Envoys Spar Over Aviation Carbon Market Compromise Deal

Aviation negotiators have begun final talks in Montreal over the creation of a carbon market for the world airline industry.

More than 190 countries in the International Civil Aviation Organization are discussing a revised proposal by the assembly’s President Michel Wachenheim that would limit the European Union emissions trading system prior to the global deal and exempt countries with a low share in international civil aviation. The triennial meeting ends Oct. 4.

At stake is international commitment to agree on the details of a market-based emissions-reduction tool for the $708 billion industry in 2016 and start the program in 2020. An agreement would be unprecedented for any global industry. Airlines emit 2 percent of greenhouse gases worldwide.

The issue of a global program for airlines moved to the top of the ICAO agenda this year after the European carbon market expanded to cover airlines. Russia, the U.S. and Brazil opposed the EU’s plan to include in the market emissions from the full length of all flights to and from its airports, including flights to and from destinations outside the EU.

Under the draft compromise, the EU will be required to narrow the scope of the program until 2020. The deal would allow the 28-nation bloc to impose carbon curbs on flights only in the EU airspace.

EU Support

The EU will be able to accept the compromise if each element of the proposal is kept and the package receives a strong majority support, said Lithuania, which holds the rotating presidency of the bloc.

“Most other nations are likely to also prefer such a compromise because it would reduce the current tension among parties, without tangible commitments in the next few years,” Itamar Orlandi, an analyst at Bloomberg New Energy Finance in London, wrote in an e-mail today.

The draft deal proposes route-based exemptions to and from states whose share in international civil aviation is below 4.7 billion revenue ton kilometers in 2014, with the threshold to be reduced each year. The African states originally wanted developing countries with less than 1 percent share in international civil aviation to be excluded from carbon markets. The U.S. objected to the reference in the original proposal to “developing states.”

The U.S. supports many aspects of the compromise, according to Todd Stern, the State Department’s lead envoy on climate. Provisions that are not perfect include the threshold for exemptions from market-based mechanisms and details on what measures should be subject to mutual agreement, he told the ICAO assembly’s executive committee today.

Russia, China

Countries including Russia, India, Brazil and China oppose the new draft, saying it would validate a unilateral move by the EU to impose carbon curbs on airlines worldwide. They say any new market-based mechanism or implementation of an existing program should be subject to consultation and negotiation.

They also want references to 2016 and 2020 dropped in exchange for promises to develop a market-based mechanism “after its feasibility and practicability are determined.”

To contact the reporters on this story: Ewa Krukowska in Montreal at ekrukowska@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net;

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