Grading the Airlines’ Climate Agreement: Historic Steps, Missed Opportunities

In a historic climate agreement last Thursday, countries and airlines gathered at the triennial assembly of the International Civil Aviation Organization (ICAO) in Montreal committed to “carbon neutral growth” in international flights between more than 60 countries after 2021. This means that after airlines flying those international routes cut greenhouse gas emissions within their operations, they would need to offset any residual increase in their emissions by purchasing credits for emission reductions made in other sectors. By 2027 the agreement will extend to international flights between all countries.

As I described in a previous blog post, the ICAO agreement is one of the most consequential events of 2016 for the climate. In the same momentous week, the UNFCCC announced that 2015 Paris climate agreement will enter into force in November, and Canada’s federal government announced a carbon pricing plan; this week governments are meeting in Kigali to amend the Montreal Protocol to phase out hydrofluorocarbons (HFCs).

The ICAO agreement is a mixed bag—it makes some historic steps and defers some important decisions to later, but is also a missed opportunity when it comes to carbon pricing. In my previous post I set out five measures on which I’d judge the ICAO climate agreement. Here’s how I grade the recent agreement on those measures:

Commit to a strong collective target.

Grade: C

The ICAO agreement restates an aspirational goal of “keeping the global net CO₂ emissions from international aviation from 2020 at the same level.” Much like the Paris agreement in December, whether you think the ICAO agreement is a glass half-empty or half-full depends on what you think was the alternative. If you think the alternative was massive and immediate emission reductions in one of the most expensive sectors, then holding net emissions steady by purchasing offsets from other sectors looks like a cop-out. On the other hand, compared to the status quo, carbon-neutral growth is a big step forward, even if not quite “the dawn of climate friendly air travel.”

I tend to view half a loaf as better than none. And as with the Paris agreement, an international architecture is now in place that can be reviewed and strengthened over time. Still, I deduct heavy marks for stripping out language matching the Paris agreement on holding global temperature rise to below 2 or 1.5 degrees Celsius. This may reflect that airlines were probably motivated less by a direct concern about climate change as they were by a desire to preemptively avoid a patchwork of country-by-country regulations on emissions.

Maximize participation.

Grade: B-

As of last week, 65 countries, including big emitters China, US, and Europe, had announced that international flights between their airports will be subject to the agreement’s initial voluntary phase from 2021-2027. Other big countries, including India and Russia, have opted out (see a recent blog post by my colleague Kartikeya Singh on evolution of climate commitments by India). Participating countries represent around 80 percent of the expected growth in emissions from international aviation, according to estimates by the Air Transport Action Group  and the Environmental Defense Fund), which is good enough for a grade of B-. The agreement leaves room for additional countries to join later, and distressingly, room for countries that are currently in to back out.

Trade carbon.

Grade: D

I’d hoped to see ICAO develop for the aviation sector the world’s first truly global cap-and-trade program. An international carbon market for aviation would have been the most cost-efficient way for airlines to meet their collective climate goal—without carbon trading some airlines will inevitably cut emissions by too little while others will do so too expensively. An international carbon market for aviation would have given participating airlines two monetary incentives to cut emissions within their own operations:  first, any emissions they could reduce cheaply would let them sell excess emission rights to other airlines; and second, cutting emissions would mean they’d need to buy fewer offsets.

But ICAO’s “market-based measure” doesn’t provide the first incentive (there’s no mechanism for one airline to sell emission reductions to another), and the second incentive is heavily diluted (big changes in emissions on the part of an airline are rewarded with only small changes in the amount of offsets it needs to buy). Without getting too technical, that’s because the amount of offsets an airline needs to buy is scaled to its total level of emissions rather than to changes it makes to that level of emissions. After 2030, the incentive slowly gets stronger as an airline’s individual performance begins to play a larger role in its offset requirement.  This missed opportunity to enact strong, early price incentives for low-carbon innovation warrants a D grade. As one redeeming factor, airlines do have the incentive to support industry-wide improvements. (Indeed, the agreement requests the ICAO Council to “make further progress on aircraft technologies, operational improvements and sustainable alternative fuels.”)

Look to the forests.

Grade: A (incomplete)

For all its shortcomings, the ICAO agreement will produce a massive new source of paying demand for emission reductions; Environmental Defense Fund’s Annie Petsonk sees international aviation needing to cut emissions by nearly 2.5 billion tons of carbon dioxide between 2020 and 2035. Airlines will be looking for emission reductions that are large, cheap, and with a good story attached—tropical forests can provide all that. As Frances Seymour and I explain in our forthcoming book Why Forests? Why Now? The Science, Economics, and Politics of Tropical Forests and Climate Change, keeping tropical forests standing offers large volumes of emission reductions, is comparatively cost-effective, and has many side benefits for clean water, health, and agriculture. A framework for reducing emissions from deforestation (REDD+) was agreed to by the UNFCCC in Paris, but it sorely lacks the funding that airlines’ offset purchases can provide.  

While ICAO’s has delegated the process for determining eligible credits to its “Committee on Aviation Environmental Protection,” nothing in last week’s agreement rules out airlines eventually meeting their target by purchasing REDD+ credits. Meanwhile, the ICAO webpage mentions reducing emissions from deforestation (REDD+) as a possibility, and a tweet by ClimateWire’s Camille von Kaenel suggests that ICAO council president Olumuyiwa Benard Aliu is “taking the idea of REDD+ credits for aviation seriously, but working out criteria for emissions units first.”

Use the latest model: REDD+. 

Grade: B+ (incomplete)

With so many tons of carbon potentially about to change hands, who decides whether emission reduction credits meet high standards of environmental and social integrity? ICAO agreed to vest this power in the UNFCCC (“emissions units generated from mechanisms established under the UNFCCC and the Paris Agreement are eligible for use in CORSIA, provided that they align with decisions by the Council, with the technical contribution of CAEP, on eligible vintage and timeframe”). This is good—the UNFCCC has the global high ground on legitimacy when it comes to setting climate standards. Such a decision implies a path for REDD+ credits through the Green Climate Fund or the Paris Agreement’s to-be-determined “Sustainable Development Mechanism,” with specific details about eligible credits delegated to the aforementioned committee. The agreement narrowly misses an A grade because it doesn’t state that only the UNFCCC can decide offset standards; this uncertainty leaves the door open to the use of offsets certified, for example, by California or the multilateral Carbon Fund, but doesn’t yet close the door on less legitimate privately operated standards bodies.

Back to school

So what’s next? Lots of homework all around:

• ICAO members should reconsider ways to augment incentives for low-carbon innovation by individual airlines, by tying offset requirements more closely to changes in the amount of emissions airlines produce, or by developing a true emission trading mechanism between airlines.
• Airlines should cut emissions in their operations, (e.g., through fuel efficiency, newer-model planes, and more passengers per flight), even though the monetary incentives to do so are weaker than would have been provided by inter-airline carbon trading or offset requirements more closely tied to changes in emissions
• The ICAO Council should push ahead with developing industry-wide improvements
• Countries whose airlines have not already joined the 2021-2027 voluntary phase should do so
• ICAO’s Committee on Aviation Environmental Protection should set the stage for eligibility for UNFCCC REDD+ credits
• Parties to the UNFCCC should move REDD+ forward from an agreed framework to saleable credits in order to meet a big new source of demand