Carbon Markets – The Enigma of Air Transport

In fairness to ICAO, it must be stated that ICAO’s efforts in this regard have been tenacious and relentless, despite the polarization between blocs of States in the Council of ICAO which have demonstrated consistently their differing policies that are calculated to thwart the development of a GMBM.

by Dr. Ruwantissa Abeyratne

It ain’t over until the fat lady sings…Origin unknown

( February 12, 2018, Montreal, Sri Lanka Guardian) On 7-9 February of this year, The International Civil Aviation Organization (ICAO) – the specialized agency of the United Nations on the subject of international civil aviation – held, at its headquarters in Montreal, a seminar on carbon markets.  ICAO, which, by its own admission, is no expert on carbon markets, therefore judiciously gathered at this seminar   experts on the subject from China, Japan, United Kingdom, South Korea, United States and Canada as well as the World Bank and several non-governmental organizations.   The purpose of the Seminar was, as stated by ICAO, to “enhance understanding of carbon markets and emissions units, including the criteria for eligible emissions units, by sharing information on various aspects of emissions units programmes, mechanisms and projects, which are of interest for the implementation of the CORSIA”.  CORSIA stands for Carbon Offsetting and Reduction Scheme for International Aviation, an initiative of ICAO calculated to bring about a global scheme of off setting and reduction of carbon dioxide emitted by aircraft engine emissions.  More on CORSIA later.

A “market” essentially involves pricing and carbon pricing constitutes a monetary cost relating to pollution. The carbon market strives to aim at a single price, be it related to a tax or emission trading scheme or carbon credits.  The problem with a carbon tax is seemingly that it does not set targets; allows polluters to emit at will as long as they pay the taxes involved, which ultimately would increase greenhouse gas emissions and stultify the goal of the Paris Agreement of 2016 which aims to limit the global average temperature to well below 2 degrees Celsius and to proceed toward limiting that increase to 1.5 degrees Celsius. Besides ICAO’s own carbon neutral target of zero emissions by 2020 would be jeopardized if no control is exercised.

This has led the world of environmentalists, particularly in the air transport world, to prefer “offsetting” through emissions trading involving the purchase of carbon credits. It is expected that CORSIA will  provide guidelines in this process, amid the grim reality that airlines would expect sufficient quotas and will take business decisions on the implementation of CORSIA.  There was much discussion at the seminar on the verification process involving monitoring of the process, where verifiers of pollution and credits would be accredited under CORSIA and lists made, as well as a regular practice of airlines calculating their CO2 emissions, and have accredited verifiers validating them according to ISO (International Standards Organization) standards.

Eventually, under CORSIA, ICAO would select and determine eligible units and it will then be left to airlines to process them in accordance with their business models and philosophy.  The selection and generating process regarding emission units was described at the seminar as involving a project draft; validation of the draft; implementation of the project; monitoring; verification; and unit generation.   Alberta and British Columbia described their own carbon markets, as well did Japan, South Korea and China.  Needless to say, some attendees at the Seminar had questions such as: why can’t there be a single carbon market for the world? As an airline, how much am I required to pay per unit? How will jet fuel, when two or   three different kinds of fuel are used, be evaluated?

ICAO’s reply was (perhaps justifiably), all those questions cannot be specifically responded to at the present time because they would come to light only after CORSIA – which is still a work in progress – is finally explained through Standards and Recommended Practices which are currently being developed. To unravel this enigma, one must know exactly know what CORSIA is and the process that is unfolding within ICAO.

ICAO member States, at the 39th Session of the ICAO Assembly in 2016 adopted Resolution A 39-3 which established CORSIA.   It addresses any annual increase in total CO2 emissions from international civil aviation (i.e. civil aviation flights that depart in one country and arrive in a different country) above the 2020 levels, taking into account special circumstances and respective capabilities of States.  CORSIA would be implemented in three phases with a view to accommodating SCRC, in particular of developing States, while minimizing market distortion.  The first phase would be a pilot phase that would apply from 2021 through 2023 to States that have volunteered to participate in the scheme. The second phase following the pilot phase would apply from 2024 through 2026 to States that voluntarily participate in the pilot phase, as well as any other States that volunteer to participate in this phase, with the calculation of offsetting requirements.

Both the first and second phases would be voluntary with regard to participation by States.  It is only the third phase – from 2027-2035 that would have an element of compulsion.  Some fundamental questions arise as to the global acceptance of CORSIA which has its genesis in an assembly resolution which is nothing but the result of political compromise between States and no legal authority can be ascribed to it under international law.

It is worthy of note that GREENAIRONLINE, an e-journal on aviation and climate change, reported: “Russia, India and Saudi Arabia, along with Argentina and Venezuela announced during the plenary that they would file reservations, or objections, against the carbon-neutral growth from 2020 (CNG2020) goal of the CORSIA scheme. They argued it was inconsistent with the Paris Agreement and had the potential to inhibit the growth of aviation in developing countries. China also said it would file a similar reservation over the goal and offered little open support for the scheme during the Assembly”. The same report said that after the resolution was adopted: “Aliu (President of the ICAO Council) explained to journalists, “There have been a number of reservations made but that doesn’t stop the process moving forward. We have adopted the resolution, so the resolution is in effect.”.  In this context it is important to note that a resolution would not be “in effect” for the States which filed reservations to the Resolution to the extent of such reservations (unless reservations were filed against the entire resolution), and to that extent the Resolution would not be globally applicable and therefore be destitute of effect, if indeed it had any effect.

Leaving aside the fact that the Resolution is a consensual result of political compromises which has no legal effect,  some claim that the implementation process of the offsetting scheme appears to be an ambivalent  monitoring scheme revolving round  a   three year compliance cycle, starting with the first cycle from 2021 to 2023, for aircraft operators to reconcile their offsetting requirements under the scheme, while they report the required data to the authority designated by the aircraft operator’s State of registry every year.

By 2020 it would be 10 years since ICAO embarked on its work on a global market base measure (GMBM) and still it we are not even at the start of the voluntary pilot phase.  The Washington Post reports that by then the climatic tipping point would have started in in Manokwari, Indonesia; by 2023 in Kingston, in the Caribbean; by 2029 in Lagos; by 2047 in Washington; by 2066 in Reykjavik; and by 2071 in Anchorage, Alaska.  A Pacific Northwest National Laboratory (PNNL) study reports: “by 2020, human-caused warming will move the Earth’s climate system into a regime in terms of multi-decadal rates of change that are unprecedented for at least the past 1,000 years.  All scientific indications are that climate change would bring significant adverse effects on the world in 2020 onwards and that the rate of climate change, which has risen sharply in recent decades, will soar by the 2020s.

In fairness to ICAO, it must be stated that ICAO’s efforts in this regard have been tenacious and relentless, despite the polarization between blocs of States in the Council of ICAO which have demonstrated consistently their differing policies that are calculated to thwart the development of a GMBM.

However, the fact remains that we have to wait for ICAO’s development of Standards and recommended practices. This in itself is a long drawn process and are also discretionary in terms of adherence by States.   So, it ain’t over until the fat lady sings.

Dr Abeyratne is a former senior official of the International Civil Aviation Organization and is currently Senior Associate, Air Law and Policy at Aviation Strategies International.  He has published numerous books on aviation and the environment including Aviation and the Carbon Trade (Nova:2011).

Author: Sri Lanka Guardian

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