extfieldsofstudy:
Medicine
Environmental Science

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International aviation emissions to 2025: Can emissions be stabilised without restricting demand?

International aviation is growing rapidly, resulting in rising aviation greenhouse gas emissions. Concerns about the growth trajectory of the industry and emissions have led to calls for market measures such as emissions trading and carbon levies to be introduced to restrict demand and prompt innovation. This paper provides an overview of the science on aviation's contribution to climate change, analyses key trends in the industry since 1990, projects international civil aviation emissions to 2025 and analyses the emission intensity improvements that are necessary to offset rising international demand. The findings suggest international aviation carbon dioxide (CO2) emissions will increase by more than 110 per cent between 2005 and 2025 (from 416 Mt to between 876 and 1013 Mt) and that it is unlikely emissions could be stabilised at levels consistent with risk averse climate targets without restricting demand.

Introduction
Sixty years ago, civil aviation was an infant industry that was responsible for a tiny proportion of the transport task. Today it is an integral part of the world economy, accounting for approximately nine per cent of global GDP and carrying more than two billion passengers and 41 million tonnes of freight and mail each year (Airbus, 2007;International Civil Aviation Organization (ICAO), 2007a;United Nations Statistics Division (UNSD), 2008). Total world revenue traffic (international and domestic, passenger and cargo) on scheduled airlines in 2006 exceeded 510 billion revenue tonne kilometres (RTK), 1 which included almost four trillion revenue passenger kilometres (RPK). 2 In the same year, total revenues of the scheduled airlines of the parties to the Convention on International Civil Aviation of December 1944 (Chicago Convention) topped US$450 billion, more than 120 per cent above 1990 levels (ICAO, 2007a).
The success of the aviation industry is poised to continue over the coming decades. Industry forecasts predict worldwide RPK will grow at an average rate of approximately five per cent per annum over the next 20 years (Airbus, 2007;Boeing, 2007). Cargo traffic, as measured in RTK, is expected to grow at around six per cent over the same period. If realised, these forecasts would see passenger (RPK) and cargo (RTK) traffic increase by 180 per cent and 220 per cent, respectively, between 2006 and 2026.
Continuing rapid growth in aviation would provide economic benefits and allow greater mobility amongst the world's population. However, these benefits would come at a cost, most notably a significant increase in aviation greenhouse gas emissions. While aviation is not currently one of the main drivers of global warming, the growth trajectory of the industry suggests it could become a significant factor over the coming decades. A report prepared by the Intergovernmental Panel on Climate Change (IPCC) in 1999 at the request of the ICAO found that civil aviation carbon dioxide (CO 2 ) emissions could rise by between 60 per cent and over 1000 per cent between 1992 and 2050 (IPCC, 1999). More recent research suggests that if strong global economic growth continues, aviation CO 2 emissions are likely to experience a greater than three-fold increase between 2000and 2050(Berghof et al., 2005Horton, 2006). Concerns about rapid growth in the industry and the associated threat to the climate system have prompted debate about the future of aviation.
The international market has been the focal point of a considerable amount of the discussion about aviation and climate change. This is partly due to the fact that international aviation is responsible for over 60 per cent of total aviation emissions and is the fastest growing segment of the market. Measures to address international aviation emissions must also deal with several important legal and policy issues that do not arise in the context of domestic aviation.
Concerns about emissions growth have led to calls for additional market measures to be introduced to restrict demand and prompt innovation in international aviation. These proposals have met resistance. Many governments have been concerned about the potential for such measures to adversely affect the aviation sector and associated industries such as tourism. Governments opposed to these initiatives have also raised questions about the legality of international aviation emission levies and measures that seek to unilaterally impose carbon prices on the extraterritorial emissions of foreign aircraft. The aviation industry has voiced similar concerns. Like many governments, the industry's current position is that it is opposed to emission levies, but supports emissions trading subject to certain conditions (e.g. it is introduced on the basis of mutual consent between participating nations and that the schemes are open and allow for permits to be traded with other sectors) (International Air Transport Association (IATA), 2008a, b).
This paper aims to add to the growing body of literature on aviation and climate change by providing an overview of the science on aviation's contribution to climate change, analysing key trends in the industry since 1990, projecting international civil aviation CO 2 emissions to 2025 and determining the emission intensity improvements that are necessary to offset rising international demand. The objective is to highlight that it is unlikely international aviation emissions could be stabilised at levels consistent with risk averse climate targets (i.e. keeping the increase in the global average surface temperature to $2 1C above pre-industrial levels) without restricting demand.
The paper is set out as follows. Section 2 provides background on the reasons for the separation of international and domestic aviation in policy processes. Section 3 discusses aviation's climate impacts. Section 4 analyses recent trends in the aviation industry, focusing on the international market. Section 5 projects international civil aviation emissions over the period 2005-2025 using ICAO traffic data. Section 6 analyses the emission intensity improvements that are necessary to offset the projected increases in demand. Section 7 provides a conclusion.

The division between international and domestic aviation
Civil aviation is split into international and domestic components for the purposes of greenhouse gas emissions accounting and climate governance. The IPCC Guidelines for National Greenhouse Gas Inventories, which are used for the purposes of reporting under the United Nations Framework Convention on Climate Change (UNFCCC), defines international civil aviation emissions as 'emissions from flights that depart in one country and arrive in a different country', including take-offs and landings for the relevant flight stages (IPCC, 2006, p. 3.58). Domestic aviation emissions are defined as 'emissions from civil domestic passenger and freight traffic that departs and arrives in the same country' (IPCC, 2006, p. 3.58). Military aviation emissions are reported separately from civil aviation, or not reported at all.
Under the UNFCCC, domestic aviation emissions are required to be included in national emission totals and are intended to be addressed at the national level within the UNFCCC/Kyoto Protocol regime. In contrast, international civil aviation emissions are excluded from national emission totals and are only reported in UNFCCC national inventory reports as a memo item. Further, Article 2(2) of the Kyoto Protocol vests responsibility for international aviation emissions in ICAO, a United Nations agency established under the Chicago Convention. As a consequence, international aviation emissions are intended to be addressed within the regime established under the Chicago Convention rather than through the UNFCCC.
The reasons for the separation of international and domestic aviation emissions relate to the nature of international transport, the UNFCCC greenhouse accounting framework and international aviation law. The emission accounting rules under the UNFCCC dictate that emissions are only attributable to a country if they result directly from activities within its territory. International transport involves movements between countries, creating a problem for the standard accounting system. Further, under international aviation law, each country has complete and exclusive sovereignty over the airspace above their territory. Beyond their territorial airspace, the capacity of a country to regulate aircraft is limited and is subject to the body of law associated with the Chicago Convention and related bilateral air service agreements. Due to these issues, ICAO was seen as the appropriate body for addressing international aviation emissions.
To date, ICAO has had little success in curbing the growth in international aviation emissions or progressing effective policy solutions. Its failures have been a product of a collection of factors. Most countries have been reluctant to undertake significant emissions abatement and obstruct growth in the aviation industry. As discussed, there is also an ongoing dispute about the legality of emission levies and the capacity of a country to unilaterally impose carbon prices on the extraterritorial emissions of foreign aircraft. In addition, there are debates about how international aviation emissions should be allocated between countries and the most appropriate design of an emissions trading scheme that applies to the sector. The political problems that have hindered progress on international aviation emissions are not unique. However, the legal, accounting and policy design issues that arise in this context set it apart from most other areas, including domestic aviation. International shipping is the only other sector that is confronted with the same types of problems.

Greenhouse gas emissions from aviation
Aircraft emit a range of gases and particles which affect the atmosphere. In the context of climate change, the major emissions are CO 2 , nitrogen oxides (NO x ), 3 water vapour (H 2 O), sulphur oxides (SO x ) (which form sulphate particles) and soot (IPCC, 1999). 4 A summary of the atmospheric impacts of these agents and estimates of their associated radiative forcings in 2000 is provided in Table 1. Radiative forcing is a measure of the impact of an agent on the energy balance of the earth's atmosphere. It is technically defined as the change in net irradiance at the tropopause (i.e. the boundary between the troposphere and stratosphere) and is measured in watts per square metre (W/m 2 ) (IPCC, 2001). A positive number indicates the agent has a warming effect, a negative number indicates a cooling agent.
The IPCC has estimated that the total radiative forcing associated with anthropogenic agents in 2005 was 1.6 W/m 2 (0.6-2.4 W/m 2 ). This suggests aviation's contribution excluding cirrus cloud effects is in the order of three per cent. When cirrus cloud effects are included, aviation's contribution could possibly be as high as six to eight per cent. Hence, while aviation is not currently one of the main drivers of global warming, its effects are significant and should not be overlooked in policy processes.
A technical difficulty facing policy makers seeking to address aviation emissions is how to account for non-CO 2 emissions. The nature of most non-CO 2 emissions precludes the use of standard

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3 Nitrogen oxides comprise nitric oxide (NO) and nitrogen dioxide (NO 2 ). 4 The emissions differ depending on the stage in the operating cycle. At cruising altitude and during takeoff, the main emissions are CO 2 and NO x . While idle, the major non-CO 2 emissions are of hydrocarbons (HC), but significant amounts of NO x and carbon monoxide (CO) are also emitted. During the approach stage, there is a mixture of CO 2 , NO x , HC and CO (Bureau of Transport and Regional Economics (BTRE), 2002). global warming potentials (GWPs) to convert non-CO 2 emissions into carbon dioxide equivalents (CO 2 -e). GWPs are a measure of the cumulative radiative forcing associated with a unit mass of the relevant direct greenhouse gas when compared to the same mass of CO 2 over a specified period (typically 100 years) (IPCC, 2001). They are not calculated for H 2 O and indirect greenhouse gases like CO and NO x because of the variable nature of the relevant climate impacts (Forster et al., 2006;IPCC, 2001). The absence of GWPs for H 2 O, NO x and CO emissions means it is very difficult to compare the impacts of a unit mass of these gases to those associated with a unit mass of direct greenhouse gases like CO 2 .
One proposed solution is to use a radiative forcing index (RFI) (i.e. the ratio between the total radiative forcing from aviation and the radiative forcing associated with aviation CO 2 emissions) to devise a metric (often called an 'uplift factor'), which is used to estimate aviation CO 2 -e emissions. To do so, CO 2 emissions from aviation are multiplied by the uplift factor to provide an estimate of the total impact of aviation emissions in CO 2 -e. There is debate about the appropriateness of uplift factors and their use in policy processes. Questions have also been raised about what uplift factor should be applied. Recent studies indicate that the appropriate uplift factor could range between 1.7 and 5.1 times aviation CO 2 emissions depending on the timescales of the analysis (Forster et al., 2006;Sausen et al., 2005). If the purpose is to provide an approximation of CO 2 -e using a 100-year timeframe, an uplift factor of 1.7 appears to be the best estimate, although it is subject to considerable uncertainty.

Recent trends in aviation traffic and emissions
The aviation industry has grown rapidly in recent decades. Between 1990 and 2006, total scheduled world RTK increased by 119 per cent, with scheduled passenger (RPK) and cargo (RTK) traffic rising by 108 and 140 per cent, respectively. The major driver of global traffic growth since 1990 has been international services. Between 1990 and 2005, total international RTK increased by 141 per cent. In comparison, total domestic RTK rose by only 54 per cent (see Fig. 1).
The increase in aviation traffic over the past 20 years has been accompanied by dramatic improvements in emission intensity. Data from the IATA suggest that system-wide fuel efficiency of scheduled IATA member services (i.e. international and domestic, passenger and cargo) improved by 23 per cent between 1994 and 2006; falling from 51.3 to 39.4 litres per RTK (L/RTK) (IATA, 2000(IATA, -2007. 5 Airbus has published data indicating that the fuel efficiency of the world passenger fleet improved by approximately 35 per cent between 1990 and 2007, falling from 7.3 to 4.7 L/100 RPK (Airbus, 2007).
The fuel efficiency and emission intensity of international aviation has followed the global trend. Over the period 1990-2005, the emission intensity of international aviation improved by 40 per cent (191-113 kg CO 2 /100 RTK). 6 These changes are attributable to three factors: beneficial changes in air traffic management (ATM) (ICAO Secretariat, 2007); improvements in aircraft and engine design 7 ; and a significant increase in load factors (i.e. aircraft are using more of their capacity). As shown in Fig. 2, the greatest advances in the emission intensity of international aviation were experienced in the 1990s when the average annual rate of improvement was almost 4.5 per cent. Since 2000, the rate of improvement has fallen to 1.2 per cent, suggesting the opportunities for gains are diminishing.
Despite the improvements in emission intensity, aviation CO 2 emissions have increased considerably since the early 1990s.  (Marland et al., 2007), suggesting that aviation constituted approximately 2.2 per cent of the world total, with international aviation emissions comprising 1.3 per cent. Aviation demand is set to experience rapid growth over the next 20 years. ICAO's most recent forecast suggests that the total scheduled passenger task (RPK) will grow at an average rate of 4.6 per annum between 2005 and 2025, with scheduled international RPK growing at 5.3 per cent per annum over the same period. Scheduled freight services are also expected to increase considerably, with overall freight RTK growing at 6.6 per cent per annum and international freight RTK growing at 6.9 per cent per annum. Boeing and Airbus have forecast similar rates of traffic growth (Airbus, 2007;Boeing, 2007).

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An expectation of strong economic growth is the main underlying driver of the aviation traffic projections. Aviation traffic is usually highly responsive to economic growth rates; with increases in economic activity prompting greater than proportional increases in traffic (i.e. demand is income elastic). 9 Where this relationship does not hold, the cause can typically be traced to unforeseen market shocks. These market dynamics are evident in the trends in international aviation since 1990 (see Fig. 3). International traffic growth rates have generally been responsive to global GDP over this period. Significant divergences between the two were witnessed in response to a number of external shocks, including the East Asian Financial Crisis in 1997-98, the September 11 terrorist attacks in 2001 (which coincided with the global economic slowdown in 2001-02) and the severe acute respiratory syndrome (SARS) outbreak that began in November 2002.
Article 2 of the UNFCCC states that the objective of the convention is the 'stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system'. Based on the available science and informed by value judgments, many individuals and institutions have suggested that the threshold for dangerous climate change is an increase in the average surface temperature of between 1.7 and 2.5 1C above pre-industrial levels. 10 To have a reasonable chance of preventing global warming exceeding a 2 1C threshold, which is the most commonly cited target, the atmospheric concentration of greenhouse gases would have to be stabilised at less than 450 ppm CO 2 -e. Meeting this stabilisation target would require dramatic action. Global carbon emissions would have to be reduced by in excess of 60 per cent on 2000 levels by 2050 (IPCC, 2007). The latest generation of climate models that account for climate-carbon cycle feedbacks suggest the required emission reductions may be greater than previously believed and that significant emission reductions may be necessary by 2030 just to keep the atmospheric concentrations of CO 2 below 450 ppm ($500-550 ppm CO 2 -e) (Friedlingstein et al., 2006;Meehl et al., 2007).
Theoretically, an increase in aviation emissions could be accommodated within a risk averse policy framework if there was offsetting abatement in other sectors. However, the extent of abatement that is necessary to ensure the increase in the global average surface temperature does not exceed 2 1C, and the speed at which it would have to occur, leaves little room for significant increases in emissions from any sector. Consequently, if there is a desire on behalf of policy makers to pursue a temperature target of around 2 1C, it is likely that steps will need to be taken in the near future to curb aviation emissions. International aviation emissions are of particular concern because of the speed at which demand is increasing and the political, legal and policy issues hindering the introduction of effective abatement measures.

Emission projections
The reason for the concern about international civil aviation can be demonstrated by projecting international emissions over the period 2005-2025. To do this, the following equation was used: where E n ¼ t CO 2 emissions in year n, RTK n ¼ projected RTK in year n, EI n ¼ emission intensity of international aviation in year n, measured in t CO 2 per RTK. This is a simple emission intensity approach. It does not account for the interaction between demand and emission intensity and is only intended to provide a broad indication of possible outcomes.
Two scenarios were developed using the emission intensity equation: S1 and S2. Details of S1 and S2 are provided in Table 3.
The traffic data for 2005 and 2006 were obtained from ICAO (2007a) and IATA (2006IATA ( , 2007, with the exception of the nonscheduled cargo data for 2006, for which data were not available. The 2006 non-scheduled cargo estimate was derived in accordance with the assumptions discussed in Table 3. The emission intensity for the base year (2005) was derived using the IEA's estimate of international aviation emissions (IEA, 2007a). There is considerable uncertainty associated with international traffic, fuel and emission statistics, including those published by the IEA. The weaknesses in the available databases are well known and are discussed at length elsewhere. 11 Key problems include the reporting of non-scheduled traffic and the allocation of fuel between domestic, international and military uses. These issues add further uncertainty to the emission projections.  1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Percent Real global GDP International aviation RTK The results for S1 and S2 are shown in Fig. 4. Indices of projected CO 2 emissions at five-year intervals are provided in Table 4. Under S1, international aviation CO 2 emissions rise from 416 in 2005 to 1013 Mt in 2025. Under S2, emissions increase to 876 Mt in 2025.

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The above projections of international civil aviation CO 2 emissions do not fully account for the impacts of aviation emissions on the climate system. As discussed in Section 3, aviation non-CO 2 emissions (particularly NO x and H 2 O) have important climate impacts and are believed to account for 50-80 per cent of the current warming associated with aviation. If an uplift factor of 1.7 is used to estimate total CO 2 -e emissions, the emission intensity model suggests international aviation emissions will be between 1488-1722 Mt in 2025. While the use of uplift factors is controversial, these figures illustrate the potential magnitude of the total climate impacts associated with international aviation.

Comparison with previous projections
The results for S1 and S2 from the emission intensity model are at the higher end of previous international aviation emission projections. Olsthoorn (2001) projected that international aviation CO 2 emissions will be 86-144 per cent above 1995 levels by 2020 (or 383-503 Mt) and 187-513 per cent above 1995 levels by 2050 (591-1263 Mt) if carbon is not priced. These results suggest that by 2025, emissions will be approximately 100-190 per cent above 1995 levels ($410-600 Mt CO 2 ). In comparison, the emission intensity model predicts that emissions will be 150-190 per cent above 1995 levels in 2025 (876-1013 Mt CO 2 ). The results from Olsthoorn's (2001) low and high emission growth scenarios (the Ecological and Schumpter scenarios (marked 'OE' and 'OS' respectively)) are shown in Fig. 5, along side the results from the emission intensity model. Much of the difference in absolute numbers is attributable to Olsthoorn's (2001) lower estimate of emissions in 1995 (206 Mt CO 2 compared to the latest IEA estimate of 306 Mt CO 2 ). In relation to the proportional increases, the emission intensity model results overlap the upper end of the range in Olsthoorn (2001). The higher estimates from the emission intensity model are due mainly to differences in economic growth rates, which are a major determinant of aviation demand. The scenarios in Olsthoorn (2001) assumed annual global real GDP growth of 1.6-3.1 per cent. The ICAO traffic forecast used in the emission intensity model assumed real GDP growth of 3.5 per cent to 2025. Owen and Lee (2006) provide another source of comparison. The report, which was prepared for the UK Department of Environment, Food and Rural Affairs (DEFRA), projected scheduled domestic and international aviation CO 2 emissions over the period 2000-2050. The traffic forecasts prepared by the FESG for the sixth meeting of ICAO's Committee on Aviation Environmental Protection (CAEP/6) were used as the basis for the projections to 2020 (Wickrama et al., 2003). Traffic forecasts for 2020-2050 were developed using a non-linear Verhulst logistic model derived from the historical relationship between aviation traffic and GDP between 1960 and 1995. The model was applied using the GDP growth rates from the IPCC's A1 and B2 SRES scenarios. The results suggest that scheduled international aviation CO 2 emissions will increase from approximately 240   projections and those from the current study are primarily due to a lower base year fuel quantity estimate in Owen and Lee (2006) and differences in scope (i.e. Owen and Lee (2006) exclude nonscheduled traffic, which is likely to have reduced their estimates by approximately 10 per cent). As discussed in Section 4, a number of long-range global aviation emission projections have been prepared. Vedantham and Oppenheimer (1998) Fig. 6 compares the results from the emission intensity model to selected adjusted results from Vedantham and Oppenheimer (1998), Eyers et al. (2004), Horton (2006) and Berghof et al. (2005). The international component of the global estimates from these studies was estimated by assuming that international civil aviation CO 2 emissions are proportional to the international share of global scheduled traffic. The international/domestic traffic shares were devised using the ICAO (2007b) traffic forecasts. 12 From Vedantham and Oppenheimer (1998), only the basedemand level projections for the IS92a (IPCC base case), IS92c (low growth) and IS92e (high growth) scenarios are shown (marked 'IS92a', etc.). Their high-demand projections were excluded because they currently appear to be less plausible than the base-demand projections. From Berghof et al. (2005), only the Unlimited Skies (ULS) and Regulatory Push and Pull (RPP) scenarios are shown (marked as 'CONSAVE-ULS' and 'CONSAVE-RPP'). The other two scenarios from Berghof et al. (2005) (Fractured World (FW) 13 and Down to Earth (DtE) 14 ) were considered less likely. From Horton (2006), only the Case 3 (or base case) outcomes are shown (marked 'AERO2k-H') because Cases 1 and 2 were theoretical cases based on no change in fuel efficiency, while Cases 4 and 5 were dependent on the imposition of carbon prices. The results from Eyers et al. (2004) are marked as 'AERO2k-E'.

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As Fig. 6 shows, the results of the current study for 2025 align well with the base case (IS92a) and low growth (IS92c) scenarios from Vedantham and Oppenheimer (1998), while being noticeably higher than those from Eyers et al. (2004) andBerghof et al. (2005). 15 The trajectory of S1 and S2 also suggests emissions will be above the Horton (2006) projections in 2030. The differences between the results of the current study and those from Eyers et al. (2004), Horton (2006) and Berghof et al. (2005) are attributable to a combination of a higher base year estimate in the current study, coverage (i.e. the current study includes scheduled and non-scheduled traffic) and higher traffic growth rates.
International aviation demand is growing faster than many previously forecast. ICAO's (2007) traffic analysis suggest the strong growth will continue over the next two decades. The rise in oil prices and economic slowdown experienced in 2008 may alter these forecasts. However, if the 2007 predictions are realised, international aviation emissions are likely to be at the upper end of current projections.   (ICAO, 2007c). The global mail task was assumed to grow in accordance with the growth rates outlined in Table 3. Global civil emissions in Vedantham and Oppenheimer (1998), Eyers et al. (2004) and Berghof et al. (2005) were estimated by subtracting an estimate of military emissions from the global total. For Vedantham and Oppenheimer (1998), the estimates of military emissions were derived using the nominal growth rates adopted in the study. 13 FW assumed security concerns and a move away from global integration obstruct traffic growth. 14 DtE assumed there is an aggressive push for greater environmental protection. 15 In reality, the international proportion of the estimates of global aviation emissions is likely to be lower than indicated in Fig. 6. This is a product of the fact that domestic aviation tends to have higher emission intensity than international aviation due to the nature of the domestic task (i.e. shorter routes) and the domestic fleet.

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6. Can international emissions be stabilised without cutting demand?
The results from the emission intensity model indicate that international aviation CO 2 emissions are likely to be more than 110 per cent above 2005 levels by 2025. Given the ambitious nature of the IATA target of improving the fuel efficiency of the fleet by 25 per cent by 2020, 16 the more probable outcome is an increase in international aviation emissions of greater than 140 per cent by 2025. If the international community agrees to pursue risk averse climate targets, new measures are likely to be necessary to control international aviation emissions.
Calls for the introduction of mandatory measures to address aviation emissions have met with industry resistance. This is not extraordinary; most emission-intensive industries have resisted mandatory measures to curb greenhouse gas emissions. In responding to proposals for mandatory measures, the industry has relied heavily on the improvements in emission intensity as a means of deflecting criticism. Yet history has shown that demand growth generally outstrips emission intensity gains. Whether this trend continues in the future is unknown. However, the available evidence suggests international aviation emissions are unlikely to be stabilised unless there is a radical shift in technology or demand is restricted. 1 9 9 0 1 9 9 2 1 9 9 4 1 9 9 6 1 9 9 8 2 0 0 0 2 0 0 2 2 0 0 4 2 0 0 6 2 0 0 8 2 0 1 0 2 0 1 2 2 0 1 4 2 0 1 6 2 0 1 8 2 0 2 0 2 0 2 2 2 0 2 4 2 0 2 6 2 0 2 8 2 0 3 0 To demonstrate this, two hypothetical scenarios (S3 and S4) were developed using the traffic forecasts outlined in Table 3. S3 sought to answer the question: if demand is not restricted, by how much will the emission intensity of international aviation have to improve in order to keep CO 2 emissions below 831 Mt in 2025 (i.e. 100 per cent above 2005 levels). S4 was the same as S3, only the object was to determine by how much the emission intensity of international aviation would have to improve in order to stabilise CO 2 emissions at their 2005 levels by 2025 (i.e. 416 Mt).
As Table 5 and Fig. 7 illustrate, the task faced by the aviation industry if it proposes stabilising emissions without restricting demand is daunting. Without the imposition of carbon prices on international flights to suppress demand, it seems unlikely that international aviation emissions will be able to be kept below 850 Mt CO 2 by 2025 (i.e. more than 100 per cent above 2005 levels). International aviation CO 2 emissions are only likely to stay below this level if one or more of the following events occur: a prolonged global economic slowdown; an international shock, such as a major international conflict, pandemic or a substantial increase in the price of oil; or the emergence and rapid deployment of new emission saving technology. While more efficient aircraft are currently being rolled out (e.g. A380 and B787), the fuel efficiency gains associated with the latest generation of aircraft are unlikely to be sufficient to offset the increases in international demand. Moreover, international aircraft have relatively long commercial lifetimes (typically 15-35 years) (ICAO, 2007c). Without aggressive policy measures to promote the deployment of state-of-the-art technology, the slow rate of turnover in the fleet will hinder progress on curbing emissions growth.

Conclusion
The international aviation industry is facing increasing pressure to curb growth in its greenhouse gas emissions. To date, it has been able to deflect calls for the imposition of effective abatement measures, successfully arguing that it is only a minor cause of global warming and that it has achieved admirable advances in emission intensity since the early 1990s. The cause of the industry has been aided by a lack of political will and legal and policy disputes about how best to address emissions from international aviation.
Frustrated at the lack of action, the European Union (EU) has proposed extending its emissions trading scheme to international aviation in 2012 (Council of the European Union (CEU), 2007; European Commission (EC), 2006). This proposal has been met with near universal opposition from non-EU countries. At this point, it is unclear whether the EU will go ahead with its scheme and defy the international community. However, its willingness to propose the scheme is a sign of the intensity of the pressure for more action to be taken to contain the growth in emissions.
The basis for the EU's concerns has been highlighted in this article. Projections based on ICAO's (2007) traffic forecast suggest international aviation CO 2 emissions will increase by between 111 and 144 per cent between 2005 and 2025 (i.e. from 416 Mt to between 876 and 1013 Mt). These projections are at the upper end of previous estimates, primarily because of an increase in forecast economic growth, higher base year emission estimates and broader coverage. It should also be emphasised that they are confined to CO 2 emissions and do not account for emissions of other gases and particles like H 2 O and NO x . If an uplift factor of 1.7 is used to estimate total CO 2 -e emissions, the emission intensity model suggests international aviation emissions will be between 1488 and 1722 Mt in 2025.
Stabilising international aviation emissions at levels consistent with risk averse climate targets without restricting demand will be extremely difficult. To prevent emissions from increasing by 160.00 1 9 9 6 1 9 9 8 2 0 0 0 2 0 0 2 2 0 0 4 2 0 0 6 2 0 0 8 2 0 1 0 2 0 1 2 2 0 1 4 2 0 1 6 2 0 1 8 2 0 2 0 2 0 2 2 2 0 2 4 kg CO 2 /100 RTK S1 S2 S3 S4 Fig. 7. Historic and projected emission intensity improvements 1996-2025. more than 100 per cent between 2005 and 2025, the emission intensity of international aviation would have to fall by 32 per cent, requiring an average annual decrease of 1.9 per cent. To stabilise emissions at 2005 levels, the emission intensity would have to be improved by 65 per cent, necessitating an average annual decrease of 5.2 per cent. With current technology, emission intensity improvements of this magnitude appear unlikely. Further action on international aviation emissions is likely to be necessary if the international community wants to keep the increase in the global average surface temperature to less than 2 1C. Under current policy settings, emissions are likely to increase significantly unless there is a major global economic downturn or other shock to the aviation market.


METHODS OF MEASURING THE EFFICIENCY OF COMMERCIAL BANKS: AN EXAMPLE OF POLISH BANKS

Efficiency analysis is essential for the evaluation of banks' performance. To estimate banks' effici ency, we can apply different methods. Analysis of financial indicators is the most popular efficiency analysis method in banks, but the number of financial indicators can be really big and make the interpretation of the results more difficult. Another way to estimate efficiency measures is the non parametric frontier method - Data Envelopment Analysis (DEA). This method has become increa singly popular in measuring bank efficiency in the countries with developed banking systems. The main aim of this article is to present the results of efficiency analysis, computed by means of both methods, i. e. the classical index of balance sheet characteristics and the non-parametric DEA method. The analysis was carried out in the biggest banks operating in Poland in 2000-2007. The empiri cal results show that the efficiency measures give a similar although not identical picture of Polish commercial banks' performance. These results (yielded by both methods) are complementary to each other and suggest that the non-parametric DEA method is really valuable and worth applying in bank practice. The work presents also the reasons that would explain the achieved results. It also compares both methods, their potentials and limitations in applying them to banking.

Introduction
The intensive and continuously increasing competition in the financial services market creates a need for an access to information that would allow to evaluate commercial banks operating in this market. Such evaluations are really essential to both bank owners and customers who expect high-level financial profits.
To estimate banks' efficiency, we can use different methods. These methods can be classified in various ways. One of them distinguishes: the traditional method of financial indices based on balance sheet analysis, parametric methods based on the knowledge of production function, non-parametric methods that do not require such knowledge. For the purpose of the present research, the traditional method of financial indices and the non-parametric DEA method were chosen to evaluate banks' efficiency. The parametric method was omitted as it requires defining the relation between inputs and performance and also data over long periods of time.
The method based on balance sheet characteristic indexes has monopolized the banking practice. Another way to estimate the efficiency levels is the non-parametric frontier Data Envelopment Analysis (DEA) method which is commonly applied in Western Europe and is just being introduced in Polish banking.
The aim of this article is to present the results of efficiency analysis computed by both methods, i. e. using the traditional financial indicators and the non-parametric DEAmethod.
The analysis was carried out in commercial banks operating in Poland. The period of efficiency analysis covers the years 2000-2007. This article presents also a comparative analysis of both methods and reveals their constraints and advantages.

The current situation in the Polish banking sector
In 2007, 51 commercial banks, 14 branches of credit institutions and 584 cooperative banks, i. e. altogether 649 banks and branches of credit institutions carried on operating activity in Poland. Domestic investors controlled 11 commercial banks (including four State Treasury banks) and all cooperative banks, while 40 commercial banks and 14 branches of credit institutions were controlled by foreign investors holding 70% of stakes in registered equity funds of the whole banking sector in Po-82 land. At the end of 2007, investors from 19 countries were present in the Polish banking sectorl.
For many years, the assets of the whole sector have been showing a rising tendency, and they have exceeded PLN 785.5 billions. Moreover, all the commercial banks operating in Poland meet the mini!I1um equity fund requirement of 5 mln euros. There are 14 domestic commercial banks listed on the Warsaw Stock Exchange. Their assets constitute 2/3 of the whole banking sector assets.
Banks in Poland operate through 13,000 branches and employ over 161,000 employees. The main factor contributing to the fast development of the Polish banking in the recent years is a very dynamic growth of credit services, particularly mortgages.
On the other hand, since 2002 there has been a steady decline in fixed term deposit accounts of households which are an important source of financing banks' activities. This decline results mainly from a change in preferences to invest financial surplus in non-bank financial institutions. The changes have been caused by the development of other segments of the financial market and the reduction of interest rates.
A dynamic growth of households' savings invested in investment funds and shares which in 2006 increased nearly twice as fast as traditional bank deposit accounts is particularly noticeable.
The growing financial result of the banking sector has been a characteristic tendency in the last few years. The positive trends are reflected in the improved basic efficiency measures of bank performance. The operating cost I income ratio of domestic commercial banks has decreased to 52.0%, ROA has risen to 2.1 and ROE to 27.0.
Despite the excellent performance of the banks in the recent time, their activity must be analysed and evaluated continuously due to competition pressure within the sector and other financial institutions, and due to the expectations of both banks' owners and customers.

Efficiency analysis by the method of financial indicators
Efficiency analysis is essential for the evaluation of banks' performance. Financial indicators are still an important analytical instrument, and the banks' owners and potential customers use them to compare and evaluate the performance of banks. That is why banks need to pay particular attention to the value of the traditional indicators if they want to create a positive image and to be perceived positively by general public. These indicators can be divided into four groups: • profitability rates, margin rates, weighted result rates, employment efficiency rates.
The efficiency indicators may be analysed from different aspects. In the case of time as a criterion, we study the dynamics of ratios, which allows to check whether the efficiency improves or deteriorates within a given period of time. If we consider a group of banks, we can compare the banks' efficiency to the average values of the group. The banks' financial reports such as balance sheets, profit and loss accounts or, less frequently, cash-flow accounts are used to assess the efficiency indicators.
The first group of the indicators are profitability rates. The most common ones in this group are: • return on assets (ROA), presented as a ratio of financial result and a bank's assets; return on equity (ROE) -a ratio of financial result to a bank's own fund; return on sale (ROS) -a ratio offinancial result to a bank's income; costs ratio (C/I) -a ratio of costs to incomes.
The ROA, ROE and ROS ratios, which are universally applied in financial analysis, allow to evaluate the efficiency of banks' performance within a given period of time and in comparison to other market players. So, their significance for management is of comparative nature. Another group of efficiency indicators are margin rates. Two basic rates of this group are based on interest margin: • net interest margin -a ratio of interest results to assets; interest spread, which can be interpreted as a difference between the average interest-bearing assets and the average expense of interest-bearing liabilities.
The additional margin rates that show the income and expenses of banks' activi- After the period of a visible decline, the net interest margin is constant in commercial banks in the last years.
The next group of financial measures applied in efficiency analysis are weighted result rates: the result rate charged with reserves (reserves balance) which is shown as a difference between the building up and dissolution of reserves, and the achieved result; the result rate charged with operating cosrs, i, e. the ratio of operating costs to the result.
If the result rate charged with reserves shows a positive value, i. e. if a bank builds up more reserves than dissolves, it can be 84 said that building up reserves charges the bank's result, i.e. 'decreases' its leveL The result following from both definitions can be interpreted in various ways. The clearest interpretation is provided by applying the result of banking activity. In this case, the indicators show the percentage of the result used to cover the operating costs or the reserves balance.
Chart 3 shows the values of result ratio charged with bank operating costs in years [2000][2001][2002][2003][2004][2005][2006][2007]. The year 2002 seems to be the worst in this period as almost 60% of the achieved result was used to cover the operating costs of commercial banks in Poland.
In 2007, less than 53% of the achieved result was sufficient to cover the operating costs of commercial banks.
The last group of measures constitutes the employment efficiency rates. The most frequently used ones are: the rate presented as a ratio of assets to a number of employees (job positions);  These indicators show the average balance sum (sum of assets) and the result produced by one full-time employee ofa bank.
As shown in Chart 4, the employment efficiency measured by the net profit achieved by one employee in commercial banks of Poland has been increasing dynamically since 2004.
Analysis of financial indicators is the most popular efficiency analysis method in banks.
Chart 4  The number of financial indicators applied can be really big, and interpretation of achieved results in this case it more dit~ ficult. On the other hand, a single indicator provides too little information whether or not a given value is correct.

Evaluation of efficiency measures by the DEA method
The non-parametric DEA method has become increasingly popular in measuring efficiency in the countries with developed banking systems (Grigorian, Manole, 2002). The method was first proposed by Charnes, Cooper and Rhodes (Charnes, Cooper, Rhodes, 1978). The authors, relying on Debreu and Farell's concept of productivity, in which the efficiency measure was defined as a ratio of a single input to a single output, applied the method in a multidimensional situation in which there were more than one outputs and more than one inputs. The efficiency is measured in relation to other units in the group under 86 study. The proof of economic efficiency can be the fact that the examined unit is on the efficiency frontier which means that it fully utilizes the available resources and also that it is not possible to increase the production of particular goods (for example, a bank's services). In this method, any units on the efficiency frontier are said to be efficient and their efficiency rates equal I. The units below the efficiency frontier line have efficiency rates less than I, which show a level of their inefficiency. The efficiency rate defined in this way takes the values from 0 to I.
Depending on whether we are interested in maximizing outputs or minimizing inputs, we can calculate the inputoriented technical efficiency which shows how much a company's inputs should be decreased to be efficient leaving outputs unchanged, or output-oriented technical efficiency which presents how much a company's productivity should be increased using the same values of inputs.
The input-oriented analysis is particularly useful for evaluating banks' perfonnance as it measures cost efficiency.
An important stage in applying this method is building up the behavioural model of a bank and defining the inputs and outputs of its activity. The main approaches used in modeling a bank's behaviour are production approach, intennediation approach and modern approaches, i.e. the ones that involve characteristic features of lar models. However, there are no explicit conclusions which approach is the best.
In the model application of the DEA method to evaluate commercial banks' efficiency presented below, the valueadded approach has been chosen. In this approach, an output of a bank's perfonnance is any activity consuming its resources. The choice of a model detennines the classification of inputs and outputs. So, in this case, the volume of loans, deposits banks' activity, i. e. risk management and and non-interest income are outputs, and data processing for the classical theory of the net fixed assets and the total number enterprise.
In the case of production approach, a bank's activities are treated as a production of services for deposit account holders and borrowers. However, one of the problems in this approach is the way of assessing the volume of products. The question is: what is the most suitable way of presenting the volume of products: the number of accounts, the number of transactions on these accounts or maybe the sums of turnover? Due to the access to data, the sums of turnover in nominal value are used most frequently.
The intennediation approach is complementary to the production approach, and it differs in the way of specification of a bank's activities. In this model, an emphasis is put on the role of a bank in transfonning the means borrowed from the deposit account holders into granted credits. Apart from these classical models, there are also other approaches such as the assets approach, value-added approach and user cost approach.
The literature on the subject presents a lot of arguments for and against particu-of employees are defined as inputs (Resti, 1997).
The definitions of inputs and outputs are presented in the following way: Inputs: -assets, -number of employees. Outputs: -loans, -deposits, -non-interest income.
While evaluating efficiency by the DEA method, various assumptions referring to the economy of scale can be made, and so we can assume constant scale effects (e_crs), variable scale effects (e_vrs) or non-increasing scale effects ofperfonnance (e_nirs). Table I  While analysing the achieved result, we should note that the evaluated measures of efficiency applied in the commercial banks under study are not homogeneous. In years  Nearly 'i4 of the examined banks (9) operated efficiently, i. e. transformed inputs into result in an optimal way. The remaining Y4 of banks were not efficient in their performance, which means they should have used their inputs better to achieve better results.

Concluding remarks
A comparison of results achieved both by the DEA method and the classical method of financial indicators seems to be interesting. Two basic indicators of financial 88 analysis, i.e. return on equity (ROE) and employment efficiency rate (presented as a ratio of the financial result produced by one employee) and also two efficiency measures assessed by means of DEA (e _ crs -a constant scale effect measure and e _ vrs -a variable scale effect measure) have been chosen to compare the results.
Chart 5 compares the above-mentioned measures achieved by commercial banks in Poland in 2000--2007 and shows a convergence of results achieved by both methods (financial indicators and DEA).
The results achieved by both methods show an increase of the efficiency of banks' performance in recent years. We can trace the reasons for efficiency increase in a significant rise of the scale of banks' performance. The balance sheet total of the banking sector has increased from 500 bin in 2004 to nearly 800 bin in 2007. The decisive factor for the development of the banking sector in Poland was a very dynamic increase of credit activity. The increase in the value of granted credits resulted from the high demand for credits among households and enterprises. In the

. Efficiency measures assessed by DEA method and by analysis offinancial indicators
Source: our own calculations recent years, a particularly high demand for mortgages has been noted, and the upturn in the financial situation and the optimistic view of the future resulted in an increase in consumption credits.
A high dynamics of credits for enterprises has also been noted. Due to higher incomes from taxes and the inflow of funds from the EU, deposits of supervisory and self-government institutions have increased significantly. The Gross Domestic Product went up by (6.6% in 2007) (6.2% in 2006) and that has been the fastest growth in this decade. The favourable macroeconomic situation and the increasing scale of banking sector activity have been reflected in the increase of banks' financial results, and this influenced the efficiency of banking in Poland.
The results of efficiency measurement by both methods prove these positive tendencies.
The increase in efficiency can be clearly seen in absolute values obtained by the method of financial indicators (i. e. ROE and employment efficiency). However, it is less spectacular in the measurements obtained by the DEA method (e_crs, e-vrs). The reason may be the fact that the numerators of the ROE and employment efficiency indicators present the value of the financial result that has been growing dynamically in the recent years. On the other hand, efficiency measure in the DEA method is calculated in a different way and considers far more factors affecting banks' performance.
The applied methods complement each other, and each of them has advantages and constraints.
The main advantages of the method of financial indicators are: simplicity and easiness of application, universality of application, obtained measures are absolute values and thus can be used for evaluations, comparisons, rankings, etc. availability of data. Financial indicators can be used by all those interested in evaluating a bank's per-fonnance -banking supervision, owners, managements or customers.
The method of financial indicators has certain drawbacks. The basic one is a vast number of the indicators used. In banking practice, a few hundreds of such factors are used. Applying so many measurements can make a comparison of banks debatable. However, limiting the number ofmeasurements does not give the whole picture of the situation since particular indicators provide only fragmentary infonnation.
That is why it is advisable to supplement the method of financial indicators with a synthetic measure, i. e. the efficiency measure evaluated by the DEA method.
The main advantages of this method are: a greater extensiveness in comparisDn with the method of financial indicators; it does not require access to data over long periods of time. This method has also certain constraints.