Methodologies to monetize the variations in load factor and GHG emissions per passenger-mile of airlines

Global GHG emissions from air travel are currently at 3% and it could increase to 15% of the total GHG emissions by 2050. To curb the growth of GHG emissions from air travel, the U.S. Federal Aviation Administration (FAA) has created a policy to achieve carbon neutral growth by 2020 relative to the 2005 baseline. If the airline industry is to both grow and meet the objectives set by this policy, new and innovative aircraft designs, operational efficiencies, and widespread use of alternate fuels are required. To accomplish this would require large research and development investment. The federal government and state governments have passed legislations that provide tax breaks and other incentives to encourage investments in new technologies. One such tax policies is cap and trade system. This had partial success in reducing GHG emissions in certain industries but was not successful in the airline industry. This paper presents alternate methods to raise capital to invest in GHG emissions reduction projects in the airline sector. The four methodologies presented here monetizes the GHG emissions resulting from differences in load factor (ratio of number of passengers to number of seats) and GHG emissions per passenger-mile among different airlines, among different flight sectors, etc. to raise the capital. Based on 2012 air travel data, these methodologies could raise more than $300 million dollars annually to invest in GHG emissions reduction projects.