Taking greater investment risks with technologies and new lines of business can help lower emissions from the aviation industry, one of the world’s fastest-growing sources of climate pollution, according to research from UCD Michael Smurfit Graduate Business School published in Science.
The paper reveals that smarter ways of managing investment risk could help speed up the shift toward cleaner air travel and other hard-to-decarbonise sectors. Cutting planet-warming pollution to near-zero will take more than inventing new clean technologies and will require changing how the world invests in them.
Dr Thomas Conlon, professor of finance from UCD Smurfit School, and co-authors propose a tool called an Aviation Sustainability Index, a quantitative method to assess how different technologies or investments could help decouple emissions from growth in air travel. The approach is designed to help investors distinguish between projects that only modestly improve efficiency and those that could significantly transform the sector’s climate impact.
A trillion dollars expected
While roughly $1 trillion is expected to flow into aviation over the next decade, most of that money will simply make aircraft slightly more efficient. Few investors have clear incentives to back the kind of breakthrough technologies, such as hydrogen propulsion, advanced aircraft designs or large-scale sustainable fuel systems, that could substantially reduce emissions.
“Cleaner flight is possible, but it requires changing how we think about both risk and return,” said co-author David G. Victor, professor of innovation and public policy from the UC San Diego School of Global Policy and Strategy. “We need new institutions, incentives, and partnerships that reward innovation, not just incrementalism.”
Conlon said the technology to support clean aviation exists but requires a new way of framing the relationship between risk, return and sustainability. “Capital needs to flow towards risky innovations that will really move the dial in terms of deep decarbonisation,” he said. “The proposed ASI provides a greenwashing resistant way to underpin sustainability linked financing to the sector, allowing investors to identify innovations will truly move the dial.”
The researchers also highlight a broader lesson for climate policy. Global decarbonisation goals such as net zero by 2050 sound bold and ambitious, but when it becomes clear they cannot be met, these goals make it harder to focus on the practical steps needed today to drive change in real-world markets.
By developing better tools to evaluate climate-friendly investments and by rewarding companies willing to take calculated risks on breakthrough technologies, governments, investors and industry leaders can accelerate real progress toward decarbonisation. The paper was co-authored by Philipp Goedeking from Johannes Gutenberg University of Mainz and Andreas W. Schäfer from University College London.
