Sustainability: Making the net-zero vision a reality

Transcript

David Wills:Thank you for that slick introduction, Steve.

Christian Bennett:I would—

David Wills:I'd like to introduce the panel, and as Marco indicated, it's a red-hot quality panel today, so hopefully A discussion that's in— okay, let's try take 2. So to my left, I'm just going to look at this to make sure I get the titles correct. Dr. Kimberly Kamras, Sustainability Lead Australia, New Zealand, and South Pacific at Boeing. Fiona Messitt, the Chief Sustainability Officer at Qantas. Kiri Hannafin, Chief Sustainability and Corporate Affairs Officer, Air New Zealand. Christian Bennett, who confusingly got the title the other way, but Chief Corporate Affairs and Sustainability Officer at Virgin Atlantic. And down there, Margie Osman, CEO of Tourism Transport Forum Australia. So thank you all for agreeing to participate in this. It's probably worth getting a quick comment from each of you Maybe starting at the highest level in terms of the transition to a low-carbon future and the 2050 net zero, uh, net zero goal. Steve, one of his slides there showed that the carbon emission intensity now is back on track where it was in 2019. So as an optimist, you would say it's trending in the right direction. There's lots going on, and it'd be good to hear from each of you, I guess, from your organisational perspective, what you're seeing as the current reality, challenges, priorities. And Keri, maybe start with you because Air New Zealand had a recalibration of its sort of sustainability goals, targets through the year, certainly not 2050, but it's sort of the stepping away from the 2030 target. So maybe you could speak a little bit Do that as well as your broader thoughts around—

Kiri Hannifin:That was a shock. You never give the person who's asking the questions warm eye contact because they always go for you first, so I obviously was looking at you too fondly. I think it's a good point actually around carbon intensity, and I think that's one measure but probably not the actual measure we should be looking at as a sector in our view. And actually Air New Zealand did have a carbon intensity measure, and we moved away from that last year and have a net emissions measure now. So we did pull out of our science-based target, and that was a very hard decision to make, and, you know, very disappointing actually for us. And we've set a new approach a couple of months ago whereby we have, as I say, a net emissions guidance out to 2030, but it's certainly pretty tricky. out there, but there's a lot to play for. Air New Zealand's always sort of followed the science as much as we can, and although 2050 is looking very difficult, we're certainly every day giving it our absolute best to get there and working across the entire aviation system, not only here in the Pacific, but across Asia and North America and Europe as well. It's something we need to work together on.

David Wills:Okay, thank you. Um, Kimberly, since you're next to me, you get— I mean, from a Boeing perspective, I mean, there's been talk today about clearly the reliance on new aircraft, next-generation aircraft, and we don't need to probably dig into that. But from sort of the Boeing lens, what's your view of net zero 2050, but particularly the next 5 years and what it looks like?

Dr Kimberly Camrass:Yeah, I think as Kerry put it, the next 5 years to 2030 are super critical. I mean, industry and nation states have agreed to a 5% reduction in carbon intensity through flight using SAF by 2030. And I think we really need to rally around that as a short-term target as well. I think realistically, you know, we're an OEM like the other OEM in the room. We're obviously not making SAF and we're using it, but in very small volumes compared to our airline customer friends. So really, we're focused on what are the enabling policy frameworks that can be put in place that are consistent with global frameworks but nuanced to local context, and that's really, really important. And what will those frameworks and policies look like to actually help reduce the cost of abatement for airlines? I think it's pretty clear, given the slides earlier, you know, airlines can't be expected to bear the brunt of that cost in isolation, and there needs to be a really sophisticated approach that cost stacks, the green premium that we do have to pay for SAF at the moment. I think the numbers, while small, are doubling each year in terms of SAF uptake globally. And I think the last comment I'll make before I hand over to the other panellists is obviously we're coming at this from an emissions reduction perspective and in line with meeting net zero targets by 2050. But really, for governments, the opportunities, I believe, are much more significant and broader than that. This is a national security measure to produce stuff in Australia and New Zealand where 90 to 100% of our fuel is imported, which has been done well in peacetime, but, you know, with future geopolitical shocks, who knows what disruptions could occur. And it's also a play for regional jobs. It really is, especially in communities that are transitioning for other— from other industries. So that holistic view from a policymaker perspective really needs to be employed.

Fiona Messent:Sure. Well, maybe building on some of the points, because I think on some of these things we're all going to be in furious agreement, but I think airlines can't do this alone. And the way that we're really approaching our targets is to look across the whole supply chain of the role that everyone across that has to play. So we're still very much committed to our 2030 target of the net emissions reduction and 10% SAF, and the way we're really approaching that is to partner with our corporate customers, to make investments ourselves, to actually encourage the pipeline to develop, but also, as Kimberley mentioned, to make sure government is also playing their role. Because as with any— we're standing up a whole new industry here. This isn't going to be easy. There are going to be steps forward and then 10 steps back, and, you know, it is a time of learning, and I think we're definitely seeing that in SAF, which I'm sure we'll get to later in the discussion.

Kiri Hannifin:Thank you.

Fiona Messent:But I think that's how we have to approach it because airlines can only do so much, but we can provide very important demand signals. In the same vein though, because we are only one part of the ecosystem, it does make achieving those targets hard. So for example, we are reviewing our waste targets because we have realised that particularly for our single-use plastics, the innovation just hasn't happened at the level that we thought it would by now. And so Similarly, the infrastructure for recycling isn't at all of the ports that we operate in. Regulation is completely piecemeal. So, you know, I think we're constantly having to look at the conditions in which we're operating and adapting as we go, but also making sure we're pushing where we can and influencing the transition.

David Wills:Christian, do you want to—

Christian Bennett:Well, much has been said, and I think I would just add from a Virgin Australia perspective that You know, least cost decarbonisation remains an absolute sort of priority for us. Obviously, we have, you know, leaned very heavily on the fleet renewal lever to date, and that's the primary driver that we saw our emissions intensity drop by 3% over the last financial year. And that's obviously, you know, important for the 2 major airlines at this time, given we're both subject to the safeguard mechanism arrangement where, you know, we need to reduce our emissions by 4.9% per year. Thank you. Per year, or else we creep towards a period where we may need to, you know, obviously offset those via ACCUs. So the— but we, you know, we revisited our SAF strategy earlier this year, and our colleagues have already touched on 2 really key areas which are at the forefront of that review, which is one, the importance of policy advocacy over the next 5 years, because that's really going to determine exactly what SAF arrangements look like from 2030 onwards, and also partnerships. We've been working with Boeing in this space now for some years. We signed an MOU with Qatar Airways, obviously a strategic investor in us now. And on Tuesday, we were, for example, we were out looking at a potential SAF project to the west of Charters Towers, which just gives you a bit of a feel for both the opportunity but also the significant challenge that lies ahead. And it really will be determined in Australia by the quality of the policy response. It'll need to be a very sophisticated policy response. There are no simple solutions to this very complex and difficult challenge.

Margy Osmond:Well, good afternoon everybody. I'll probably take a slightly different tack on this to my aviation colleagues, only because I think part of the solution in this space is a whole of tourism and travel industry piece. This is not an issue that should be left wholly and solely in the hands of the aviation sector. The whole tourism industry benefits by a resolution of this and the establishment of a workable SAF industry. And beyond aviation as well, increasingly now what we're seeing is the cruise industry will have a very significant requirement for this kind of fuel, and anybody that's a land-based travel mechanism, you pick any of the major bus and tour companies here in the country, organic fuel is now going to be pivotal to them. So from the tourism and transport perspective, from our organisation's perspective, I think there are a couple of issues. One is making the whole tourism industry embrace the need for a solution to this, and the second part of that is making more people within the political environment understand why it's critical. We had several days in Canberra last week with a group of our members, many of whom are in the room, and talking about SAF. And while at the highest level of government conversation they get it, they're not moving as quickly as we'd like and there are still issues, but across the board they don't. And we had a room full of, I think, about 250 people, and I'd say probably there's only 10% in the room that understand why this is important and the impact it will have. And that is even worse at state government level, probably with the exception of Queensland. So there are some really critical issues, and our colleagues in other parts of the world in our kind of industry organisation have realised that our biggest job and our biggest contribution will be to galvanise that wider industry.

David Wills:Margie, can I ask you what, what else can or should be done to move the needle from 10% to 100% in terms of understanding of this and Part B of that is, what's, what's the risk to Australian tourism if, if we lag the world in dealing with this?

Margy Osmond:Oh, look, we're already starting to feel the impact of that, particularly in the business events space. Now admittedly, much of this data is anecdotal, but in places around the world where we bid for major business events, people are saying, no, we're not going to send that major event, which are worth millions, to Australia because the corporates who might attend it aren't going to put all their delegates on an aeroplane that hasn't got enough SAF in it because it'll affect their carbon outcomes as an individual company when they've got to report these things. So we're already losing significant economic benefit for Australia by not having those business events. The other part of the puzzle is, look, I think customers are coming to get us on this one. For many years it's been a case of everybody always says they're interested in sustainability, but do they tick that box when they're buying? a ticket, you know, I mean, we all know that. But we're in the situation now where over the last 5 years, things like the Booking.com global surveys where they ask about sustainability have gone from people being— 49% of them being interested in it to 91% of people saying that it was a critical part of their decision-making process. Now, obviously, that's not just about SAF, it's about a range of different things, but The customers are coming to get us, and it's one of those reasons why that issue of price of a ticket has to be dealt with. And I think that's something else we get— we talk about the tech a lot, and we talk about the stats and the data, and we have those conversations with government, but I think there are some practical consumer issues that we need to answer and we need to prosecute.

Dr Kimberly Camrass:Just to add something to that, Margie, if I may, from the New Zealand context. Thanks, Kerry. And we were fortunate enough to work with some partners in New Zealand recently to look at some data and quantify what would be the actual cost of no or delayed action around sustainability in aviation for the New Zealand tourism economy. And that piece of work was released last week, and it indicated at a high level that essentially if New Zealand moved to meet the 5% target that I mentioned earlier, by 2030. In the, in the run-up to 2050, $4.2 billion of potential lost tourism revenue could be avoided. And there's also a risk with New Zealand, of course, and Kiri will be able to speak to this much better than I can, but around, you know, the heavily reliance on air cargo and the potential economic impacts of that there. So I think, you know, for Australia, New Zealand, and the Pacific, this is a real issue in terms of you know, the impact of more climate-conscious tourism, but also events and business-making decisions where we could see actual economic impacts of delay or inaction.

Fiona Messent:I'll maybe just finish up with maybe a positive spin on it, because I actually think that there is an economic opportunity— well, there is an economic opportunity for Australia as well. So beyond the tourism opportunity cost of not doing anything, there is also a massive economic benefit. So we did a study last year with Airbus that showed that if we can get the policy settings right in this country and accelerate the supply of SAF, there is the potential to add $13 billion to GDP by 2040 annually and 13,000 jobs in the construction of these plants. So there are, you know, material GDP figures here that has the potential to put Australia in a really good standing. I think, you know, we were having a conversation earlier, Christian, about what policy could look like in Australia. And I think 12 months ago, we might have been lamenting the fact that Australia hadn't yet acted, but actually it's a really good thing that we hadn't, because now we can learn the lessons of the rest of the world and make sure that whatever is enacted here is fit for purpose for the Australian aviation sector and does achieve the objective— objectives that we are trying to do, like increasing SAF but keeping flying affordable and, and Well, I mean, while talking about policy settings, I mean, what, what have—

David Wills:what should we have learnt from the last 12 months from the experiences elsewhere in the world, and, and what, what does that mean in terms of the ideal design in Australia and New Zealand? Um, what, what should it look like? Kiri, do you want to have a—

Kiri Hannifin:It's a good question, and I think we're only just beginning to see some of the schemes come into place. If you think of Europe and the UK, next year we'll see Singapore come online. That'll be the first port that Air New Zealand flies to where we'll be subject to a SAF charge.

Margy Osmond:I think—

Kiri Hannifin:and we've got the benefit of actually looking around the world and seeing what's going to work and what will be best for customers, for connection, for for the airlines that fly in and out of this region of the world. But what I would say is that the more harmonised it is, the better for all of us. I think because we're—

Fiona Messent:it is—

Kiri Hannifin:the aviation world is so interconnected and actually quite small, we operate very well when we have sort of standards that go across. If you think of safety, I think the more harmonised we are, particularly if we could do it in the Asia-Pacific, the better off we'll be. So New Zealand has a very open mind about that. what that could look like. At the bottom of the world, we're looking across to Australia to see what the policy design will be here, and we think it would make sense to harmonise with Australia. And so we're cheering you guys along, hoping that you get some policy soon. If I could just— Kimberly made a good point, and you, you know, you asked a good question. I think we should all think about it, which is why can't we sell this? Like, what's taking us so long to get the message around SAF and potentially aviation sustainability out? And I reflect on what a poor job potentially I've done or we've done in New Zealand, and I think because we've just talked about carbon and climate change and sort of it's been doom and gloom, and it hasn't worked, and I think actually the story is economics, and it's the flow of capital, and it's protecting tourism, and it's protecting nature, and it's fuel resilience, and it's defence, and it's— I think that's the story, isn't it? And I think probably I've been guilty of like, just like, we're gonna die. Yeah, and no one responds to that. Strangely enough. So now it's all about the flow of capital, and it seems to be maybe making a little bit more sense.

David Wills:Yeah.

Margy Osmond:Can I just add to that too? Because I think Kerry's absolutely right, because this is about the best arguments being made with unlikely bedfellows. So it will be the people outside of this room. You know, it'll be the heads— it'll be hoteliers, it'll be, you know, Taronga Zoo, it'll be a whole lot of unlikely people that will have a voice. that will take this out into a wider community discussion, because we're all focused on it, we need it to happen, we're talking to as many people in government as we can, everybody who's sitting up here, but somehow this has to become the sort of thing that people talk about around the water cooler, and that's the argument we have to figure out.

Christian Bennett:David, I think, you know, it's a bit prosaic looking out over US, Kiwi, and Australian naval vessels, That one of the topics I think that might help push along the debate regarding low-carbon liquid fuels is indeed liquid fuel security. Fiona's touched on the economic aspect. From our perspective, they are both 2 important enablers, but what for specific for the airlines and for us is going to be how it supports least-cost decarbonisation, because that's going to be absolutely essential to what level of burden ultimately falls on the shoulders of our customers who, as you've heard probably several times today, you know, we focus very much on value. And it's not going to be a simplistic solution. It's easy to throw out the word mandate. I think in the EU this year they'll need to acquire about 1.25 billion litres of SAF. That will add US$1.2 billion of additional fuel costs and an additional US$1.9 billion in compliance costs. That's their IATA figures. And there's quite a bit of noise now around just the design of the mandate in Europe, and I think that is actually an opportunity for us to learn about the perils of poorly designed policy and the importance of very comprehensive demand and supply-side solutions, finding ways to create additional levers to defray risk and cost. So, for example, if there are broader national security and/or employment objectives, and also to sort of innovate. And that's why, you know, we invested some time over the last 12 months and with Boeing in a report that we had commissioned by Pollination to look at, for example, the concept of book and claim, where you could actually— where essentially you separate the physical fuel from the environmental attributes. And how would you use that potentially as another enabler to aggregate demand for SAF, production of SAF into Australia because of our very strong natural attributes when it comes to feedstocks and other characteristics which will be important to ensuring the long-term integrity of sustainable aviation fuel in the eyes of a myriad of stakeholders. This is just sort of one topic. It's very complex, but managed well and done in a very thoughtful, comprehensive policy framework, It could serve as the enabler. Now that we've passed the federal election, government's obviously got a very clear mandate. You know, what the next 12 to 24 months holds in this space, I think, then rests on all of our shoulders as to, you know, how we can help the architects of what will inevitably be a next tranche of low-carbon liquid fuel policy, how to ensure we avoid the unintended consequences, which are so easy to make. Only got to look at the Australian gas market. and decisions made 15 years ago, and be as smart and as sensible as possible about how to grow this industry in Australia, which doesn't place an unmanageable burden on long-term affordability of aviation in this country.

Dr Kimberly Camrass:David, just with regards to your question around policy, I mean, it's a tricky policy question because you're looking at the intersection of government, obviously, of traditional energy, of the private financing sector, and of course of aviation. So it's a bit of a systems-based challenge. But when we think about policy, obviously, you know, we really need, you know, a demand-side signal. And of course, that could come through mandates, targets. But, you know, we really feel, and I think there is a collective agreement, that the opportunity for defence and for procurement and use of SAF by our defence forces in Australia and New Zealand, that's a really strong demand signal in and of itself. And we're seeing that in— with the Australian government's recently released Defence Future Energy Strategy and the ongoing rather than sort of more one-off use of SAF by the Royal Australian Air Force. And of course, on the other side of the coin, we need supply-side support. And we need that to be carefully designed and implemented in a way that, again, shares the cost. There are a couple of really good examples of that. I mean, I think Qantas's work in working with the corporate sector through their SAF Coalition to drive that private financing funds and focus into purchasing SAF is critical, and I think it's actually world-leading. There are other mechanisms that we're seeing globally as well. In the UK, there's a guaranteed strike price for SAF, essentially sets a range. If it goes below that, the government pays the producer the difference. If it goes above, the producer pays it back to the government. Why is that useful? Well, it sets a long-term, you know, revenue certainty mechanism in place that gives the private financing sector the confidence to invest in this new industry, as Fiona put it. So the integrated suite of policies is critical, and as Kirsten said, that will help to share what is clearly an additional cost.

David Wills:I mean, the— from a simplistic level, if you looked at the fuel burnt by the aviation industry and presented that to the traditional oil manufacturers to say there's a $3 billion— or 3 billion tonne a year market there, at face value they should be rushing at it. What are the— What are the barriers that are stopping them where there seems to be, at least at a conceptual level, a long-term commitment from all major airlines to use SAF?

Fiona Messent:They have massive margins from existing fossil fuels, so there's just not the incentive to move to a lower margin fuel at this stage unless you have a carbon price. But I think as well it goes probably back to the EU policy design as well, where they've almost got monopolistic control at the moment because they're controlling the fuel that goes into the the airports, they can just pass the penalty straight on to airlines, and that's not a good— no one is winning out of the current policy design in the EU.

David Wills:And just going back to the discussion of book and claim, again, there's a sort of inherent logic to doing that so that every jurisdiction doesn't have to produce independently their SAF. Where is Australia at? Where is New Zealand at in adopting a policy policy around book and claim, and how does that fit with what the rest of the world is doing?

Christian Bennett:Well, we're not very advanced, I suppose, is the simple answer. Really, it's up to voluntary efforts. We, for example, book and claimed some SAF as a trial using the Shell Avilia platform, where the SAF was physically injected into the Changi fuel farm. We have no idea which planet it went on, and we have even less interest. But we did claim the Scope 1 environmental benefits back into our voluntary target. Obviously, we couldn't claim it back into our safeguard mechanism because you can't claim international— it's not an offset, it's an inset because you're helping to solve a problem in the aviation industry. So, you know, these at the moment are voluntary tests, and we would see it if Australia could demonstrate itself as a world-class leading SAF producer and you overlay a book and claim structure on top of that, then that should help attract in more investment into Australia for those countries that simply never will have domestic SAF production. And why ship SAF if you can simply use SAF accounting to manage where the environmental attributes are claimed? That's much easier said than done. The report we've done, it's on our website, is— it's complex. You need to, you know, make sure you manage to ensure there's no double counting around national inventories. You've got certification issues, you've got to deal with Chapter 6, with Chapter 7 of the Paris Agreement. It's not without challenge, but it's certainly something I think Australia and New Zealand, by way of a green lane, could certainly start to think about. Australia and Singapore and the green agreement that we've got with Singapore could be interesting, and you could actually start to develop these arrangements and test them out at a bilateral level to see whether there is the potential to then grow those out into a more regional and beyond framework. But To us, and I think, you know, I think another growing set of stakeholders, people realise that book and claim could be one of those sophisticated policy mechanisms that unlocks the very significant challenge we have with respect to overcoming— you asked the question— that it's the 4-letter word, cost. I mean, you know, if we do an ACQ, we buy an ACQ, it's 1/20th the cost of the equivalent of using SAF at the moment at 3 times the price of regular jet fuel sort of scenario. So my CFO is in the room. My prospects of winning an argument with Racer at the best of the times are challenging, let alone, you know, suggesting we should go down a path of significant— significantly excessive cost to nominally achieve— nominally achieve the same outcome.

Kiri Hannifin:New Zealand, we don't have the policy either, but we're looking at voluntary engagement with book and claim as well. It's very hard for customers to understand, corporate customers, because they kind of really want the fuel that they are— the SAF that they're buying to be on the plane that they're sitting on. So it's a long conversation, but we're doing it to stimulate the market as well. We're sort of disadvantaged in New Zealand. I'm not sure what it's like in Australia, but when we buy SAF, we can't offset it on our emissions trading scheme in New Zealand, so we're paying for it twice. So it really is burdensome at the moment, and you've got to very much keep your CFO, you know, comfortable that this is all sort of getting us to the right place. But it is hard when you haven't got the sort of the wide policy support to keep trying, but we must.

Fiona Messent:And the approach that we're taking is taking into account all of those different factors is trying to target those jurisdictions where there is policy support. support. So you can obviously pick it up in California, and there is the LCFS, and there's subsidies there as well. And for the last few years, we have picked up 10 million litres of SAF out of Heathrow, and part of the reason we could do that and not pass it on to our customers was because there were incentives from the government, there were incentives from Heathrow Airport, and our SAF coalition that we've mentioned a few times helped mitigate that premium. And so it meant that we didn't have to actually think about passing that cost on. And I think that's where, you know, to the original point of getting the whole supply chain to think about taking some of this cost burden, it is how we have to go forward. And I think continuing to show that that demand is there and accelerating some of that is important. And, you know, the book and claim thing is an interesting one for us to consider in Australia.

David Wills:So on the, on the cost burden of decarbonisation, whether it's $700 or A number plus or minus that. I mean, Margie, from your point of view, if it's not going to go directly onto ticket price, how does— given that the benefit of air travel is distributed broadly, not just to the airline, how does the— what options do we have to ensure the ticket prices don't bear the full brunt of whatever costs that David, would you like me to do world peace next?

Margy Osmond:Anyway, well, look, I mean, you've got examples like the Singaporean marketplace where they've put a levy on, you know, passengers as they fly out of Singapore to supplement the exercise. I think this is one of the questions, though, is to sit down and figure out exactly how you mitigate that cost. I'm not certain there is a simple answer here in Australia. I'm not certain there's a simple answer anywhere in the world, to be brutally frank, but it's one of the big topics that's still remains unresolved. And until we have a simple, customer-friendly answer to that, we are going to struggle to make this an issue that the wider community really cares about.

Fiona Messent:Yeah.

Margy Osmond:I mean, the only other thing that I would flag too, that it's not so much a cost issue, but it goes back to a point that was made earlier about partnerships and who's working with whom at the moment. There's such significant growth in the China market in the development of SAF. It's really quite impressive. I mean, I've spoken at a couple of workshops in the last month or two with universities all over China, and the Chinese government is investing very heavily in stimulating the market. And much of that SAF— and there are so many more people in the room who are much more expert than me at this— but so much of that SAF is actually supplementing and supporting the European marketplace at the moment. Much of that SAF is coming from China.

David Wills:I think there are some interesting opportunities for us to be thinking about, to be working with Chinese organisations in this space, which do us a whole lot of other good Actually, Christian, I wanted to ask you, I saw on your LinkedIn post after your excursion on Tuesday, um, a comment about the role of rural communities in supporting, um, you know, SAF development with agricultural refuse as an example, and in light of the political position of those who represent the rural communities, Is it sort of a major— is there a reality in the potential for rural Australia contribution, a significant contribution in biofuels?

Christian Bennett:David, absolutely. I mean, the visit we made out west of Charters Towers to the RDA project, and Kimberley was there as well, we met with the mayor of Charters Towers, she kindly came out in the public, Show Day, public holiday, in Charters Towers, absolute strong support because the feedback. And then we went to 2 different properties. These are 20,000, 30,000-plus acre properties where they've got the ability to carve out 2,500, 3,000 acres of what they call cadex land, which could be converted, for example, into cane fields to be harvesting and actually a completely internalised SAF project, just 100% support from those farmers who saw obviously not just, to be honest, their own potential economic benefit from such projects, but all of them spoke quite considerably about the ability of bringing people back to the regions. The local primary school only has 3 students, trades have started to leave the area, so there was, you know, there was just very, very strong support from, from them. So I think at a local level, yeah, what we saw, what we heard was, was very encouraging, and it's, you know, part of that process you want to engage with. But having been in the oil and gas sector, I've seen the opposite side of that on the coal seam gas debate. So that was very, you know, really important, and, you know, one of various characteristics which will determine whether a project like that, 100 million litres a year SAF project located strategically right on a rail line that could, you know, bring either by road or rail, uh, that SAF volumes into Townsville, uh, can get it— can get off the ground.

Dr Kimberly Camrass:The farmers that we spoke to, they, they talked a lot about, um, this opportunity in terms of revenue diversification for them, um, de-risking some of the, you know, the economic headwinds that of course they face in, in, in that work and That was fascinating. They also spoke about the fact that biofuels or SAF production, renewable diesel production in this instance, is not in competition or separate from regenerative agriculture and sustainable agricultural practices, and that those 2 things can complement one another, which obviously is in their benefit in terms of the, you know, environmental health soil health of their farming land. So it was interesting to see that obviously the carbon reduction is a focus for the industry as a whole, but there are these other drivers for the agricultural sector. And I'd argue we all could do as a collective an even better job at engaging with farmers and with the agricultural sector as part of this broader supply chain exercise.

Margy Osmond:Fantastic.

David Wills:Now, change of topic, and maybe Fiona and Kiri, this is for you around carbon offsets. I mean, carbon offsets in a form will be part of every net zero strategy to eliminate any residual emissions, and as Steve said, the— certainly the public reporting of offset programs has diminished over the last number of years, and it's not perhaps not surprising given some of the cynicism, scepticism about offset programs. But Air New Zealand and Qantas both had, although it was low, probably some of the best uptake of voluntary carbon offsets in the world. So how do we get back to the point we need to where offsets are recognised as a bona fide robust part of a net zero strategy?

Fiona Messent:It's something we think about a lot. We are a hard-to-abate sector and carbon credits will be absolutely essential to how we get to 2050 net zero. And it's a massive part of the Paris Agreement. It's part of our safeguard compliance. There is a huge role in making sure that the carbon credit market develops in a high-integrity way and that the supply continues to increase and the confidence in the market increases. So we've done a lot of work internally to make sure that the credits we're procuring fit the integrity profile that we think we need, both domestically and internationally, and we have tried to make that clearer to our customers as well. So I think everyone is evolving the way that they're reporting on this and being more transparent and allowing that traceability to the various projects so that you can instill greater confidence. We engage third-party assurers on the projects we procure offsets from. I think there's a lot we can be doing to try and instill that confidence in talking about the success stories, because I think there's so many— You know, every couple of weeks there's a story about another carbon credit project that perhaps isn't as high integrity as some of the very many that are. And I think that we all have a role to play. I think in terms of the customer program, ours has dropped a bit since COVID but it's still steady at around 7%. And I think we haven't done a whole lot in that to encourage that uptake, but I think It's something that our customers do want and that we do need to keep offering.

Kiri Hannifin:You're right, it's going to be a big part of 2050. We've just remodelled our residual emissions to 2050, and the removals we'll need will be more than potentially they were when I started. Air New Zealand's just actually— I'm very proud about this— we've just done our first purchase of nature-based removals in New Zealand. They need to be internationally verified before the deal is completely finalized. But if it works, it'll be the first sort of project of voluntary carbon removals in our country. Indeed, New Zealand will be— we've been waiting for the government to do it, but hopefully this will help stimulate this industry in New Zealand. And why we are so keen to do it as an airline, because there's so many co-benefits to nature, biodiversity, tourism, jobs, communities. And so even though it'll serve its purpose by— through native trees of removing carbon, actually it's really good for the economy. So we're working with a partner, they're working very hard to get it verified internationally. It has to be because it has to be high integrity, but if it works, then we can create a carbon market in New Zealand that could probably get, you know, actually we could export it. It would be very good for our economy. So working hard at it, and we will need more than probably, we think now.

David Wills:Maggie, a different topic again. There's not often a lot of talk about the physical impacts of climate change on aviation specifically, but tourism more generally. I mean, we're sitting off, you know, quite close to the Barrier Reef here, and the bleaching of the reef and the, you know, carbon reduction aren't always talked about in the same breath. So what, what, what risk do we have from the physical impacts of climate change if we don't respond? And clearly it's not just an aviation issue, but a broader issue for the whole country, for the planet.

Margy Osmond:Oh, look, I think we're already seeing massive impacts across the board. I mean, we're here in Cairns. How many cyclones have swept through this area as a result of global warming, or largely as a result of that, over the last 5 to 10 years? And it cost both governments and operators in this area and further south massive amounts of money in terms of infrastructure rebuild and lost business. I mean, you've only got to have the word cyclone mentioned on the news and people start cancelling their holidays in a given destination or area, even if the weather system's not going anywhere near it. They make that association. And that's a— has been a very significant problem for the last couple of years. In addition to that, from an aviation point of view and from a customer perspective, changes in weather and wind at airports are making life so difficult for airlines and airports because how do you guarantee what the weather and the wind is going to do because now it's that much more unpredictable and that will affect on-time running. It'll affect a whole lot of regulatory requirements for the airlines and the airports, but it makes customers crazy and they don't see it as a weather outcome. They see it as something that either the airport or the airline's done. So there's a whole range of brand impacts that are born out of that. And I think one of the challenges that the industry has to accept is that we have to explain these impacts a whole lot better in the future so that people understand why costs change, why flights don't always arrive on time, simply because of these impacts of climate change that are already manifesting themselves every day in people's lives. I think it's obviously a challenge, but in some ways just talking about those things more openly I think makes for a better discussion and argument about why the SAF thing is so critical, because we can't afford to leave it. We're already paying for climate change now as an industry.

Fiona Messent:Part of the reason we've made a $10 million investment into the Great Barrier Reef Foundation And it was not to obviously cure climate change because it will not go anywhere near that, but it will— it's investing in a project with the Australian Institute of Marine Science looking at how you can increase the resilience of the reef so that you can continue to have the tourism benefits that we are seeing here. And I think that's really important for us to think about is how do we, you know, if there's no natural icons here for people to fly to Australia to, that's a real problem for all of us. And I think that engaging the local communities as well, to your point about the co-benefits, it's so important for the local tourism industry to be part of those solutions and learning and educating their customers as well.

Dr Kimberly Camrass:And this conference is Australia and the Pacific, and I think, you know, when we think about the impacts of climate change, our South Pacific neighbours are going to be most, and already are, most at risk. Of experiencing those consequences. I think that brings together some of the other things we talked about, about book and claim and other things for areas of the world that won't be able to produce SAF, either through lack of feedstocks or economic challenges. You know, I think there's a role that we play, particularly across Australia and New Zealand, in ensuring that our South Pacific neighbours are not bearing the brunt, the most significant brunt and the most near-term brunt of the physical implications of climate change that we're already observing.

David Wills:And maybe Christian, from an airline operations point of view, are there changes that have already occurred to adapt to wind, rain, whatever, you know, physical impacts?

Christian Bennett:Well, a lot of work is underway now. We've got enhanced reporting obligations under what's known as the ASRS, where, you know, we are compiling, you know, a list of climate-related risks and opportunities that you know, new reporting obligations which, you know, and also need to be sort of ticked off by boards of directors. And yes, you know, certainly you take, for example, you know, operations up in much more warmer parts of Australia like Northwest Australia, and, you know, excessive heat can obviously have implications for acceleration and thrust. So some of the investments you might be making in aircraft to, you know, ensure you can— And aircraft selection to ensure you can respond to those issues. We've seen flooding in Townsville, obviously, and obviously, you know, the Brisbane storm was, you know, a significant event only in the last sort of 6 months. But look, this is clearly— this is a part of our reporting that is, you know, it's consuming quite a significant amount of resources so that we can fulfil our regulatory responsibilities, reporting responsibilities. And and obviously make the necessary adjustments to operations to ensure that we, we can meet all, um, uh, all the circumstances before us.

Margy Osmond:Okay, just one other thing I'd add to that. There's some really interesting work happening in Europe at the moment on climate mapping of particular destinations off Europe, around Europe, and what are the projected temperature changes. Now, the reason for that is, say, a city like Seville, you know, their top summer temperature at the moment on average might be 32 degrees. Well, in the next decade, that's going to be over 40 according to the mapping projections. Now, it's about do they have sufficient power for the air conditioning units? Do they have enough water? Do they have enough shelter for tourists? So it's all of those kinds of significant infrastructure costs beyond the aviation sector that are now going to be critical because they will change people's willingness to invest in a whole lot of destinations simply because of what those ongoing infrastructure costs are going to look like now.

David Wills:I didn't really want to finish on a doom and gloom note, but we're out of time. But thank you all for wonderful contributions. I hope this provided some insight to the challenges, the opportunities, and maybe the optimism of where we're going to get to. So thank you, everyone.

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