In July, JetBlue Airways announced that it had become carbon neutral on all of its domestic flights. CEO Robin Hayes committed to this initiative publicly in January 2020, well before CoViD upended the entire aviation industry. At the time he stated that “We reduce where we can and offset where we can’t. By offsetting all of our domestic flying, we’re preparing our business for the lower-carbon economy that aviation – and all sectors – must plan for.”
‘Preparing for the low carbon economy that aviation must plan for’ – true adaptive leadership from JetBlue
We want to unpack this initiative of JetBlue and understand the broader implications and key learnings from this news as an industry.
In recent years, carbon off-setting has become a subject which is receiving an increasing amount of attention within the aviation community. This article seeks to explore what carbon off-setting means to the aviation sector and how it will likely change the industry in the future.
Carbon offsetting is one of many greenhouse gas mitigation strategies which the aviation sector can avail of. It will be the focus of this article. In future articles, we will explore other technological improvements such as more efficient aeroplanes and engines, artificial intelligence/machine learning optimized air traffic management and flight planning methods as well a reduction in air travel volumes such as those occurring now during CoViD or also through consumers opting out of air-travel, known as the Greta-effect.
Who are JetBlue?
JetBlue Airways is an American low-cost carrier headquartered in Long Island, New York and has it’s main base at John F. Kennedy International Airport. It has a market cap of $3.14 Billion. It started operations 20 years ago in February 2000 and despite the crisis caused by 9/11 in its start-up year, it survived and thrived to become the fifth largest domestic airline in the United States. In 2019 it had 5.5% market share of the US domestic market which equates to carrying more than 30 million customers a year in it’s 250 aircrafts.
Why is this newsworthy?
There are several interesting aspects to this decision by JetBlue including the precedent that it sets, the effects that it has on the market, on consumer behaviour, the technology and the cost of this commitment.
Setting an example:
In terms of precedent, as an act of good corporate citizenship, JetBlue is the first US airline to voluntarily choose to go carbon neutral and have commited to offsetting approximately 7 million tonnes (15 billion lbs) of carbon dioxide per year. Several European airlines such as Air France, British Airways and EasyJet, have made similar commitments. Only a few weeks ago we saw an exciting announcement from the oneworld alliance for a similar goal. The notable difference is the target time frames, where legacy carriers appear to be less ambitious than the more recently founded low cost carriers.
How much will this cost?
The cost of this new way of operating is difficult to determine as JetBlue have not disclosed the costs related to its use. JetBlue has partnered with Carbonfund.org who sells air travel offsets to businesses and individuals. Using Carbonfund.org’s online calculator to determine the cost of offsetting JetBlues 2019 passenger miles (53 billion), JetBlue’s targeted offset purchases would cost approximately $70 million before taxes on its current operating revenue of $7.3 billion. The actual net cost is likely to be much lower. Analysts project that this cost may reduce annual earnings per share by a maximum of $0.20.
How will this affect consumer behaviour?
In terms of consumer behaviour, JetBlue is banking on being known as being more environmentally friendly and sustainable than its peers. This could pay off in terms of increased customer loyalty and enhanced brand value. Looking to Europe, which leads the US in flight shaming, consumers are acting out their concerns about flying and its effect on the environment. Sweden and Germany saw drops in overall flights in and out of their countries by approximately 3 percent in 2019. Post CoViD, consumer behaviour indicates a growing awareness among climate conscious travellers who will respond positively to airlines like JetBlue and make investments in sustainable business practices.
Is carbon off-setting a licence to wash away bad practices?
The effect of carbon off-sets is hotly debated amongst environmentalists, specifically about how such practices will enable consumers and businesses to greenwash away their carbon sins without altering their carbon intensive activities in the first place, via new technology and challenges existing practices.
Kevin Anderson, a leading climate researcher, writing in the journal Nature stated that “Offsetting is worse than doing nothing. It is without scientific legitimacy, is dangerously misleading and almost certainly contributes to a net increase in the absolute rate of global emissions growth.” Others share his concern, notably Peter Kalmus, a climate scientist at NASA’s Jet Propulsion Lab. Speaking only on his own behalf and not NASA’s, he believes that “there’s no more potent way hour-for-hour to warm the planet than flying.” He believes offsets might do more harm than good because they make people believe they can fly without contributing to climate change. In a recent interview with the New York Times, Michael R. Solomon, the author of “Consumer Behavior: Buying, Having and Being” and a professor at St. Joseph’s University, said he was not surprised by the allure of the carbon-offsetting market. “Consumers are always going to gravitate toward a more parsimonious solution that requires less behavioral change. We know that new products or ideas are more likely to be adopted if they don’t require us to alter our routines very much.”
In short, carbon-neutral campaigns are a sign of the times; easy on the sacrifice and big on the consumerism.
Countering this viewpoint one could speculate that JetBlue’s actions will lead to behavioral contagion amongst the industry to make it easier for others to follow. This could help make off setting an industry norm. There are many in the aviation industry and beyond who view offsetting as a necessary step to reducing emissions as airline travel continues to grow and in the absence of any other technological alternatives it is an option to be pursued. Chris Goater, IATA’s manager of corporate communications stated recently that “lower or zero-emission planes, such as hybrids or electric, won’t come into play until the mid-2030s and then only for shorter hauls.” Furthering this viewpoint, Daniel Lashof, Science Director of The Climate Center at the Natural Resources Defense Council said that “We can’t stop global warming with voluntary offsets, but they offer an option for individuals looking for a way to contribute to the solution in addition to reducing their own emissions and urging their elected representatives to support good policy.” Pre-CoVid, IATA forecast that airline travel will double in the next 20 years with most of that growth coming from consumers in India and China. Regardless of the varying expert opinions on carbon off-sets, it is set to become a multi-billion dollar business over the next five years, reaching at least $6.2 billion a year for air travel alone, according to an analysis by Citigroup.
How does carbon off-setting work?
There are several ways for airlines to reduce their Green House Gas (GHG) emissions including water vapor, hydrocarbons, carbon monoxide, nitrogen oxides, sulfur oxides, lead, and black carbon. Offsetting is a method for calculating emissions and then purchasing equivalent “credits” from projects that prevent or which remove the emissions of an equivalent amount of greenhouse gases elsewhere on the planet. JetBlue and other airlines are achieving their GHG reductions through purchasing sustainable-fuels which will reduce the carbon dioxide produced by the airline. JetBlue has agreed to buy sustainable aviation fuel (SAF) from Neste, which uses 100% waste and residue raw materials. SAF can reduce an airline’s carbon footprint by as much as 80%, compared to fossil jet fuel. Such fuels are derived from sustainable oil crops or from wood and waste biomass and have the single largest impact in reducing emissions from each flight by around 80 percent. However, fuels made from these sources are in short supply, according to the International Air Transport Association (IATA).
Is carbon off-setting regulated?
There is no government or industry regulation of carbon off-setting of this multi-billion dollar industry. The reasons why are complex. In the mid 2000’s, the UN regulated carbon market arrangements such as the Clean Development Mechanism (CDM). However, this arrangement in the form of the CDM was not ratified due to the global financial crisis and the regulatory uncertainty following the 2009 UN climate conference in Copenhagen. This failure to ratify this proposal, resulted in a dramatic fall in carbon prices and a loss in trust among many profit-oriented actors. Despite the lack of a UN agreement, the private sector market created a variety of voluntary carbon offsetting schemes. In response to the mounting sense of climate crisis, many business actors now insist that these market arrangements should be enlisted and scaled up to support the Paris Agreement. Many business actors believe that carbon markets can stimulate low-cost climate mitigation and help to raise states’ commitments for and transition to low carbon economies. Countering this viewpoint, is a growing criticism from the NGO community over the future role of carbon market schemes. Resolving the tension between these counter positions will not be easy as there are a complex variety of actors, many disparate authority arrangements and opposing views as to the legitimacy claims in the Paris climate agreement.
The current schemes make it difficult in many cases to know whether money for offsets is in fact going toward carbon reduction, or even how those reductions are being measured. In searching for good programs should be mindful of the following two attributes:
1 – Is carbon off-setting permanent?
Carbon offsets must represent a permanent reduction of emissions through long term storage of that carbon. If trees are to be used to absorb the carbon, then they cannot be burned in the subsequent years. It should be noted that the recent wildfires in California have destroyed 2.6 million offset credits based on the carbon stored in its forests.
2 – Is carbon off-setting methodology transparent?
The International Small Group & Tree Planting Program (TIST) is an excellent example of transparency in their work over the last 20 years. They have helped over 95,000 farmers in India, Kenya, Tanzania, and Uganda plant and maintain more than 18 million trees on their farms. Independent auditors visit the sites to measure the diameter of these trees and make sure they’re still in the ground. TIST uses the latest online technology to log the location, images and diameters of their trees for all to view. Other programs we have spoken to include CLevel and Daren Howart, CEO comments regarding validity & regulation: ‘Offsetting is a way to quantify and deal with the impact of your carbon emissions. It is a good start but you need to find verified, trustworthy projects; the offsetting is practical but not transformational and needs to go hand in hand with reducing emissions and taking a deeper look at the business.
At C-Level, we operate strict criteria for projects to enter into our Carbon Balanced programme. For example, projects must deliver verified action on carbon, action on forests, and always with communities. For this reason, our projects are regulated under the worlds original carbon standard, called Plan Vivo. We combine satellite data with live updates from apps on field technician’s mobile phones to provide real-time reporting to our clients on the reforestation they are working with. Transparency is fundamental. ‘
What alternative technologies are available for carbon off-setting?
Alternative technologies exist such as direct air capture technologies but these are emergent and yet to be truly viable and cost effective. One of the most publicised techniques converts carbon dioxide into stone and works extremely well however, it is one of the most expensive methods available. Another lab based technology showing much promise is solar to fuel conversion technology. Whilst the technology has been under investigation for many years, recently major breakthroughs have been made. This is where artificial leaves in solar panels absorb carbon dioxide “The new solar cell is not photovoltaic—it’s photosynthetic,” says Amin Salehi-Khojin, assistant professor at the University of Illinois at Chicago, a leading researcher in this technology. High technology is appealing but simple reforestation has enormous potential to affect climate change like no other in both cost and scale. Carbon offsets aren’t the solution to climate change, but they’re all airlines have, for now.
Our prediction:
It is Arvensis Partners’ opinion that this is a positive move and shows clear leadership on the part of JetBlues senior executives in a time when the entire industry is in crisis and we have spoken to many carriers who have told us that their sustainability efforts have been removed from the priority list. It puts JetBlue on a clear and self determined part with respect to their commitment to a measurable sustainability program at a time when the aviation industry is in the midst of dual crises. One short term crisis as a result of CoViD which has rapidly upended the global aviation sector and from which we are yet to understand the full impact of. The other crisis, climate change, is slowly unfolding and affecting the industry.
Recently we interviewed a Senior Sustainability professional in a european flag carrier who told us that the Chairman himself brought sustainability & fast change to the board room because ‘he couldn’t look this grand-children in the eye any longer’.
Whilst it has not been experienced with the same degree of immediacy as CoViD, its effect has already been felt in boardrooms and living rooms across the world and is the desire to act being propelled by an awakening consciousness both by senior leaders and consumer.
JetBlues leadership team in their commitment to sustainable practices will pay off in ways beyond higher customer engagement such as being able to attract better talent when hiring and in having increased employee retention. JetBlue is also building its adaptive capacity, a term which describes organizational resilience and preparedness to deal with change.
This will enable the organization to respond more effectively to the challenges of the future with more assured outcomes and confidence.
Dermot O’Mahony, Co-founder Arvensis Partners