IATA airlines agree on a set of guiding principles to ensure equitable distribution of global MBM financial burden

IATA airlines agree on a set of guiding principles to ensure equitable distribution of global MBM financial burden

IATA DG Tony Tyler: "MBMs are critical to meeting our targets. Technology, operations and infrastructure improvements will not be enough for CNG2020, at least in its early years." (photo: IATA)

Tue 4 June 2013 – IATA airline members have overwhelmingly supported an AGM resolution recommending a set of principles that could be applied to individual carriers as part of a single global market-based measure (MBM) in a post-2020 carbon-neutral growth (CNG) agreement. Along with a broader package of measures to address aviation CO2 emissions, the industry acknowledges that a global MBM will be required to achieve CNG, at least as until technology can fill the emissions growth gap. The resolution seeks to define principles on how an MBM scheme should be equitably applied to airlines and also proposes a collective industry baseline as well as individual operator baselines based on 2018-2020 average annual emissions. The resolution also urges IATA’s 241 airline members to strongly encourage ICAO states to adopt a single global MBM at their Assembly in September.

“Airlines are committed to working with governments to build a solid platform for the future sustainable development of aviation. Today, they have come together to recommend to governments the adoption of a single MBM for aviation and provide suggestions on how it might be applied to individual carriers,” said Tony Tyler, IATA’s Director General and CEO, at the IATA AGM in Cape Town yesterday. “Now the ball is in the court of governments. We will be strongly supporting their leadership as they seek a global agreement through ICAO at its Assembly.”

Tyler acknowledged such an agreement would not be easy. “It was difficult enough for the airlines, given the potential implications,” he said. “Bridging the very different circumstances of fast-growing airlines in emerging markets and those in more mature markets required a flexible approach and mutual understanding. But sustainability is aviation’s licence to grow. With that understanding and a firm focus on the future, airlines found an historic agreement. This industry agreement should help to relieve the political gridlock on this important issue and give governments momentum and a set of tools as they continue their difficult deliberations.”

Tyler warned cash-strapped governments though not to use MBMs as a revenue generation or avoid their role in incentivising investments in new technologies and sustainable alternative fuels. He said the industry was on track to achieve its own short term (2010-2020) 1.5% average annual fuel efficiency target.

A set of principles annexed to the resolution says the global MBM should be easy to implement and administer, as well as cost efficient, and endorses a single mandatory carbon offsetting scheme rather than an emissions trading scheme similar to the EU ETS. Both systems are under consideration at ICAO. The scheme should also maximise environmental integrity and minimise competitive distortion by granting equal treatment to all operators on any given route, adds the resolution.

As well as the collective industry and individual operator emissions baselines, the resolution recommends that provisions be made for new entrants and specific adjustments for fast-growing carriers. In addition it calls for an ‘early movers’ provision, based on a 15-year benchmarking timeframe (2005-2020) and combined with a five-year sunset clause (2020-2025), that recognises carbon reduction measures taken prior to 2020. Some airlines that have already invested in new aircraft fleets, particularly those from the Gulf states, have in the past argued this should be taken into account in an MBM.

An additional adjustment should also be made to ensure that any net reductions in emissions below an individual carrier’s baseline are captured for use by the industry as a whole.

To ensure data integrity, the resolution calls for an industry-accepted ICAO standard for reporting and independent verification of emissions data, with data reporting kept simple, and also flexibility for operators to select from a hierarchy of reporting methodologies. It also recommends a periodic CNG2020 performance review cycle to assess the proper functioning of the MBM mechanism and revise elements and parameters as appropriate.

Despite the strong industry support for the resolution, according to outgoing IATA Chairman and Qantas Airways CEO Alan Joyce, Air India and Air China had voiced concerns. China and India have been strong opponents of a global market-based approach to limit the growth of international aviation emissions, arguing that emerging economies such as theirs are exempted from such action under the UN climate principle of Common But Differentiated Responsibility (CBDR), better known at ICAO as Special Circumstances and Respective Capabilities (SCRC). The principle has proved one of the main stumbling blocks to a global MBM agreement at ICAO.

However, IATA says it is not trying to overcome the SCRC issue through its set of principles – “only governments can decide whether to take into account SCRC and, if so, how” – but is suggesting ways of how the financial burden of a global MBM can be spread equitably through all its member airlines, whether from the developed or developing world.

Individual responsibilities of carriers should be fairly determined using “an equitable balance” between an emissions share element – reflecting the individual carrier’s share of total industry emissions – and a post-2020 growth element that reflects the individual carrier’s growth above baseline emissions, says a resolution principle.

“For example, you might have a large carrier in a mature market with a small proportion of growth compared to a small carrier in a growing market with a large proportion of growth,” IATA’s Director of Environment, Paul Steele, told GreenAir from Cape Town. “The mechanisms in the resolution are a way through that. More work still needs to be done on this but the resolution recognises that such issues need to be dealt with and sends a strong signal to governments, which may want to apply political mechanisms such as SCRC at some point, that they need to take this into account and also avoid creating competitive distortions.

“Under our proposals, everyone is subject to the same set of rules. What we are doing is reflecting the different circumstances of airlines. Everyone is paying a share of the industry’s growth but with adjustments, for example, for fast growth. This is not about a distinction between developing or developed countries, nor about a route by route basis, this is in general about any airline anywhere.”

Steele said he did not favour the route differentiation concept, by which certain city-pairs were exempted from a global MBM scheme to avoid conflict with the SCRC principle, as it created an administrative complexity. Ideally, he said, the industry wanted a single global mechanism that included all airlines from all countries.

The resolution was welcomed by regional airline associations Airlines for America (A4A) and the Association of European Airlines.

US NGOs Environmental Defense Fund (EDF) and Natural Resources Defense Council (NRDC) backed, with caveats, IATA’s call for ICAO member states to agree on a single global measure at this year's Assembly.

“IATA has opened the door, now it is time for governments to walk through it this September. This is the signal that governments have been seeking,” said EDF’s Annie Petsonk. However she cautioned that “not all the ingredients offered in IATA’s resolution will fully address aviation’s contribution to climate change.”

Bill Hemmings of European NGO Transport & Environment commented: “Today’s IATA resolution represents a welcome departure from their historical position that better air traffic control, better planes and biofuels alone can solve the problem. However, it kicks the ball in the long grass until after 2020, and sets out a string of unworkable conditions. It rules out the EU ETS as a stepping stone, as well as the raising of revenues, and impacts on traffic volume, which are inherent to any market-based measure. Finally, it relies solely on out-of-sector offsets rather than real emissions reductions within aviation.”

Aviation Environment Federation’s Tim Johnson added: “ICAO members should see it as an encouragement to come up with an effective scheme at the Assembly, not as a blueprint for such a scheme.”

At the AGM, Tony Tyler raised IATA’s previous profit forecast for the industry in 2013 to $12.7 billion on anticipated revenues of $711 billion, despite, he said, a “tough” business environment. He reported the industry’s average load factor was at a record high of 80.3%, 6.0 percentage points above 2006 levels. Oil prices, he said, are expected to average $108/barrel (Brent) this year, a little below the $111.8 average for 2012.

IATA CNG2020 resolution and principles (pdf)
IATA press release: ‘Historic agreement on carbon-neutral growth’ and video interview with Tony Tyler
IATA – Interview with Paul Steele on CNG2020 resolution

During the IATA AGM, a 45-minute panel session took place entitled ‘CNG2020 and the aviation emissions puzzle’. Moderated by IATA’s Director of Aviation Environment, Paul Steele, the panel consisted of Julie Oettinger, Assistant Administrator, US FAA; Jos Delbeke, Director General, Climate Action, European Commission; Christoph Franz, CEO, Lufthansa; and David Abney, President, UPS Airlines.
A video of the session can be viewed at http://www.iata.org/events/agm/2013/Pages/panel-cng2020-emissions.aspx



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