Despite doubts that it would be able to do so, at its 36th General Assembly in September 2016 the International Civil Aviation Organisation (“ICAO”) succeeded in reaching agreement on a global market based measure (“MBM”) to control future carbon dioxide emissions from aviation.

Aviation and carbon emissions

With over 100,000 flights every day and more than US$211 billion in fuel payments, the aviation industry emits 705 million tonnes of carbon dioxide (CO2 ) annually, contributing 2% to global human emissions of around 36 billion tonnes. Nearly 80% of the aviation industry emissions come from flights which are over 1,500 kilometres in length and for which there is no alternative means of transport.

In total, 3.4% of global GDP is supported by the aviation industry, and if aviation was a country it would have the 21st largest GDP in the world, and would rank 7th, between Germany and South Korea, in terms of the highest emitters of CO2 in the world. According to an analysis by the ICAO Committee on Aviation Environment Protection (“CAEP”), the average annual growth in aviation traffic will range from 4.2% to 5.2%. This means that the fuel consumption growth rate will be between 2.8 to 3.9 times higher in 2040 than it was in 2010. ICAO data already show that CO2 emissions from aviation have grown from 185 million tonnes in 1990 to approximately 705 million tonnes in 2012. This figure will continue to rise exponentially unless strict measures are put in place to control and regulate emissions from aviation.

Brief history of measures to control aviation emissions

Article 2(2) of the Kyoto Protocol to the United Nations Framework Convention on Climate Change (“UNFCCC”) charged ICAO with the responsibility for the reduction of emissions from aviation. This was the cue for ICAO to develop globally applicable measures to tackle climate change.

The ICAO took the first step in 1983, when the Council created the Committee on Aviation Environment Protection (“CAEP”) to explore ways to reduce aviation emissions. 

After being criticised for failing to develop a global emissions trading scheme (“ETS”) to cut aviation emissions, ICAO formulated the Group on International Aviation and Climate Change (“GIACC”).

The major part of ICAO’s work towards creating an MBM was set out in the General Assembly Resolution A37-19 in 2010, which put forward a comprehensive structure for a proposed MBM for aviation, and encouraged the Council to conduct a feasibility study on the available MBM options, and to explore the possibility of the application of the Clean Development Mechanisms (“CDM”) of the Kyoto Protocol to international aviation.

The International Air Transport Association (“lATA”) and the Air Transport Action Group (“ATAG”), which together comprise the majority of the world’s airlines and many key supply chain companies such as airframe and engine manufacturers have also played an important. IATA has a four pillar strategy for addressing climate change by means of a) improved technology; b) effective operations; c) efficient infrastructure, and d) positive economic measures. Furthermore, IATA and ATAG have introduced three very ambitious targets, for which IATA passed a resolution in June 2013:

  • to put a cap on aviation CO2 emissions from 2020 (“CNG2020”);
  • to have on average improvement in fuel efficiency of 1.5% per year from 2009 to 2020;
  • to reduce CO2 emissions by 2050 to 50% of the 2005 level. These targets are very costly. For example, to meet the goal of 1.5% fuel efficiency annually until 2020, airlines would be required to spend around 1.3 trillion US dollars to purchase around 15,000 new aircraft.

Due to lCAO’s slow progress in establishing global measures, regional organisations such as the EU have laid down their own measures to deal with emissions from aviation, which have played an important part in the development of a global MBM

An MBM serves as a financial incentive for the aviation industry to strive towards carbon emissions reductions, by putting a price on carbon and hence making it economically burdensome for the industry to emit an excess of CO2 over a specified limit. More than being simply an incentive, an MBM also allows the industry to collectively reduce its carbon foot print through mutual cooperation within the industry and possibly even with other sectors.

Both lCAO and CAEP have concluded that the implementation of new aircraft technology, operational improvements and the move towards bio fuels will not by themselves be enough to turn aviation into a sustainable industry. The former Director General of lATA, Giovanni Bisignani said that “a global industry (requires) a global solution”. Thus, it became incumbent on lCAO to develop a global MBM.

ICAO considered many options, and at its 2013 Assembly narrowed down its consideration to three different schemes – global emissions trading; global mandatory offsetting; and global mandatory offsetting with revenue.

The emphasis on the need to tackle the growing issue of climate change was amplified by the 2015 United Nations Climate Change Conference (“COP21”) held in Paris which resulted in the Paris Agreement, although the Conference and the Agreement completely ignored the aviation industry, and again left the responsibility of reducing aviation emissions to ICAO.

The 2016 ICAO General Assembly

Despite there being some scepticism as to whether or not ICAO Member States would be able to reach an agreement, it was expected that the Assembly would introduce a global mandatory carbon offsetting system as its chosen MBM to take effect by 2020, to go along with lATA’s CNG2020 approach, setting the industry’s emissions in 2020 as the baseline above which all emissions would need to be offset through emission credits.

On 6 October 2016 this was indeed what happened, with one major exception. ICAO agreed upon the Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”) which aims to make all aviation growth after 2020 carbon neutral, with a pilot phase from 2021 to 2026 based on voluntary participation and then a second phase with mandatory participation from 2027 to 2035 for all States with a revenue tonne-kilometre (“RTK”) of over 0.5% in 2018.

The Assembly also agreed to adopt new standards for aircraft designs, requiring a minimum level of jet engine fuel efficiency, to take effect in 2020.

The agreement on a global MBM was an important achievement for the aviation industry and in the fight against climate change in general. It is the first time that the international community has agreed to impose restrictions upon the amount of CO2 emitted from international civil aviation, and is seen as a major step towards limiting the damage to the environment caused by aviation.

Many commentators are, however, critical of this deal, in particular its voluntary nature until 2027 and the fact that major aviation powers such as Russia, Brazil and India have expressly stated that they will not sign up before 2027 at the earliest. Furthermore, the very concept of an offsetting scheme is seen by some as not ambitious enough, as it essentially only seeks to compensate for CO2 emissions and not reduce them.

Conclusion

ICAO has said that 86.5% of international aviation activity will voluntarily take part in its new offsetting MBM. It is expected that such participation will only marginally affect the international aviation industry’s growth and costs. ICAO projects that in 2036 the additional cost per seat of an MBM on a flight of 10,000-12,000 kilometres would be approximately US$10 and only US$1.50 on flights between 900 and 1,900 kilometres.

Prior to the 2016 Assembly, ICAO was under immense pressure to reach an agreement and there was still considerable difference of opinion as to which MBM option to go for. There was also the threat of the EU reinstating its ETS globally if ICAO failed to do enough. The fact that the ICAO Assembly responded to all this pressure and agreed upon a global MBM is promising, although the agreement may be seen as only the first step towards the development of a scheme to reduce emissions from aviation.

A global offsetting scheme requires an efficient system to determine the quality of offsets and a mechanism in place to prevent problems such as double-offsetting, as well as a well-developed monitoring, reporting and verification system. Many key decisions still need to be made with regards to the implementation. Questions of how it will be implemented, how it will be enforced and how it will be regularly updated are all very important and need answers. 

Another important question is the future of the EU ETS, given that the Commission’s “Stop the Clock” decision (limiting the application of the EU ETS scheme to intraEU flights only) was due to expire at the end of 2016, after which the scheme was to apply to all flights. There have been suggestions that the EU is not satisfied with the scheme agreed by ICAO, and hence that it might re-apply the EU scheme to all flights. However at the present time the “Stop the Clock” decision has been informally extended, and it seems that the Commission will in the near future propose a formal extension until 2020.

We are grateful to Hamza Hameed (Leiden University LLM graduate), who recently spent some time with the firm as an intern, for assistance in preparing this article.