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Grounded in Montreal, if not Reality

Regular readers will be aware of the carbon negotiations within the UN’s International Civil Aviation Organization, ICAO. In summary, the rest of the world is not excited at the idea of EU’s DG Climate requiring airlines landing or taking off in Europe to pay for their aircrafts’ GHG emissions, including those emitted outside European airspace.

If almost everyone howled in protest at the EU plan, some went further. The Chinese suggested, and we are told, implemented, a de facto ban on buying Airbus planes. The US Congress, as is its way, made it illegal for US airlines to comply (even though the airlines’ non-compliance means they are still liable for the allowance fees and fines in the EU, regardless of the US ban on buying allowances) and President Obama recently signed the legislation.

It looks like this month’s negotiations in Montreal may have averted the worst of the possible trade conflict scenarios, but ultimately created more questions than answers.  The Montreal negotiations were apparently resolved around suspension or withdrawal of the EU proposal in exchange for a commitment from ICAO to seek short term measures such as air traffic efficiency improvements to reduce emissions, and to consider a global market based mechanism (MBM) for aviation by 2020.

To begin with, it is unclear whether the EU Parliament will accept extending the suspension of implementation beyond the current April 2014 deadline.  And while global “Sectoral Agreements” such as the proposed 2020 Aviation MBM are a favorite idea in some parts of the climate community (theoretically they avoid the nasty competitive  / free rider issues of national actions), their legion of problems include who sets the goals, who enforces them, who pays, who gets the money, and what gets done with it. That said, at least aviation is better positioned than most, having a well established statutory global body to decide and in theory, to enforce rules on such matters.

However, we are frankly doubtful that a post 2020 global MBM is possible – or even desirable – for aviation. The cost of fuel provides an enormous incentive to reduce consumption already, there is no viable alternative to fossil based fuel, and the non-monetary short term measures adopted by ICAO will use most of the available tools to limit consumption further (and will impose significant costs).

Going further will require either a sea change in biofuel production and use, further technology breakthroughs, or a big change in consumer and business habits.   Who gets the money (“A new UN tax” has a nice political ring to it…) — and what it is used for — will be material for years of debate and rancor.  We also note that, at the insistence of India and China, the 2020 MBM will take into account the “environmental and economic impacts” of different options, “including feasibility and practicability.”

The airlines’ main trade body, IATA, seems to equate a “market based system” to buying offsets, rather than on reductions inside the sector itself . . . and we predict the path of least resistance here will be one more (offset-based) fee on tickets, which may or may not ultimately result in additional GHG reductions somewhere outside the aviation sector.  (Meanwhile, in another part of the forest (to coin a phrase), in the face of major problems over validity, additionality, and even fraud, DG Climate has been reducing the number of offsets usable in the EU emission trading system.)

If, as we expect, the wider UN negotiations – due to be completed by 2015 – remain deadlocked well beyond that date, sectoral approaches such as the Aviation MBM are an obvious alternative. In every sense there will be a lot riding on those aircraft.