At this year’s ICAO Assembly in September 2013, Parties are supposed to agree on a Framework for market-based measures (MBMs) to address international aviation emissions and on the feasibility of a global MBM.  But countries are far from agreeing how such MBMs should look like. The current preferred option is to simply use offsets to meet emissions reduction obligations. This will do little to incentivize airlines to do their share in helping fight global warming.

Flying is bad for the climate: Jet fuel emissions account for 5% of global GHG emissions. On top of that other air travel impacts, such as contrails and cirrus clouds also lead to significant warming.[1] Aviation may therefore currently be responsible for up to 14% of man-made climate change.[2] Most worryingly, air traffic emissions are rapidly rising. Left unmitigated, international aviation and shipping emissions could take up about 30% of the 2° degree Celsius global emissions budget by 2050. The aviation sector must reduce its emissions if we are to achieve the 2° degree Celsius goal.

Negotiating at a snail’s pace

In 1996, discussions of how to allocate aviation emissions started under the UN Framework Convention on Climate Change (UNFCCC). In 1997, the responsibility to reduce aviation emissions was given to the UN’s International Civil Aviation Organization (ICAO) to develop a climate protection mechanism for its sector. Until now it has failed to do so: Neither countries nor companies have to currently account for their aviation and shipping emissions.

EU acts and retracts

In 2010, ICAO agreed to an aspirational goal of carbon-neutral growth by 2020. However, such voluntary actions will not suffice. This is why the EU tried to include all inter-European and international flights arriving to and flying from the EU into its EU ETS. But the EU’s decision prompted very strong reaction, in particular from China, India and the US. The EU was accused that its unilateral approach would spark a trade war and infringe on national sovereignty.

After months of tense negotiations and lawsuits the EU introduced the so called ‘stop the clock’ exemption which temporarily halts the inclusion of intercontinental flights in the EU ETS for one year. Only flights within the EU still have to comply with the EU-ETS. The EU “stop the clock” is set to expire and the original EU legislation that requires all airlines to pay for their emissions will automatically enter into force as of January 2014. This is unless the EU decides that ICAOs actions are sufficient and that the inclusion of flights in the EU-ETS is therefore no longer necessary.

Courtesy of andreas.christen/flickr

Options to reduce aviation emissions

At this year’s ICAO Assembly in September 2013, countries are supposed to agree on a Framework for market-based measures (MBMs) which could serve as an umbrella for national, regional or sectoral initiatives to address international aviation emissions. Countries are also discussing the feasibility of one global MBM.  But countries are far from agreeing how such a global MBM should look like. ICAO has narrowed its options to three approaches:

• a global cap-and-trade scheme
• mandatory offsetting with revenue generation which may be used for additional climate finance
• mandatory offsetting without revenue generation

Both the emission reduction goal and the measures how the cap can be met will determine if the aviation sector will have to reduce its own emissions. Of the option on the table, only a cap-and-trade scheme with a stringent cap and a limit on the use of offsets could achieve this. However, 100% offsetting will not lead to emission reductions in the sector itself, even if the cap was to be stringent.

Given ICAO’s track record of ‘aspirational goals’ there is a genuine lack of trust that ICAO can deliver a binding agreement that would require the aviation sector to reduce its emissions. A so called ‘coalition of the unwilling’ headed by USA together with countries like India and China is fervently opposed to commit to a binding agreement to reduce emissions and questions the need for a market based measure.

The International Air Transport Association (IATA), a trade association representing the airline industry, recently declared that they prefer a 100% offsetting option. This position is likely to be supported by a majority of ICAO negotiating States.

The troubles with offsets

Offsetting is not a long term solution because it does not lead to emissions reductions in the aviation sector itself but merely compensates these emissions throughout investment in reduction projects elsewhere. Since offsetting delays mitigation action in the aviation sector itself, it cannot deliver the large long-term emission cuts required to mitigate aviation sector’s emissions and projected growth in air-traffic.

To make things worse, if the offsets are of low quality, climate impacts actually get worse.  It is still unclear what types of offset credits would be approved for such an aviation MBM. There are the two offset mechanisms under the Kyoto Protocol: the CDM and Joint Implementation (JI). Both of these mechanisms have come under sharp criticism for the lack of quality of their offsets.

Offset credits are also produced outside the UNFCCC, without international regulatory oversight. These include voluntary offset programs (e.g. Verified Carbon Standard), national offset programs (e.g. Australia’s Carbon Farming Initiative), bilateral offset mechanisms (e.g. Japans’ Bilateral Offset Credit Mechanism). Offsets from these programs have been scrutinized even less. We know little about their quality but it would be naïve to assume that they are generally of higher quality than CDM and JI credits.

If ICAO decides on a MBM, demand for offsets from the aviation sector could be in the hundreds of millions. Putting in place quality restrictions for such offsets would be absolutely vital. Carbon Market Watch recommends:

• CDM: Quality restrictions should be placed on CDM offset credits to ensure high environmental and social quality, for example, industrial gas and large scale power projects should be excluded.
• Joint Implementation: JI has been repeatedly criticized for a severe lack of quality control. 95% of all ERUs issued to date are issued by host countries without any international oversight. Offset credits from JI should not be eligible under an ICAO scheme.
• New Market Mechanism (NMM): A new offsetting mechanism was approved in 2011 and is being developed under the UNFCCC framework. It will likely take many years until emission reduction units will be issued under this new mechanism. NMM credits should only be eligible under an ICAO scheme if they are verified to be real, permanent and additional.
• Voluntary offset programs: Because of the lack of international quality oversight, offset credits from the voluntary market should not be eligible for compliance.
• Allowances from cap-and-trade systems. Emission permits could also be acquired in the form of allowances from cap-and-trade schemes. Cap-and-trade systems only lead to emissions reductions if there is a scarcity of allowances. Surplus allowances from over-supplied schemes such as the EU-ETS should not be eligible under an ICAO scheme.

In order to ensure that we stay below 2 degrees warming, the aviation sector needs to set a meaningful cap that leads to actual emission reductions in the sector itself. The use of offsets has to be restricted and eligible offset types have to be limited to those that have high environmental and social integrity.