The route from China to ICAO's CORSIA emissions scheme: there's still a long way to go
Tue 27 Jun 2017 – The 39th session of ICAO Assembly last October is regarded as a milestone in addressing CO2 emissions from international aviation. Specifically, the resolution on the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) was adopted by the Assembly, in spite of the fact that Russia, India and a few others maintained their serious concerns on the equity and feasibility of the scheme. China is a constructive and even decisive contributor to the successful outcome of the Assembly after a long series of give-and-take discussions, writes Ren Wang.
During the Assembly, ICAO included China in the list of countries that have decided to join the scheme from the beginning based on the wording “…China and the United States support the ICAO Assembly to reach consensus on a global market-based measure this October, and expect to be early participants in such measure” included in the US-China Climate Change Cooperation Outcomes in September 2016. However, no official announcement is available to confirm China is or will be an early participant. From expectation to confirmation, there’s a long way to go for both ICAO and China.
I would argue the foundation for ICAO to develop and implement CORSIA is not solid. Firstly, CORSIA is basically a quasi-compliance market. According to the Convention on International Civil Aviation, ICAO is a UN agency with a purpose to ensure that “…international civil aviation may be developed in a safe and orderly manner and that international air transport services may be established on the basis of equality of opportunity and operated soundly and economically.” Literally speaking, the focus is on air transport safety, equal service opportunity and economic operation.
To develop a market-based measure scheme is obviously not in the centre of the scope of tasks that the Convention authorised the Organization to deal with. Moreover, as Professor Michael Milde, formerly at McGill University, has pointed out, the Convention on International Civil Aviation established ICAO as “an international organisation with wide quasi-legislative and executive powers in the technical regulatory field and with only consultative and advisory functions in the economic sphere.”
Lacking legal obligations and mandates on States to address their emissions from international aviation, ICAO can depend on nothing but the political will of States. However, political will can facilitate the development of the scheme but not guarantee its implementation, which needs something legally binding rather than an assembly resolution, which is only a collective decision without any penalty clause.
Secondly, the development and implementation of the relevant Standards and Recommended Practices (SARPs) by ICAO may further the distrust among States to jointly address international aviation and climate change.
Article 37 of the Convention on International Civil Aviation provides clearly the scope of issues which need SARPs. The monitoring, reporting and verification (MRV) of emissions, emissions unit criteria (EUC) and registries are completely out of the scope. It is assumed that ICAO recognises it is short of executive power to ensure the implementation of CORSIA, and SARPs – which are used to deal with safety, regularity, and efficiency of air navigation – is a tool which can “request” States to take tangible actions. But the point is that issues like emissions unit generation and registry development are closely related to governments’ social and economic administration modes, which can never be standardised due to the various development stages of the 192 Member States.
During the Assembly, China, among some major developing or emerging economies, highlighted serious concerns over ICAO’s decision to develop SARPs on MRV, EUC and registries. Unfortunately, ICAO and the developed states habitually choose to neglect such concerns and keep accelerating the pace to develop the SARPs. Hence, it can be assumed that ICAO will successfully add another volume to Annex 16 of the Convention but may also see a record-breaking number of notifications of departures from the standards.
China’s participation in CORSIA
I would also argue that it is not easy for China to get ready for the participation in CORSIA. China is a large developing country with the largest population in the world, which has created a huge aviation market. It is highly possible that China, now the world’s second largest aviation market, will maintain an annual growth rate of over 10% in the next 5-10 years. China has been enhancing its efforts to build a green and low-carbon aviation sector and the CAAC 13th Five-year Plan on the Development of Civil Aviation has highlighted its resolution to take tangible actions. But it does not mean China is ready to announce its participation in the CORSIA right away. The Chinese government has to tackle three challenges ahead of the next ambitious step.
Firstly, it must deal with the issue of Taiwan, Hong Kong SAR and Macao SAR. As per the currently-developed rules on CORSIA, it is the position of Member States to report air transportation and emissions data to ICAO, which is correct from a political perspective. As a result, all aircraft operators registered in China, including those registered in Taiwan province, Hong Kong SAR and Macao SAR, must submit their verified reports, among others, to an authority mandated by the Chinese central government, for example the Civil Aviation Administration of China (CAAC), which will then contact ICAO.
As such issues are closely related to the “state sovereignty”, “national security” and “territorial integrity” of China, which are core Chinese interests, any trial or proposal to allow the three regions to contact ICAO (and other UN agencies) without the central government approval is illegal and surely faced with a resolute and huge “NO” from China. At present, such channels between the central government and the three regions has not yet been established and it will be very difficult to do that due to the political and historical reasons known to all.
Another related issue is how to define “international aviation” for airlines registered in the three regions. Currently, flights between the Taiwan province/HK SAR/Macao SAR and Mainland China are accumulated as international flights by those airlines registered in the three regions and regional (neither domestic nor international) by airlines registered in Mainland China. If China joined CORSIA, change must take place on statistics methodology and practices, which, again, is not a purely technical problem.
The second challenge is the coordination between China’s national carbon market and CORSIA. The Chinese Emissions Trading Scheme (ETS) will kick off in late 2017 and it is reported that civil aviation will be included in the scheme. Officials from the National Development and Reform Commission (NDRC), who are involved in building the ETS, have hinted that it is an item on the future – but not the present – agenda to get the ETS linked with other carbon markets. A dilemma then has to be faced up to. On the one hand, the Chinese carbon market would get more robust and liquid if its carbon units are ICAO eligible. On the other, an ICAO-eligible unit will inevitably be a medium to get two or more carbon markets linked indirectly and hence make the market more volatile, which is not desirable for the newly-born carbon market.
Another related problem is ICAO policy on registries. As per the Assembly resolution on CORSIA, a consolidated central registry would be established under the auspices of ICAO, and Member States are required to develop necessary arrangements for the establishment of their own registries in accordance with ICAO guidance. The Chinese registry has been established for the national carbon market prior to the ICAO policy or standards, which are not self-executing. If the Chinese registry departs from the ICAO material on the development of a national/regional registry, will the Chinese government modify its economy-wide policy merely for an industry with less than 1% of its total CO2 emissions?
Chinese airline complaints
Thirdly, there is the outcry from Chinese airlines. Airline CEO-level personnel know little about carbon markets and the battle with the European Union regarding the EU ETS has left them an impression that a market-based measure is something evil.
Since last October, some experts from the Chinese airlines have been complaining they would lose billions of RMBs each year to join the scheme. Their rationale is that Chinese airlines are expected to grow very fast – particularly concerning international flights – and the CORSIA formula to calculate the offset responsibility penalises that growth. Such complaints further enhance those senior managers’ concerns and have surely got the attention of senior government officials. This will lead to a more comprehensive evaluation of CORSIA before any further decision is taken by the government.
Objectively speaking, the current CORSIA design takes into account both the historical and future responsibilities of airlines because the first 10 years adopts the sectoral approach and the last five years a mixed approach (sectoral and individual). Although more refinement is necessary on the methodology and even rationale, those analyses from airline experts are correct in pointing out that it is unfair to take 2020 emissions as the CORSIA baseline, about which the Chinese government filed a reservation shortly after the 39th Assembly.
“It is evident that China is earnestly fulfilling its commitment made in the Paris Agreement …. As a developing country, tackling climate change is a tough process for China and requires extraordinary efforts. However, we will persistently progress along this path,” Premier Li Keqiang said at a State Council executive meeting on June 14.
That said, we can assume the journey from China to the confirmation of her participation in CORSIA will not be quick due to the ICAO procedural issues and China’s special national circumstances mentioned above. But China will not stop or withdraw from her plan to develop green aviation.