Airlines avert trade war with carbon agreement

The international aviation industry has reached a landmark agreement on addressing climate change, averting a potentially damaging trade war.

Industry representatives at the 38th Assembly of the UN International Civil Aviation Organization (ICAO) agreed to develop a global market-based measure (MBM) that will enable the industry to achieve carbon-neutral growth from 2020. This global solution will effectively act as a replacement for the European Commission’s Emissions Trading Scheme (ETS), which caused considerable friction between the EU and several major states, including the US and China, when it was unilaterally enforced.

“Today was a great day for aviation, for the effort against climate change and for global standards and international cooperation,” said Tony Tyler, IATA’s director general & CEO.

“Industry, civil society and governments have worked hard to reach this point and keep aviation at the forefront of industries managing their climate change impact. Now we have a strong mandate and a short three-year time frame to sort out the details. Airlines need and want a global MBM. Without losing any of the momentum built up over these last two weeks, we are eager to get on with the detailed work needed to design the global scheme in time for finalisation at the 2016 Assembly.”

The ICAO agreement will now lead to the development of a detailed set of standards for the global MBM, including monitoring, reporting and verification of airline emissions and the type of scheme to be implemented.

This is likely to take the form of carbon credit trading and offsetting programmes, similar to the ETS. But the important difference is the fact that this will be a global programme, rather than one unilaterally imposed by a single country or region. The EU ETS caused concern as it charged airlines based on their emissions not only within EU airspace, but for the entire duration of the flight. This caused countries including the USA, China, Russia and India, to accuse Europe of imposing extra-territorial taxation, and infringing the countries’ sovereignty.

But despite the tensions caused by the ETS, IATA did move to thank the EU for bringing the issue to a head.

“We should also recognise the important role that the European Commission… played in raising the aviation emissions issue up the international agenda,” Tyler said. “Aviation would not be in the climate leadership position it is in today were it not for their early and persistent efforts which inspired both industry and other governments. As the EU Transport Commissioner, Siim Kallas, said, ‘The EU’s hard work has paid off.’ Aviation – through the stewardship of ICAO – has achieved the first-ever global deal to curb an industry’s emissions,” he added.

Had an agreement not been reached however, the EU could have resumed its ETS plans (which it only “paused” in late 2012), potentially leading to further tensions. During the peak of the ETS row, China’s banned its airlines from buying large Airbus jets in retaliation for the scheme, while the US passed legislation potentially banning its airlines from taking part. Fortunately however, a compromise has been reached and airlines can move forward without the fear of heavy taxation or political disruption.

Carbon-neutral growth from 2020 is one of IATA’s main environmental pledges, along with reducing net CO2 emissions by 50% by 2050, compared to 2005 levels. Aviation accounts for an estimated 2% of global manmade C02 emissions.