Abundant supply of high-quality carbon offsets available for ICAO GMBM but effective governance required
The second phase of the Los Cocos Wind Park in the Dominican Republic was registered as the CDM's 7,100th initiative
Fri 8 Apr 2016 – A policy brief prepared for the German environment ministry finds that despite uncertainty over the future of the UN’s Clean Development Mechanism (CDM) after 2020, there should be an abundant supply of high-quality carbon offsets to satisfy demand from the aviation industry under ICAO’s proposed global market-based measure (GMBM). As such, there should be no concerns over high prices of emission units due to limited availability and no reasons why quality standards should be compromised. Environmental integrity is vital though to maintain the credibility of the scheme and eligible units should accordingly be restricted to those that met strict sustainability standards, warns the report by the Wuppertal Institute. It cautions that an effective and transparent governance structure, backed by political support, must be put in place under an ICAO agreement.
ICAO should establish close ties with the UNFCCC in order to benefit from the learning-by-doing approach to the development of the CDM and to address issues arising from the Paris Agreement reached at COP21 in December, advises the briefing.
“Unless the clear rules for accounting of emission reductions and transfer of emission units are incorporated in the fine print to the new climate agreement, it is hardly possible to avoid double-counting,” it says.
According to ICAO projections, international aviation traffic (expressed in revenue tonne kilometres) is expected to grow at an average rate of 4.6% per year until 2050. Assuming ICAO’s aspirational goal of an average 2% annual increase in fuel efficiency is met, experts estimate an emissions gap of between 288-376 Mt CO2 in 2030 and 590-816 Mt CO2 in 2040. Over the proposed period of the ICAO GMBM scheme (2021-2035), the potential demand adds up to around 3300 Mt CO2. Although a portion of this demand may be met through the use of sustainable alternative fuels there is for now high uncertainty over their contribution, says the briefing, and even speculative levels will not be sufficient to achieve the carbon-neutral growth goal of the GMBM.
To put this into context, the briefing provides an estimated aggregate demand in the EU Emissions Trading Scheme for the period 2008-2020 at about 1650 Mt CO2.
While the future of the CDM is unclear, recent research by the Oeko-Institut shows that Certified Emissions Reductions (CERs) – emission units or carbon credits issued under the CDM – generated by current registered CDM projects could satisfy the demand of the aviation sector (see article).
“Even under rigorous quality restrictions, i.e. excluding all project types that raised environmental concerns and taking into account only recent vintages, the existing CDM pipeline can generate enough CERs to offset the entirety of the projected emissions growth of international aviation for the period 2021 until 2035,” says the briefing.
Despite the current low prices for CERs, a survey of over 1,300 CDM projects found that the vast majority were still operating regularly and only 15% had stopped their mitigation activities. A strong majority could also return to regular operation including verification and issuance at moderate price levels of between €5 and €10 per CER. The research shows there is also considerable capacities on the supply side and even if the CDM was shut down there is ample experience in applying the CDM’s tools and methodologies.
“Within seven to eight years, the CDM managed to build up capacities for designing and registering projects that are capable of satisfying twice the expected demand from international aviation,” says the briefing. “While a lot of the human capacities that contributed to this accomplishment are currently running idle due to the slump of CER prices, the history of the CDM has shown with confidence that sufficient supply will be available to satisfy ICAO’s demand for offsets.”
The briefing points out that the CDM, being an instrument of the Kyoto Protocol, was not transferred to the Paris Agreement and future technical negotiations will determine whether existing CDM projects can be transferred to a newly established mechanism. Therefore, it advises, it would not be appropriate for ICAO to exclusively rely on existing UNFCCC mechanisms at this point in time.
“However, the ongoing negotiations under UNFCCC remain of vital importance for any ICAO decision,” it adds. “One of ICAO’s own eligibility and integrity criteria is the avoidance of double-counting. The Paris Agreement has created a significantly different structure than the Kyoto Protocol, including the need for a very different type of accounting framework.
“The Paris Agreement’s accounting framework will be elaborated in the coming years. As long as this task is not accomplished, it is almost impossible to avoid double claiming of emission reductions. For the use of international carbon markets, a robust accounting framework is therefore a prerequisite. As long as there is no clarity on this issue, it is virtually impossible to adhere to ICAO’s own draft recommendations on the eligibility of emission units.”
The current draft proposals for the GMBM scheme lack detailed provisions with respect to governance, says the briefing, with questions to be answered on who decides on the eligible offset programmes and how compliance with eligibility criteria is ensured after a programme has been accredited. The CDM experience has shown that these are key issues for maintaining the credibility and environmental integrity of an offsetting scheme, says the author of the briefing, Lukas Hermwille, Research Fellow at the Wuppertal Institute for Climate, Environment and Energy.
ICAO, he recommends, should follow the example of the CDM scheme by allowing a transparent governing framework and carefully design the details of the scheme. “Either it establishes a permanent body following the example of the CDM Executive Board that continuously oversees the offsetting scheme or it could allow ‘internationally accepted’ units only and leave oversight on these to the UNFCCC.”