Carbon offsetting rather than emissions trading becoming favoured route as ICAO looks towards a global scheme
Fri 5 Oct 2012 – As ICAO expert groups continue their work on a global market-based approach to limiting the growth of international aviation emissions, it is beginning to emerge that carbon offsetting, rather than emissions trading, is the favoured option for States and industry. Emissions trading is technically the correct instrument but offsetting could be an interim approach on the road to a global emissions trading scheme, believes British Airways’ Environment Policy Manager, Andy Kershaw. However, difficult challenges still face the ICAO process and will require strong political will to achieve an agreement by the time of its Assembly later next year, he told a Brussels conference. At the same conference, Abdul Wahab Teffaha, Secretary General of the Arab Air Carriers Organisation, called on the EU to halt its unilateral inclusion of foreign airlines into its carbon emissions scheme and give the ICAO process a chance. According to reports, Saudi Arabia has joined China and India in instructing its national airline not to comply with the EU ETS legislation.
Political compromise will be needed to find a global solution, but the accelerated process now taking place at ICAO on building a framework for market-based measures had provided a positive momentum, said Kershaw at the Platts European Emissions Markets Conference.
However, it was important the special circumstances and respective capabilities of states were accommodated and provision was made for the least developed countries. Defining ‘special’ states was a challenge, he said, as the Kyoto Annex I definition was unsuitable given that eight of the top 20 countries by aviation activity were from the developing world. At the same time, if there was no equal treatment for all airlines then market distortions would occur.
Kershaw said the industry was looking for an agreement at the 2013 Assembly to build a global market-based mechanism and then, potentially, to adopt it by the following 2016 Assembly. Industry had proposed far-reaching emissions reduction targets, he added, but it was up to countries to take the initiative and agree a harmonised, multilateral approach through ICAO.
Philip Good from the European Commission, who is taking part in the ICAO MBM working group process, said the work on MBM options was still at the conceptual stage and the outcome was still unclear at present, with concerns being expressed by some stakeholders. “We are developing proposals that are technically feasible but the question is very much whether they will translate into something which is politically feasible.”
Under a global carbon offsetting scheme, international aviation emissions are offset through the surrender of eligible emissions allowances and credits, with offsetting set at a level above a specific baseline up to 100% of emissions. If a baseline is used, this requires a method to distribute the baseline amongst individual participants, known as benchmarking or grandfathering. The option requires a globally harmonised approach on benchmarking, MRV, enforcement, offset quality standards and registries to track transfers, surrender and cancellation of credits. A further option under consideration is to add an additional charge to raise funds for further mitigation methods.
Good said a separate workstream is looking at a framework of design principles for MBMs that States or regions should adopt and is also developing a common approach to harmonise systems between States to avoid an overlapping patchwork of conflicting and market distorting measures.
From the perspective of European carrier LOT, a cap-and-trade system such as the EU ETS was the most cost-efficient market-based mechanism but the EU scheme had burdened airlines with enormous bureaucracy, said its Head of Environmental Affairs, Andrzej Rode. Moreover, he suggested, it had also created the dangerous prospect of an international trade war, with countries such as China, India, Russia and the US threatening retaliatory measures against European airlines. “This, and not the carbon price, might become the biggest cost of the EU ETS for EU airlines,” he predicted.
AACO’s Abdul Wahab Teffaha said the ICAO process must be given a chance as it was the only body capable of producing an acceptable global agreement. Europe, he said, had given a lead on the environment but as far as the EU ETS was concerned, the EU needed “to go back to the drawing board and leave it to ICAO.”
He had no objection to the EU applying its scheme within Europe but “these were no longer colonial times” and no country had the right to impose their decisions on others.
Arab airlines would be paying the EU around €850 million ($1.1bn) up till 2020 for the cost of the EU ETS, he told delegates. As his members came from a largely immature emerging market, he said the costs would be much higher than those for airlines from the mature, developed markets. Using EU ETS revenues for other than environmental purposes also added insult to the injury, he said.
“The EU needs to come off its pedestal and see the political realities,” he went on. “Otherwise, they will have a trade war on their hands. They are not the world’s regulators.”
Teffaha added that the suggestion the EU should compromise by omitting non-EU incoming flights from the EU ETS would not be sufficient as it did not address the central issue of national sovereignty.
Philip Good reiterated that the EU ETS legislation allowed for a review if there was a global agreement to reduce aviation emissions. Such an agreement would require an assessment by EU decision-makers on how binding was the commitment and what impact it would have on reducing emissions.
AACO member Saudi Arabian Airlines, according to a Bloomberg report this week, has been ordered by its national authorities not to comply with the EU ETS directive and the kingdom is said to have notified the EU of its decision.