Airline Pollution Deal Hinges on Complex World of Carbon Offsets

  • Deal calls for companies to compensate for emissions growth
  • Challange will be ensuring offsets have enviromental value

The United Nations aviation climate accord hinges on a creating a system requiring companies to spend billions of dollars to protect forests, build solar farms and more. The trick will be ensuring those projects are legitimate.

The agreement finalized Thursday in Montreal calls for airlines to compensate for their emissions growth beyond 2020 by buying credits to back eco-friendly initiatives. The idea is that as airlines add new routes, they’ll help finance projects to counteract the additional pollution. Think of it as planting trees to absorb every new ounce of carbon dioxide.

Yet what types of credits, or carbon offsets, will be eligible and how the UN will verify their ecological integrity remains unresolved. The quality of these offsets varies. Last year, the research group Stockholm Environment Institute said about 75 percent of offsets offered through the UN’s second-biggest program had dubious environmental value, including claims that some Russian factories were boosting emissions solely to sell offsets generated by later cutting them. Ultimately, the Montreal accord’s success depends on ensuring offsets bought by airlines are authentic.

“We have to be cautious,” said Paul Steele, senior vice president of the International Air Transport Association, a trade association representing 265 airlines. “There are a lot of credits out there that are not particularly robust.”

In theory, carbon offsets are a zero sum tool for the atmosphere. If a company increases its emissions by 100 tons of carbon dioxide, it can buy offsets to preserve an endangered forest, saving enough trees to suck up 100 tons of carbon. The environmental damage is, theoretically, negated.

Carbon offsets are sold by companies. They’re backed by a wide variety of programs, ranging from massive solar farms that reduce the need for coal-fired power plants to projects in Chinese villages to fuel cook stoves with methane derived from animal dung. 

Rules Needed

Environmentalists say it’s possible to create a successful program for the airline industry. The key, they say, is establishing strict protocols to verify that projects are legitimately lowering emissions and not also being used to satisfy national targets under the Paris agreement or any other accord.

“If we can get the rules right, we can build something that’s durable,” said Annie Petsonk, international counsel for the Environmental Defense Fund. “The industry wants predictable rules here.”

In addition to ensuring offsets are legitimate, airlines say they need them to be plentiful. The UN’s International Civil Aviation Organization estimates the accord will cost companies between $5.3 billion and $23.9 billion annually by 2035. That will require a huge supply of offsets.

“We want and need broad access to carbon markets,” said Nancy Young, vice president of environmental affairs for Airlines for America, a trade group representing American Airlines Group Inc., JetBlue Airways Corp. and other carriers.

Supply Issue

Supply shortages are not currently a problem. The UN created two emissions offset programs in 1997 through the Kyoto Protocol. The price of the credits has languished for four years at levels about 98 percent below their highest in 2008. There’s a glut of offsets up for sale, and some of them are of questionable ecological value, environmental groups say.

Renat Heuberger, who runs Zurich-based South Pole Group, a clean-energy project investor, said most offsets that will be sold are credible. That’s thanks to reforms enacted over the last two decades and new measures that are due to be established under the Paris climate deal. 

“The offset industry has gone the extra mile and these loopholes have really been closed,” he said.

The ICAO established a committee of environmentalists, aviation industry representatives and others, which who has been working for three years to devise criteria for the offset program. They expect to finish by the end 2018. Brad Schallert, who represents the World Wildlife Fund on the committee, said the airline climate deal will only be as strong as the offsets.

“If you don’t have high-quality emission units there is no certainty that those emissions reductions actually happened,’’ Schallert said. “They need to be real.”

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