UN Assesses Existing Carbon Markets to Help Meet Airline Demand

  • Variety of sources are available to meet criteria, ICAO says
  • UN body seeks to decide carbon-market rules in October

A United Nations aviation panel is assessing whether existing carbon trading programs can be used in a proposed emissions market for airlines as it lays out its supply criteria for the first time.

The environment committee of the UN’s International Civil Aviation Organization in Montreal is gauging the “potential needs” of an aviation carbon market for after 2020, it said by e-mail. The Committee on Aviation Environmental Protection wants aircraft operators to be able to buy credits from existing carbon offset programs as well as “allowances from emissions-trading schemes” to meet the industry’s pollution limit.

ICAO agreed in 2013 to create its own global market after the European Union suspended expanding its carbon market to cover international flights, a move that triggered protests from China and Saudi Arabia to Brazil. ICAO estimates the market will need credits and allowances covering 142 million to 174 million metric tons of emissions in 2025, which is similar to Vietnam’s carbon emissions from energy use in 2014.

“A variety of sources exist to acquire emissions units to compensate this gap,” the organization said by e-mail. “No decisions have been made regarding the eligibility of individual programs to be accepted under the global market-based measure.”

With passenger numbers forecast to double by 2034, the airline industry is set to provide new demand for carbon contracts as existing UN offset markets and Europe’s emissions-trading system languish because of oversupply. 

The EU’s carbon market, the world’s biggest, allocates emission permits to power plants, factories and airlines, which must surrender them to cover discharges within the bloc. The UN’s Clean Development Mechanism allows polluters to offset domestic emissions with credits earned from investing in carbon-cutting projects elsewhere.

A market such as CDM could probably meet aviation’s demand for about 3.2 billion tons of emissions in the 15 years through 2035 at a cost of about $50 billion, according to the Oeko Institute for Applied Ecology, a research group in Freiburg, Germany. That’s the equivalent of about two years’ demand in the EU program. 

Nations in ICAO are seeking to decide rules of its new program at a meeting set for Sept. 27 to Oct. 7 in Montreal.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE