oil sands and other sources are included.


Of all the world’s industries, aviation is arguably the most exposed to these exigencies. Not only is it the world’s seventh largest carbon emitter in equivalent country rankings – even excluding allowance for multiplier impacts – but its 5.2m bbl/day fuel consumption (10) represents a massive 33% of overheads (11), rendering it perpetually vulnerable to oil price volatility and supply shocks (12) (see figures 1 & 2).


More fundamentally, options for alternative fuels are more limited than those for other transport modes, progress on developing these has been slow, and many biofuel sources – long identified as perhaps the most promising substitute – face difficulties on cost, land competition, and net carbon-accounting once land-use change has been factored in (13). In addition, technical factors relating to combustion at altitude prohibit use of pure biofuels, necessitating blending with fossil fuel.


In the context of these challenges, demand projections are not comforting. Passenger traffic is expected to grow at an average rate of 4.8% a year to 2036, doubling fuel requirements and emissions over that period, excluding allowance for technological and operational improvements (14) (see figures 3-14). Unfortunately, in terms of efficiency gains, much of the low-hanging fruit has already been harvested. Fleet updating, better operations and load-factors have enabled traffic to grow 45% over the last 10 years, whilst fuel use has increased only 3% (figures 15 & 17).


In part because of this, existing industry ambitions for decarbonisation are modest in comparison with other sectors.  The Kyoto Protocol covers only domestic aviation emissions, whereas the ICAO (International Civil Aviation Organisation) is responsible for limiting or reducing international emissions. In 2010, it adopted the following goals (15):


  1. a global annual average fuel efficiency improvement of 2% until 2020 and an aspirational global fuel efficiency improvement rate of 2% per annum from 2021 to 2050, and
  2. a collective medium-term global aspirational goal of keeping the global net carbon emissions from international avaition from 2020 at the same level. Other inter-national aviation bodies (IATA, ACI, ICCAIA, CANSO) have also adopted a goal of reducing net aviation CO2 emissions by 50% by 2050, relative to 2005 levels (16). However, this target is also only aspirational: at present, no technical line-of-sight exists to achieve it.


Recent research by Manchester University has examined the mitigation potential of (i) technology and improved operations (ii) biofuels, and (iii) extension of current regional market-based measures to 2050, quantified for low, central and high traffic projections (17). None, singly or in combination, for any growth scenario, met the ICAO’s aspirational 2020 carbon-neutral goal by 2050, or the 2005 emissions stabilization goal, and the 2% goal would only just be met assuming maximum reductions from technology, operations, and ‘speculative’ availability of biofuels. Another recent study by Southampton University revealed that only by increasing ticket prices by 1.4% a year and, thereby, suppressing demand, will efforts to reduce CO2 emissions not be outweighed by the growth in passengers (18). The resulting ‘emissions gap’ has been widely recognised, but not yet bridged (16, op.cit., 17 ibid) (see figure 16).


Addressing these issues is particularly problematic in an industry in which the net margins over the last forty years have averaged a mere 0.1%,  and even in the best year over the decade to 2012, were only 3.2%. The average return on invested capital (ROIC) in the 2004-11 business cycle was 4.1%, a marginal improvement on the previous cycle but far below the weighted average cost of capital at 7-9% (19). Economic losses for the entire aviation supply chain have been calculated at $16-18bn annually. (20) Clearly, some form of breakthrough is needed given the multiplying difficulties ahead.


A recent IATA/McKinsey report examined how much value is being extracted from aviation by the fuel supply industry, and estimated that air transport generates $16-48bn in profits for the jet fuel industry, with the majority accruing to the crude oil suppliers. IATA has called for a partnership approach in the aviation value chain to find ‘the most productive way forward’, including for instance vertical integration, such as Delta’s purchase of an oil refinery. It commented that ‘new thinking is required’ to bring about the necessary improvement (20,  ibid.).


In summary, the airline industry faces a suite of challenges including fuel security, profitability and return on capital in the current business model, and the need to comply with upcoming carbon reductions – whether self-imposed or regulated. Carbon Order is advancing a solution which utilizes ‘new thinking’ along the value chain to address several of these challenges with one integrated approach. The solution is for airlines themselves to internalize the key fuel supply part of the value chain, through a strategically important new technology: direct air capture.  DAC is a nascent technology that allows industrial-scale capture of atmospheric CO2 for the production of low and zero-carbon fuels, and is now on the cusp of commercialization. By partnering with or operating DAC facilities, airlines can hold a stake in the profitable fuel supply step of the value chain, and can ensure delivery of fuels that are compatible with existing jet fuel infrastructure yet have dramatically lower – or even zero – carbon intensity.

Carbon Engineering is the acknowledged world leader in this field. Following successful trialing of technology systems developed over the last decade, Carbon Engineering is now delivering a complete end-to-end demonstration unit, and is targeting commercial roll-out by 2018 followed by deployment of full-scale (one-million tonne CO2/year) plants from 2020.  There are four commercial pathways to yield low-carbon fuels with DAC, all based on the carbon-negative quality of atmospheric CO2:


  • Air-to-Fuel Synthesis (A2F), involving the production of low and zero-carbon hydrocarbon fuels from CO2 through widely recognised industrial processes,
  • enhanced oil recovery (EOR), where the carbon intensity of the extracted oil is reduced by around half
  • algal biofuels, which require concentrated CO2 to achieve  commercially-viable  production, and can achieve carbon-neutrality only if the CO2 is atmospheric in origin, and
  • via sequestration, where the CO2 is buried in saline aquifers or mineralised in malfic rock formations, to offset emissions produced from combustion elsewhere.

All four are relevant to the aviation sector, but three in particular offer near-term options for the production of low-carbon jet fuel: DAC-EOR; Air-to-Fuel Synthesis; and sequestration.

  • Air-to-Fuels Synthesis involves the production of zero-carbon ‘drop-in’ compatible hydrocarbon fuels such as jet fuel, petrol and diesel from atmospheric CO2 and hydrogen through well-established, multiple-option chemical pathways.  At current energy costs, synthetic diesel production at scale would cost €1.5 litre.  Projected cost reductions in solar generation are, however expected to reduce this to $1.00/litre by 2020.
  • DAC-EOR pairs emerging DAC technology with the well-established EOR sector – currently mining COfrom underground and unable to meet demand – to produce ‘drop-in’ fuels with dramatically lower carbon intensity. The carbon intensity of a DAC-EOR fuel can easily be less than 50% of conventional fuels, but, by mixing low-carbon and conventional fuel, the carbon intensity can be adjusted to any level. Calculations based on Carbon Engineering’s cost and performance data show that a 33% emissions reduction would add less than 10% to airline ticket prices. A 50% emissions reduction would add 15% which, over a 35 year time-frame, represents a nominal annual surcharge.
  • Sequestration – the offsetting of CO2 emissions through burial of an equivalent amount to that released from combustion – would add circa $50/bbl for zero-carbon fuel (excluding allowance for multiplier impacts at high altitude at $120/tonne CO2 sequestered ($120/2.315bbl per tonne CO2), representing a 15% increase on ticket prices, or 25% including multiplier impacts.

Beyond these, however, is the opportunity to capture a critical part of the fuel-supply value chain, enabling through vertical integration a sixty-fold improvement in  long-run industry profitability and return on capital.

This proposal turns a negative into a positive: the airline sector’s exposure to external fuel sources, representing until very recently, a colossal 33% of its operational cost-base (20), is re-interpreted as valuable purchasing power and used to third-party debt-fund DAC plants through securitising long-term contractual out-takes. The enormous value of airline purchasing power can in fact help drive the deployment of low-carbon fuels. And, rather than lagging other sectors with costly 1-2% gains in emissions reduction, the airline industry can be an early mover in low-carbon transport. A 1 million tonne CO2/year DAC plant costs circa $0.7bn and generates an IRR of 20%. Strategic partnership arrangements would be entered into with one or more EOR oil producers or fuel synthesis developers for the downstream supply of low-carbon jet fuel, the CO2 for which is provided through the airline-owned DAC plant.  Although the extra revenue from the ticket price premium is fully absorbed by the cost premium for the low carbon fuel, the airline retains the profit which would have been available to a third-party DAC developer from sale of the CO2 – nearly $20m in year one rising to nearly $50m in year 25.This increases long-run aviation sector profitability from 0.1% to 2.3% initially, rising to 5.7% in year 25 – a twenty-three to fifty-seven fold improvement.  Comparisons against profitability in even the best performing years of 3.2% show an increase to 5.46% in year one, rising to 8.85% in year twenty-five – a gain of 70-176%.

Current fuel consumption by the aviation industry is 5.2m bbl/day (20). Reducing CO2 emissions by 50% by 2050 equates to an annual emissions decrease equivalent to 26m bbl, requiring the construction of thirteen 1-million-tonne DAC plants a year, at a cost of circa $9bn. However, projected growth of 4% per annum (net of efficiency improvements of 1% annually) will result in additional consumption of 73m bbl/year, necessitating construction of a further 18 DAC plants/year if that growth is also to be at 50% carbon intensity, increasing the programme to 31 plants annually, at a cost of $21bn/year.

Reducing Carbon Intensity  (CI) below 50% can in theory be achieved through DAC/EOR by over-injecting CO2,  although this is not optimal in terms of oil extraction efficiency. For the purposes of this proposal, it is assumed that the remaining 50% reduction to zero-carbon performance is secured through either over-injection or straight sequestration, involving the burial in saline aquifers of an amount of CO2 equivalent to the residual level of emissions. To achieve zero-carbon aviation would therefore double these figures, adding 13 plants a year for existing emissions ($9bn), and 18 plants a year to cover future growth ($12.5bn), producing totals for zero-carbon emissions by 2050 of 26 plants/year ($18bn) for existing demand levels, and 36 plants/year ($25bn) for growth. Summing these two sets of figures produces a grand total requirement therefore for 62 plants/year ($43bn).

For obvious reasons, multiplier impacts can also only be compensated for through sequestration, as it is not possible – apart from via BECCS, which has scaleability constraints from land-use competition – to reduce carbon emissions to less than zero, other than through offset mechanisms. Using a multiplier of 163% (see note in side panel for calculations), compensating for existing demand, growth projections, and these in combination would require respectively further plants of 16.4, 22.7, and 39/year, producing grand totals of 42 ($29bn), 58.7 ($40.6bn) and 102 ($70.5bn) a year.  This compares with 2010 global revenues of $598bn.

Substantial though these figures are, even the total of $70.5bn/year for the next 20 years represents less than 30% of the $5 trillion of new capital required to fund the growth of air travel in emerging markets over the same period (21). More significantly, however, because the proposed DAC programme would be third-party debt-funded, it would not impinge on capital resources required for other purposes.

It should be noted, however, that revenues for sequestration plants would need to be accounted for differently from those for EOR, due to loss of the $60/tonne commodity value for the CO2 for oil extraction purposes (the carbon-negative value is retained at $100/tonne). It is assumed for the purposes of this proposal that this is accommodated via a combination of a further premium on ticket prices and/or income from carbon pricing anticipated within a decade.  As alternative DAC-enabled air-to-fuels synthesis comes on stream, this could progressively be substituted for EOR sources. Indeed, Greyrock Energy, with whom Carbon Engineering has formed a strategic partnership, is projecting commercial-scale production of zero-carbon jet fuel, based on the Carbon Engineering DAC process, at less than EURO 1.50/litre ($1.65/litre).  Anticipated cost-reductions in solar generation will reduce this to $1.00/litre from 2020.  As explained above, such decarbonisation pathways provide opportunities ultimately to internalise the entire fuel-supply value chain, further improving profitability and return on capital.

Fuel security would also be improved. Airbus has argued that ‘new sources of fuel should primarily be reserved for aviation, as there are no other alternative sources for the industry today’. Its alternative fuels programme seeks to ‘catalyse the search for sustainable solutions for the production of commercial quantities for aviation without competing with land, water or food’. It is difficult to conceive of a more compelling argument for prioritizing fuel for aviation if this is derived from low-carbon sources which meet these criteria, through an initiative which is led by the aviation industry itself.  At the very least, it is suggested that approaches such as DAC-AFS and DAC-EOR be merged into the alternative fuels programs such as that of Airbus mentioned above. Decarbonisation is a critical issue for the aviation sector. The growing recognition by the investment community that, if the world is to adhere to the maximum 2oC limit, most fossil fuel resources are ‘unburnable’ represents a serious challenge to current aviation business models. Institutional downgrading of share values where these are based on theoretically unrealisable fossil-fuel assets, and the international momentum toward fossil fuel divestment, risks contagion to other sectors which are indirectly exposed via non-viable supply-chains.

At a growth rate of 4% per annum, aviation emissions will multiply nearly fourfold by 2050 to circa 4bn tonnes CO2/year, equating to 87.5bn tonnes over the 35 years to 2050. If the world is to adhere to the 2oC limit, the headroom remaining in the global carbon budget is 986 Gt CO2 (from 2011, 846 GtCOfrom 2016). Of this, without mitigation, the aviation sector will have accounted for 14% (16.9% from 2016), including allowance for multiplier impacts. Future-proofing through the approach proposed here therefore addresses multiple issues.

Carbon Engineering has now completed its final-stage Demonstration Pilot Plant and design and engineering work is underway for a coupled A2F plant for production of ultra-low carbon diesel, for completion in Q3 2017.  These plants provide a basis for equipment suppliers to provide cost and performance guarantees for full-scale plants up to 1m tonnes CO2/year capacity. These will be negotiated as part of the design detailing for an FOAK (First Of A Kind) commercial plant.  It is intended that this will be partly grant-funded, with a competitive return on equity generated through  long term out-take contracts for the resulting fuel production. Participation by one or more airlines through forward contracts to purchase the low-carbon jet fuel would both accelerate its development whilst providing an exemplar for wider take up by the aviation sector.

This initiative is therefore intended to catalyse the following:


  1. assembly of a consortium of airlines and aviation representative bodies to explore the foregoing proposal. This will (i) review critical issues, explore options and substantiate the case for the recommended approach and (ii) provide a route-map for realisation of the ultimately agreed programme
  2. commissioning of an independent report on DAC generally,  and its potential value to the aviation sector
  3. identification of an airline or small consortium of airlines to collaborate in the development of the FOAK DAC plant through off-take purchase of low-carbon jet fuel,  enabling optimal debt funding of the DAC facility as an exemplar for the aviation sector, in terms of financial engineering, market evaluation, and commercial  realisation, and
  4. to engage international aviation bodies in the proposed DAC programme for the purposes of wider policy adoption to meet global decarbonisation targets.

Interested parties should contact Carbon Order through this website.


ALLOWING FOR GROWTH OF 4% PER ANNUM IN AIR TRAVEL (NET OF 1% PER ANNUM TECHNICAL IMPROVEMENTS IN FUEL ECONOMY)  WOULD REQUIRE THE CONSTRUCTION OF 31 one-million TONNE DAC PLANTS A YEAR at a cost of $21 BILLION a year (DOUBLE THIS figure for zero-carbon flying, excluding multiplier impacts), and all potentially third-party funded.  This compares with $5 trillion of new capital required over the next 20 years to fund aviation growth in emerging markets.'

Carbon Order, 2012

'Fuel surcharges for example, have a negative impact on air travel demand, as the estimated values of price elasticity show that demand is rather elastic, notably for leisure travellers, and especially in periods of economic recovery, where consumer confidence is fragile. additionally, air transport is generally more impacted than other sectors by increases of crude oil prices, as fuel currently represents more than 30% of airlines operating expenses.'


‘Delivering the Future’, Airbus Industries 2011

'Today, whilst having an aviation infrastructure that is already large and growing fast, the people of china take just 0.2 trips per person per year. this compared to the largest domestic aviation market in the world in the us, where their flying citizens take on average nearly 2 trips per person per year. increasing wealth will however move these countries along the flight curve, flying more and helping to drive our forecast passenger traffic growth at a 4.8% average annual growth rate per annum over the next 20 years.'

‘Delivering the Future’, Airbus Industries 2011

'The world’s fleet of passenger aircraft, will grow from 15,000 at the beginning of 2011 to nearly 31,500 by 2030.'

‘Delivering the Future’, Airbus Industries 2011

'Unless plane ticket prices rise by at least 1.4% a year, efforts to reduce carbon dioxide (CO2) emissions will be outweighed by the growth in passengers. The cost of air travel has become 1.3 per cent cheaper a year on average since 1979 – a long-term trend that must be reversed’...ticket price-increases necessary to induce the required reduction in traffic growth-rates place a monetary-value on CO2 emissions of approximately 7–100 times greater than other common valuations'

Carbon dioxide emissions from civil aircraft, Matt Grote, Ian Williams, John Preston, Atmospheric Environment, Volume 95, October 2014, Pages 214-224 quoted in ‘Airline must end cheap travel to fulfil climate pledge’ Transport & Environment, 25.09.14

 Number of Direct City Pair Air Services

The number of direct city pair air services

 The real price of air transport (US$/RTK IN 2009$)

The real price of air transport (US$/RTK in 2009$)

 World scheduled air travel, freight and world GDP

World scheduled air travel, freight and world GDP


 Aviation and shipping in a 2oC context

'Currently and historically, increased aviation demand has outstripped CO2 emissions reductions through technological and operational improvements (IPCC, 1999). The reasons for this are that aircraft have high fuel-efficiency, and development is mostly constrained by incremental technological improvements, with rather limited scope to improve global emissions from improved operations. Moreover, the global fleet is replaced only rather slowly, and new types of aircraft have long development timescales to entry into service, and have in-service lifetimes of the order 25 years.

None of the measures, or their combinations, for any growth scenario managed to meet the 2020 carbon-neutral goal, the 2005 stabilization of emissions goal, or the 2005-10% stabilization of emissions goal at 2050.'

Bridging the aviation emissions gap: why emissions trading is needed, David S. Lee, L. L. Lim and B. Owen, Dalton Research Institute, Manchester Metropolitan University 01.03.13

'International aviation and shipping have climate impacts equal to Germany and South Korea respectively, yet they are tax-free on their fuel and are now set to be target-free on their emissions. It’s a betrayal of future generations and a sad reflection on the way the UN has become beholden to special interests. Paris needs to think again and quickly.'

Bill Hemmings, Aviation Manager at Transport & Environment, commenting on deletion from latest draft of Paris agreement of calls for aviation and shipping reduction targets, reported in Seas at Risk, 05.10.15

'Over the past forty years, air travel has expanded ten-fold and air cargo fourteen-fold, compared to a three to four fold rise in world GDP. Yet over this period airlines have only been able to generate sufficient revenues and profit to pay their suppliers and service their debt. There has been nothing left to pay investors for providing equity capital to the airline industry.
Air transport continues to create tremendous value for its users, passengers and shippers, and others in the value chain but destroys value for its airline equity investors'

 Real Price of Air Transport and Real Unit Costs

 2012 Worldwide Airline financial Results Per Departing Passenger

'after paying tax and debt interest, net profits per passenger were just $2.56. It does not take much of a rise in costs, government tax or demand shock to eliminate such a thin level of profit.'

Profitability and the air transport value chain: an analysis of investor returns within the airline industry and its supply chain. IATA Economics Briefing No 10

 Return on invested capital in airlines and their WACC

Return on invested capital in airlines and their WACC

 Industry Median ROIC, Without Goodwill

'Over the past 30-40 years the airline industry has generated one of the lowest returns on invested capital among all industries'

Profitability and the air transport value chain: an analysis of investor returns within the airline industry and its supply chain. IATA Economics Briefing No 10

Over the past full business cycle investors in airlines have received a return on their invested capital which has been on average $17 billion less each year than they would have earned by taking their capital and investing it elsewhere in assets of similar risk.

Profitability and the air transport value chain: an analysis of investor returns within the airline industry and its supply chain. IATA Economics Briefing No 10

Some 75% of in-plane jet costs, excluding any taxes, consist of the cost of crude oil.

Profitability and the air transport value chain: an analysis of investor returns within the airline industry and its supply chain. IATA Economics Briefing No 10

At current levels of jet prices, air transport generates very substantial profits for the fuel industry estimated at between $16 and 48 billion. The vast majority of those profits are generated upstream, for crude oil suppliers.. Upstream in the jet fuel supply chain, crude oil supply companies are estimated to be generating $19-37 billion of profit.

Profitability and the air transport value chain: an analysis of investor returns within the airline industry and its supply chain. IATA Economics Briefing No 10

 The Jet Fuel Supply Chain

'Returns on invested capital have only improved from 3.8% in the 1996-2004 cycle to 4.1% in the 2004-2011 cycle, still way below the level of returns that an investor would consider “normal”.

Profitability and the air transport value chain: an analysis of investor returns within the airline industry and its supply chain. IATA Economics Briefing No 10

'The decade also saw industry revenues double to an expected $598 billion. But industry profits are much less impressive. Over the last 40 years, the average net margin is 0.1%. And even in the best year of the last decade – 2010 – the industry’s $18 billion profit is equal to a pathetic margin of just 3.2%, that does not cover the 7-8% cost of capital'.

Giovanni Bisignani, Director General & CEO, IATA, writing in foreword of Vision 2050, IATA, February 2011

There is today over $500 billion of investors’ capital tied up in the airline industry. In a ‘normal’ industry investors would earn at least the cost of capital, implying a return of $40 billion a year. In fact, over the past decade investors have seen their capital earn $20 billion a year less than it would have invested elsewhere. Even at the top of the last cycle over $9 billion of investor value was destroyed.

Vision 2050, IATA, February 2011

New thinking is required to bring about the improvement required'

Profitability and the air transport value chain: an analysis of investor returns within the airline industry and its supply chain. IATA Economics Briefing No 10