ICAO releases draft resolution text on a global market measure to address international aviation emissions
Fri 18 Mar 2016 – Ahead of the second round of ICAO’s Global Aviation Dialogues (GLADs), which start on Sunday (March 20) in Cairo, a draft resolution text has been released on a global market-based measure (GMBM) scheme to achieve carbon-neutral growth in international aviation carbon emissions from 2020 (CNG2020). Following a meeting of the ICAO Council last week, the text reflects changes made from an earlier version presented last December. The GLADs will be the first opportunity for ICAO States not on the Council to study the GMBM proposals and provide feedback. The main feature of the scheme, which has been named COSIA (Carbon Offsetting Scheme for International Aviation), is a phased-in implementation under which high income States or those States with an individual share of international aviation Revenue Tonne Kilometres (RTKs) above 1% of the global total are included from the beginning in 2021, with upper middle income states or those with a share of RTKs above 0.5% of the total joining in 2026.
It has been long recognised within ICAO that technology, operations and infrastructure improvement measures are not enough at present to hold back the rapid growth of international aviation CO2 emissions – ICAO does not regulate on domestic emissions – and a “temporary gap-filler” GMBM scheme is required. However, the path to agreeing such a measure by its members has proved elusive, floundering on principles of responsibility and equity. Under the UN climate principle of common but differentiated responsibilities (CBDR), developed states are required to take the lead in addressing emissions from international aviation, but this has conflicted with the UN civil aviation principle of equal treatment and non-discrimination.
The resolution to be presented to Member States at ICAO’s Assembly starting in late September in its current draft form attempts to resolve this through the phased-in approach that would see those countries with a high aviation activity or those considered the wealthiest (based on gross national income per capita, or GNI) included in the scheme from the start in 2021. This would capture around 80% of all international aviation RTKs in the first phase. The second implementation phase starting in 2026 would extend RTK coverage to around 95% of the global total.
The scheme’s carbon emissions coverage would be further reduced as States classified as Least Developed Countries (LDCs), Small Island Developing States (SIDS) or Landlocked Developing Countries (LLDCs) would be completely exempted from the scheme unless they met both the GNI and RTK criteria. To ensure there are no market distortions, emissions from flights by all operators, regardless of country of origin, on routes to and from these countries would be exempted. This would mean, for example, flight emissions from Europe to holiday destinations such as Barbados, Mauritius, Seychelles and the Maldives would be exempted as these countries are classified as SIDS and do not meet both criteria. On the other hand, flights to Singapore would be included from the start of the scheme because although the State is classified as a SIDS, it also finds itself in both the relevant GNI and RTK categories.
The draft resolution does, however, encourage States not covered by these provisions “to voluntarily determine to participate in the scheme.”
New airline entrants are also exempted from the scheme’s application for a period of three years – in the previous draft it was five years – or until its annual emissions exceed 0.1% (down from 0.5%) of total emissions in 2020, whichever occurs earlier.
A controversial element of the proposed scheme is that offsetting obligations for emissions that have been exempted through the various criteria are not distributed among those operators that are included. This would have the effect of the scheme not meeting the CNG2020 goal, particularly falling short during the first phase.
Another feature that has raised concerns in some quarters is how the offsetting obligation is determined for each operator covered by the scheme. The proposal states “that the amount of CO2 emissions required to be offset by an aircraft operator in a given year from 2021 is calculated every year by multiplying its annual emissions in the given year with the growth rate of the international aviation sector’s total emissions in the given year compared to the 2020 levels.” This means an operator’s annual obligation is set for the whole duration of the scheme (until 2035) based on its share of total emissions in 2020 and the amount of offsets it has to buy is set by the sector’s growth in emissions and is regardless of what measures it has implemented to reduce emissions.
The Strawman GMBM proposal presented by the ICAO Secretariat shortly after the last Assembly in 2013 allowed for a combination of both individual and sectoral calculations for determining the offset obligation. However, the current proposal is seen as being fairer to airlines from fast-growing developing countries.
Although operators would be required to report their emissions data on an annual basis to their State authority, the proposed scheme would operate on a three-year compliance cycle, starting with the first cycle from 2021 to 2023, within which operators would reconcile their offsetting requirements. Given the experience of the EU’s Emissions Trading Scheme (EU ETS), in which allowances must be surrendered annually at the end of April, many aircraft operators tend to leave the purchasing of allowances until near the deadline. Some carbon analysts see the three-year compliance period for the global aviation sector having a distortionary effect on the market if most operators followed the EU example and waited until towards the end of the period and caused a sudden surge in demand for offsets.
The new draft resolution has dealt with a contentious earlier sunset clause under which the scheme would cease to apply if total emissions went below 2020 levels for three consecutive years. This is now covered under the provisions of a periodic three-year review of the scheme, which would consider a suspension if the global aspirational goals had been met by non-MBM measures, and also allows for a review of any extension to the scheme beyond 2035 to be undertaken by the end of 2032.
The December draft allowed for action to be taken by the ICAO Council if the average price of emissions units in a specific year was more than three times higher than the average price in 2021, in order “to avoid an excessive burden on aircraft operators”. The new draft is not as specific and allows for the three-year review to consider the cost impact of the scheme should it be thought to effect the sustainable development of the aviation industry.
The draft resolution concludes with action to be taken in the period after the 2016 Assembly leading up to the implementation of the scheme in 2020 and covers rules and development on MRV (monitoring, reporting and verification), emissions unit criteria, establishment of registries, governance of the scheme and the regulatory framework.
The round of GLADs finishes in Mexico City on April 8 and a briefing on the outcome will be made to the ICAO Council on April 13, which will be followed by the second meeting (April 13-15) of the newly formed 18-State High-level Group (HLG) appointed to agree the main framework of Assembly draft. The results of this meeting are due to be considered by the Council on April 20 with another draft text to be in place for the High-level Meeting (HLM) of all ICAO States convened for May 11-13 in Montreal. The HLM will be preceded by a one-day open forum organised by industry group ATAG that will cover the GMBM details.
Differences still remain to be resolved on key elements of the draft resolution, particularly over the criteria by which States will be included in the GMBM scheme from 2021. China, for example, is known to be unhappy that CBDR concerns have not been sufficiently addressed and developed countries want more emphasis on non-discrimination.
There are divergent views within the Council on the GNI classification and some members want the RTK de minimis raised. Under the present proposal, major emerging countries like China and India would be included from the first implementation phase as although they are not classified by the World Bank as high-income States, their individual share of RTK activity is above the 1.0% threshold. Other large emerging economies such as Brazil, Saudi Arabia, South Africa and Indonesia would though be excluded from the first phase as their RTK shares are below the threshold, based on ICAO 2012 RTK data, but would join the second phase in 2026. The Gulf States of Qatar and UAE would be included from the start as they meet the GNI and RTK criteria.