Designing a Market-Based Measure for International Aviation Emissions

FNI Climate Policy Perspectives 14, November 2014

The aviation sector's greenhouse gas emissions are increasing. By 2020, international aviation emissions are projected to be around 70% higher than in 2005 globally, even if the International Civil Aviation Organisation (ICAO) achieves its goal for fuel efficiency to improve by 2% per year until 2020.

ICAO is now working on defining a global market-based measure (MBM) to cut emissions, for adoption in 2016 and possible implementation from 2020. An MBM remains the only cost-effective option for airlines to make significant reductions to their emissions, until new technologies are taken up and biofuels become widely available.

In defining the scheme, ICAO should include different segments of the aviation sector to garner industry support for the scheme at every stage, including low-cost and dedicated freight/cargo operators.

The MBM needs to take into account the treatment of developing countries. Some of them will see major growth in international flights after 2020; others are dependent on aviation for economic growth, such as small island states reliant on tourism.

The global mechanism can combine a cap-and-trade scheme and offsetting, with differential treatment of flights between industrialised countries, advanced developing countries and LDCs/SIDS/ developing countries highly dependent on aviation.

Auctioning should be the primary mechanism for distribution in a possible cap-and-trade scheme - to ensure fairness, to provide a price signal and to create revenues for climate-related finance.

The global MBM should be flexible enough to accommodate schemes in regions or countries that are more ambitious environmentally. It should include the whole flight, and not be limited to airspace or to the high seas and polar regions.