Disruptive investments can build a cleaner aviation industry

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, shows new research from UCD Michael Smurfit Graduate Business School.

Cutting planet-warming pollution to near-zero will take more than inventing new clean technologies; it will require changing how the world invests in them. That’s especially true for industries like aviation, where developing and adopting greener solutions is risky and expensive.

The new 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.

Dr. Thomas Conlon, Professor of Finance from UCD Smurfit School, and co-authors propose a tool called an Aviation Sustainability Index (ASI); 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.

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,” says 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.”

“The technology to support clean aviation exists, but it requires a new way of framing the relationship between risk, return and sustainability,” says Dr. Conlon. “Capital needs to flow towards risky innovations that will really move the dial in terms of deep decarbonisation. 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 that they can’t 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.

The full article, “Mobilizing Capital and Technology for a Clean Aviation Industry,” first published in Science.

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For more information or to speak with Dr. Conlon, please contact Kyle Grizzell from BlueSky Education on +44 (0) 1582 790709 or kyle@bluesky-pr.com