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Page added on September 24, 2016
Governments poised to agree historic CO2 emissions market system for aviation
The United Nations International Civil Aviation Organization is poised to take a ground-breaking decision on a global market-based measure to control aviation’s greenhouse gas emissions in a matter of days.
If signed off at ICAO’s general assembly meeting in Montreal running September 27 to October 7, this will be the first time any sector has agreed a global market-based system for controlling emissions.
How significant is this deal, and what does it mean for commodity markets? What will the impact be in the carbon and jet fuel markets?
The short answer is: in the short-term, there won’t be much impact. In the long run however, expect to see airlines buying up carbon credits and increasingly switching to sustainable fuels as they seek to manage their carbon exposure.
Aviation has for a long time enjoyed a special status and been relatively free of environmental regulation at the national level. That’s partly because aviation is a truly international sector and needs a regulatory approach that is also global. Matters including environmental impact, noise and many other aspects of the industry are coordinated at global level to avert the risk of a patchwork of different regulatory frameworks that would distort healthy competition between regions. Aviation is a strategic wealth enabler, boosting economies as well as bringing other social benefits.
But the aviation sector is growing at 4% to 5% per year, making it a rising contributor to the build-up of atmospheric greenhouse gases. The challenge for policymakers lies in finding ways to work with this important sector to promote growth while cleaning up its environmental footprint. Other sectors are increasingly pulling their weight as part of global efforts to reduce GHG emissions. A dramatic and ongoing decarbonization of Europe’s electricity sector is a case in point.
Tackling aviation’s emissions has been a particularly thorny issue. The EU introduced legislation in 2006 to bring aviation within the scope of its legally binding EU Emissions Trading System from 2012, including from flights originating outside of Europe. This prompted accusations of jurisdictional over-reach by many of the bloc’s key trading partners, legal action against the EU legislation and a major diplomatic spat in 2011 that threatened to descend into a trade war.
Those against the EU’s actions argued that a solution should be global, not regional. The EU agreed, but said global action had not been forthcoming, prompting Europe to take a lead. Much of the recent momentum at ICAO has been attributed to pressure from the EU, whose legislation bringing aviation within the EU ETS was upheld by the European Court of Justice in 2011.
Amid an international backlash, the EU agreed to hold off on regulating inter-continental flights to allow ICAO to agree a deal this year.
In short, ICAO is about to take a decision that aims to deliver “carbon-neutral growth” in the aviation sector. To do this, ICAO will create a global carbon market for airlines, by requiring operators to buy carbon offset credits to match any growth in greenhouse gas emissions over and above their 2020 level, alongside other measures to curb emissions.
So why should this latest deal go ahead when previous attempts have been so difficult? Here are a few reasons:
- ICAO backs the use of markets: ICAO has already endorsed the market-based approach to reducing greenhouse gas emissions as early as 2004.
- Governments back it: The ICAO’s proposed system is backed by most governments, and few want to see another international clash on this issue.
- Industry supports it: Global airline industry groups including the International Air Transport Association back the global carbon offsetting system.
- It’s global and fair: Aviation groups say equal treatment of airlines and uniformity of regulations will preserve fair competition.
Some non-governmental groups warn that the proposed deal doesn’t go far enough and that it doesn’t do enough to ensure that aviation pays its fair share in the decarbonization effort. In particular, there are concerns over the quality of offset credits, which will be critical in delivering real and verifiable emissions reductions. Other observers say even an imperfect deal that covers a substantial percentage of global aviation emissions will be better than no deal, and agreement on the system will focus the industry on innovating toward lower carbon growth while preserving profitability.
Why do aviation emissions need to be reduced?
EU lawmakers note that CO2 emissions from international aviation are projected to be seven times higher in 2050 than 1990, threatening to eclipse emissions reductions achieved in other sectors such as power generation and other heavy industries. Those projections are at odds with global targets to reduce GHG emissions to limit global warming to well below 2 degrees Celsius from pre-industrial levels by 2100.
What’s the deal?
ICAO’s Global Market-Based Measure for aviation emissions (called CORSIA — the Carbon Offsetting and Reduction Scheme for International Aviation) will require the global aviation industry to benchmark its GHG emissions at 2020 levels and offset any additional emissions growth by buying carbon offset credits for each additional ton of CO2 equivalent emissions.
This means airlines will have to bear a cost for emitting carbon dioxide, providing an additional incentive to become more energy efficient. Airlines are already focused closely on fuel efficiency gains because jet fuel prices are one of their biggest input costs.
In time, the CORSIA system will act as disincentive to continued operation of the least efficient engines and most emissions-intensive fuels, while providing a relative advantage for those using high efficiency technology and cleaner fuels.
What’s likely to be agreed?
If agreed in Montreal, the global market-based mechanism for aviation emissions will consist of a broad regulatory framework including political buy-in from most of ICAO’s 191 member countries. ICAO released a text on September 2 setting out a draft framework for adoption.
Much work will still need to be done, including on the details surrounding the rules and regulations on matters such as the eligibility of offset credits, which has been delegated to the ICAO’s Committee on Aviation Environmental Protection.
Those rules may allow the use of carbon credits from existing market mechanisms such as the UN’s Clean Development Mechanism, which allows investors to earn carbon credits by investing in projects that cut GHG emissions in developing countries.
Those finer details are expected to be developed further ahead of the system coming into effect in 2020.
The CORSIA system is one part of a much wider strategy adopted by the airline industry to reduce its environmental impact, including efforts on aircraft technology development, operational improvements and sustainable biofuels.
Where do airlines stand now?
CO2 emissions from airlines operating intra-EU flights are already regulated by the EU Emissions Trading System. Those that operate intercontinental flights to or from European airports are exempt from the EU ETS under the so-called “stop-the-clock” measure.
However, in light of the ICAO general assembly outcome, the European Commission is expected to need to propose new legislation before the end of 2016 to further extend that exemption. Flights that are not included in the EU ETS will be expected to come under the terms of ICAO’s CORSIA scheme. CORSIA is expected to take effect for airlines operating in the richest countries first, from 2020, with other countries following later and with an exemption for poorer countries.
Source: ICAO/Stockholm Environment Institute
What’s the market impact?
This is where things get less clear. In theory, the CORSIA system will mean that airlines must buy an increasing volume of carbon credits as the industry’s emissions rise year on year above the 2020 level.
As mentioned earlier, the international aviation industry is growing at about 4% to 5% per year. But it is achieving fuel efficiency gains of about 1% to 2% per year. That translates into expected growth of about 3% per year to the sector’s GHG emissions, even as technological improvements continue.
That means demand for carbon credits from the aviation sector is likely to be small in the initial years, but could become significant over time as the industry continues to grow.
Source: ICAO/Stockholm Environment Institute
A study by the Stockholm Environment Institute released this year found that global aviation’s CO2 emissions stood at 490 million mt in 2013, about 1.5% of global CO2 emissions from fossil fuel combustion.
Aviation’s emissions are expected to grow to between 682 million mt and 755 million mt by 2020 and increase further to 1.223 billion mt and 1.376 billion mt by 2035, the study said. Total demand for carbon offset credits from aviation is forecast at 3.3 billion mt to 4.5 billion mt in the period 2020-2035, in aggregate.
Source: ICAO/Stockholm Environment Institute
The supply of offset credits with a high environmental integrity score is forecast at 3 billion mt – almost enough to cover demand at the low end of expectations, it said. Credits with a medium environmental integrity could supply a further 1.6 billion mt, while credits with neutral development impacts could provide a further 500 million mt, it said.
In addition, the supply of alternative jet fuels is subject to greater uncertainties but the authors believe 100 million mt to 300 million mt of CO2 could be avoided by using biofuels produced with little or no land use change impacts and backed up by strong sustainability certification schemes.
“The analysis shows that ICAO can apply high environmental and sustainable-development standards to both carbon offsets and alternative fuels without compromising its 2020 ‘carbon neutral’ goal,” ICAO said.
What does this all mean for carbon credits?
Much of the detail of ICAO’s CORSIA system has yet to be nailed down, making detailed impact analysis difficult at this stage. Further clarity is expected before the system goes live in 2020.
If the Stockholm Environment Institute’s analysis is correct, this suggests that the aviation industry can easily meet the requirements of the CORSIA scheme using high quality credits, with some additional use of medium quality credits.
Well-supplied markets tend to generate low prices, so a very crude analysis of the data suggests that the price of these aviation credits may be relatively low, as has been seen in other carbon markets to date.
Even in a strong growth scenario in which aviation emissions grew more rapidly than expected after 2020, this would simply incentivize investment in more emissions reduction projects to meet the additional demand.
As the supply and demand for these credits find a balancing point, the price of the offsets may end up being determined by the marginal cost of running an eligible emissions reduction project. That cost will depend on the type of projects ultimately allowed in. If different qualities of offsets are eligible, this would make no difference to their compliance value, hence no differentiation in their price (all credits being worth 1 mt of CO2), unless a consumer-driven demand emerged for higher quality offsets and airlines took this seriously as a reputational issue.
What this theoretical aviation carbon offset credit price turns out to be is anyone’s guess. But if the price is set by the marginal project cost, it’s unlikely to be more than a few dollars per mt, in a market with unconstrained supply. If ICAO regulators decide at a future date to cap the supply of these credits, then the price could go much higher, but that looks unlikely based on the framework being discussed by ICAO as of mid-September 2016.
20 Comments on "Governments poised to agree historic CO2 emissions market system for aviation"
Anonymous on Sat, 24th Sep 2016 4:13 pm
‘Carbon credits’ lol, wtf have those done lately?
A: Nothing. Im sure they may have netted some traders in Jew York and London some nice commissions trading worthless paper back and forth though.
But hey, lets hail an agreement to swap pieces of paper (‘carbon offsets lol), that actually do nothing to reduce pollution here in the real world, as ‘historic’. Maybe they meant historic hoax, I donno.
makati1 on Sat, 24th Sep 2016 5:55 pm
platts, another sales rag for the Market Casino. Another non-news article signifying nothing but bullshit. We have not hit Peak Bullshit and probably never will as new sources are found everyday.
rockman on Sat, 24th Sep 2016 7:30 pm
“…that aviation pays its fair share in the decarbonization effort.”
Decarbonization??? The article says “…a decision that aims to deliver “carbon-neutral growth” in the aviation sector.” IOW there’s no plan to reduce GHG production by the industry…just hold it constant. Constant at whatever level it is when the “law” goes into effect. So where is the “de” part of the decarbonization?
Apneaman on Sat, 24th Sep 2016 7:43 pm
Dead apes walking, dead apes walking.
Global Warming Will Accelerate as Oceans Reach Limits of Remediation
“But even if all the national pledges of the Paris climate summit were achieved, global temperatures would rise 2.2 to 3.4 degrees C. by 2100, and the likelihood of all those pledges actually being met are minuscule as there are no enforcement mechanisms. A list of major countries’ pledges reveal a failure to make adequate progress, with many pledges dependent on “cap and trade” scenarios that often amount to subsidies for polluters.”
http://www.counterpunch.org/2016/09/23/global-warming-will-accelerate-as-oceans-reach-limits-of-remediation/
Cloggie on Sun, 25th Sep 2016 9:32 am
The projects underway in NW-Europe indicate that by 2050 most electricity will be generated renewable.
Another big chunk in the overall energy budget is space heating. How to combat fossil fuel consumption in that area?
Answer: geothermal + seasonal storage of heat.
Examples from my own country, but similar projects are going on all over the developed world:
Geothermal: within 5 years the northern province of Groningen wants to connect a large number of buildings to 120 C geothermal heat source at a depth of 3000 m:
http://www.cobouw.nl/artikel/1122751-genoeg-warmte-met-120-graden-diepe-lagen
Seasonal heat storage: in the summer you can collect all the heat you want, but have no use for it, unless you could store it for the winter. For a single household you would need a water tank of 70 m3, far too big. However, if you use salt-hydrates, you can reduce (thermo-chemical) required storage space to 7 m3, far better attainable.
https://www.ecn.nl/nl/nieuws/newsletter-nl/archief-2009/maart-april-2009/seizoensopslag-van-warmte/
Cloggie on Sun, 25th Sep 2016 10:01 am
More on greatly reducing CO2 emissions and compact heat storage:
http://www.merits.eu/processflow
They now say that 4-8 m3 could be enough storage for a “low-energy household”.
Compact heat storage project in Warsaw (mostly English):
https://www.youtube.com/watch?v=Li3upR7-R4s
Annual figures for typical Dutch households:
1650 m3 natural gas
3400 kWh electricity
1 m3 gas = 8 kwh, in other words:
gas : electricity = 4 : 1
So it is wonderful to talk about all these fabulous wind-turbines and solar panels, but space heating is far more important.
The beauty is: solar panels and solar collectors can be combined into one hybrid collector:
https://www.buildinggreen.com/blog/cutting-edge-hybrid-solar-thermal-pv-collector-turkey
Assuming that solar panels have an efficiency of ca. 10-15%, you can conclude that the other 85-90% of solar irradiation can be stored in your compact storage and that the same amount of collector area used to generate your electricity, suffices to generate the required thermal Joules as well.
There is no long term energy problem and a renewable energy base is very well possible.
Sorry doomers.
Sissyfuss on Sun, 25th Sep 2016 11:13 am
A healthy environment and a robust economy brought to by Disney Studios. But
hey, Walt’s compost and we shall be adding to the pile immensely and soon. Trying to solve GHG emission quantities through financial machinations is like trying to cure your heroin addiction by only using clean needles. You’re not addressing the problem, you’re only maintaining your high. Until one day you find yourself in a drug house being gangbanged by 10 thugs because you didn’t pay your pusher. Bring lube.
Cloggie on Sun, 25th Sep 2016 11:27 am
Trying to solve GHG emission quantities through financial machinations
You’re not the brightest around, eh and likely yet another closet nihilist dressed up as a “rational doomer”?
I presented technical solutions to curb emissions, not financial machinations.
Apneaman on Sun, 25th Sep 2016 12:05 pm
Meaningless twaddle. It’s already too late for the humans and millions of other species. I have been following along with environmental destruction and the promises to slow & stop it for more than 30 years and everything has gotten worse. The Montreal Protocol is about the only international agreement I can recall of any consequence and that only involved a small handful of companies and there were alternatives. By every major metric, it appears that the humans are going as fast as they can to destroy the very biosphere they evolved in and thus NEED to survive. CO2, Ocean acidification, Deforestation, Soil depletion, Extinct species, Over fishing, etc and the (Red) Queen of them all, Overpopulation – all get worse every damn year, yet millions of retards like Clogged keep cheering and predicting a bright future in spite of nothing but abject failure – AKA, Going backwards. The worse things get, the louder the cheering and grander the claims. Back in reality, the humans have already crossed the Rubicon decades ago and are merely speeding things along, all the while bullshitting themselves they still have time. Time for what? The humans have as much of a chance of changing their growth obsession as a Great White shark has of going vegetarian. Inherent & unchangeable. All the fake greenwashing and fake agreements in the world will not change that. Nothing can change what we are.
Sissyfuss on Sun, 25th Sep 2016 12:36 pm
Gee Cogsucker, you thought it was all about you once again. Replying to you was the farthest thing from my paltry mind. The difference between us is you construct your narrow view of reality by looking backwards embracing BAU in any desperate form you can grasp while I perceive the gathering storm clouds approaching and reject the denial that infects you and your fellow narcissists.
In the future nihilism and realism will be indistinguishable much like you and a self-abusing bonobo.
Cloggie on Sun, 25th Sep 2016 1:00 pm
The difference between us is you construct your narrow view of reality by looking backwards embracing BAU in any desperate form you can grasp while I perceive the gathering storm clouds approaching and reject the denial that infects you and your fellow narcissists.
In the future nihilism and realism will be indistinguishable
Your post located directly after mine gave me that impression, but was incorrect.
Your reaction still gives me the impression that you are a nihilist, completely interested in any solution whatsoever, BAU-oriented or otherwise.
(I don’t believe in BAU either, but I do admit of being somewhat allergic against dyed in the wool collapseniks).
Apneaman on Sun, 25th Sep 2016 1:29 pm
CloggedTard, again you have NOTHING! Until the Keeling curve has a radical and multi year drop, you need to shut the fuck up. So far, all the alt energy in the world has resulted in ZERO drop in the keeling curve. In fact it climbs every year even as the alt energy buildout expands. Again, for the slow kids in the class – YOU’RE GOING BACKWARDS.
Lot’s of habitat destroying industrial activity in the name of “solving” the problems of too much habitat destroying industrial activity.
Golly gee, I just can’t figure out why it’s not working?
I don’t know, but let’s keep doing more of it ok? Yeah, let’s ramp it up even more – that’ll help.
BTW, my nose is bleeding, so in an attempt to remedy it, I think I’ll repeatedly smash my face against the wall until it stops. Gotta stop sometime right? – yeah when I bleed out. Good thinking humans, I’m glad to be on your team.
Anonymous on Sun, 25th Sep 2016 1:50 pm
As an interesting aside from the usual clog vs ap mudfest, the wake of the false flag in Jew York City back in 2001, the empire grounded all jets. Its puppets in Canada, and Mexico?, dutifully complied as well.
When that happened, scientists and researchers noted that air quality improved almost immediately, and dramatically over North America. No one had seen anything quite like it before. That false flag was about the best thing to happen for air-quality improvement efforts ever. Even if that was not the intended effect….
That little false-flag side-effect is almost never talked about. The reason is obvious because the message it sends is also impossible to ignore. Curtailment, or simply stop doing the things that are causing all the damage-works. This of course, is not what the PTB want to hear.
The only way to stop the massive air pollution jets cause, is to ground the jets. OR if you ultra stupid,(ie a welfare capitalist), you hire other morons to convince people you can sell each other pieces of paper in Jew York or London, that will magically reduce(sorry maintain at some unspecified current levels), air pollution from jets. Somehow it all works-trust us.
This, all in the face of clear evidence, that ‘market-based solutions’ to pollution are massive hoaxes and scams, dreamed up by the very same people causing (profiting) from all that pollution in the first place.
Apneaman on Sun, 25th Sep 2016 2:34 pm
Anonymous, what else did scientists and researchers note when all that particulate matter cleared? Temperature increase due to loss of global dimming. If there is ever a huge economic crash and a major decrease in industrial activity and transportation all hell will break loose within weeks. Estimates range from a 1C to 2.5C increase in temperatures. That would kill many crops. Sure the skies would clear and that would be good for everyones respiratory and brain health and especially the vulnerable, but it would start a die off pronto due to the spike in temps. TPTB would attempt an intervention, geo engineering (more global dimming) and most likely fuck things up even worse. It’s all just clock watching now since the planetary physics and chemistry are well on their way to creating a new world , unfriendly to humans, and nothing can stop that. Hey why not blame physics and chemistry on the Jews too? After all they have won more Nobel prizes in physics than any other tribe of talking monkeys. Survival of the fittest and all that.
makati1 on Sun, 25th Sep 2016 6:16 pm
WE are in a “Catch 22” environmental situation. Damned if we do. Damned if we don’t. It’s basically too late to really change anything in the time we have left as a species.
Of course there will be the usual techie ‘fixes’ suggested here and the usual denial that CC is even happening, but that changes nothing. Reality is a bitch.
Like the current stock market, human population has grown on easy energy/money and is doomed to fail. Humans are in for a huge die-off, be it natural (physics) or man made (nuclear). Only the timing is different, not the story’s ending. There does not appear to be any refuge this time.
Anonymous on Sun, 25th Sep 2016 6:42 pm
Hardly matters if pollution from jet aircraft is keeping the planet cool (a dubious proposition) or not. I should hardly have to remind you of all, that contrails are not a natural occurrence. Lack of contrails, is. In the absence of them, the planet would return to equilibrium in its own way, time. The idea the planet will overheat in the absence of all those super-helpful high altitude polluants, sounds more like pro-oil propaganda, than a serious scientific observation.
Put differently, Im certain the planet, and humanity, would do just fine in a contrail-free atmosphere, just like we did for 10’s of thousands of years previous to the appearance of $99 flights to disney world.
Sissyfuss on Sun, 25th Sep 2016 6:45 pm
Beat me to it, Apneo. The planet is now a yellow-eyed alcoholic. Keep drinking and it will kill you, try to quit and the shock to your system will kill you. Things grow curiouser and curiouser.
makati1 on Sun, 25th Sep 2016 6:54 pm
Anan, I have read about contrails also, and doubt their accusations. I remember contrails for at least the last 60+ years that I was old enough to look up and see them. That something may be added now is possible, but contrails themselves are not some new plot to kill humans. If they are, then has been going on for a very, very long time. Before the world population was a problem.
Apneaman on Sun, 25th Sep 2016 7:28 pm
Anonymous, did you research global dimming? No you didn’t, because you don’t want to fucking know. Learning the scientific validity would throw a wrench into your all human agency, all the time worldview gears. The idea that something could just happen on this planet and no humans conspired to make it happen is just not allowed for the conspiracy minded. A mouse could fart in Patagonia and you would probably find a way to blame it on Jew bankers or something. The humans are not in control and all they can do is kill and ruin shit The humans have pushed the physics, chemistry and biologly of earth into uncharted territory (bad) and are going to pay the price. If there is any conspiracy, it’s an unspoken one not to alarm the sheeple as to just how bad it is. Don’t really need to conspire when 99% of the population is permanently intoxicated with their consumer goodies and celebrity gawking. Most go out of their way NOT to know. It’s a fake, made up world and most sheeple like it that way as long as the consumer dopamine hits keep coming they do not care who is in control or how they got their power or who gets fucked over as long as it ain’t them. Humans.
makati1 on Sun, 25th Sep 2016 7:55 pm
The only difference in contrails is that there are more of them now than in the past, and may have a dimming effect that is similar to clouds.
https://www.flightradar24.com/10.76,164.89/3 (Takes a minute or so to load the planes.)
As to whether they are numerous enough to make a difference, that is the question. At any one time they are a minuscule percentage of ‘clouds’ in the sky. But we do like to fly as can be seen on the above web site. ALL sources of energy are part of the problem. Whether we fly 20,000 miles once a year, as I do, or we drive 20,000 miles per year, as I used to do. BOTH add to the problem.