ANALYSIS
1. October 2013 - 0:00

Thinking ahead

The IATA resolution on carbon-neutral growth is a clear sign of the industry’s commitment to the environment

Addressing carbon emissions growth is a long-term challenge that extends beyond the planning horizon of most governments and businesses. The next election is never far away, the next quarter results are even closer.

This is vividly illustrated by the difficulty in finding an agreed way forward at the various high-level environmental meetings, such as the Conference of the Parties (COP) events. The national interests involved are substantial. And it is difficult for states to focus on long-term issues that cross borders when their domestic agendas are so demanding.

Seen in this context, the resolution at the IATA AGM that endorsed the Implementation of the Aviation Carbon-Neutral Growth 2020 Strategy is a ground-breaking initiative. Airlines also have a full agenda of day-to-day issues to manage. But the resolution demonstrates their commitment to managing emissions as a core element of long-term sustainability. And it lends a helping hand to the difficult decisions that governments must make.

In essence, the resolution sets out the principles of a mandatory carbon offsetting scheme—a global market-based measure (MBM)—and suggests ways in which it might be applied to individual carriers. It opens the way for governments to join the initiative with the necessary regulations through ICAO. There is widespread support for global climate action among governments and the IATA resolution offers an opportunity to transform this support into a practical way forward for aviation.

“A global MBM is absolutely vital to the industry’s commitment to carbon-neutral growth post-2020 (CNG2020),” notes Andreas Hardeman, Assistant Director, Environment Policy, IATA. “It is a key element of the industry’s four-pillar climate change strategy.

“We must continue to see significant improvements in the other three pillars of operations, infrastructure and technology—with biofuels in particular offering huge scope for carbon reduction. But these will not get us to carbon-neutral growth from 2020. A global MBM will fill the gap and allow the industry to achieve its medium-term goals,” he adds. “IATA members have backed a mandatory carbon offsetting scheme as the best way forward. The AGM resolution is yet another example of the great cohesion and forward thinking within aviation when it comes to environmental management.”

Complex undertaking

A complex piece of analysis led to the final document and discussions delved deeply into all aspects of carbon emissions mitigation. Especially challenging was bridging the gap between fast growing airlines in emerging markets and established carriers in more mature markets. A flexible approach and mutual understanding ultimately provided the light at the end of the tunnel. The solution makes a significant contribution to government deliberations as they strive to reach an equally difficult consensus.

The AGM resolution moves beyond previous industry agreements on the environment.  Three sequential goals adopted in 2009 provide the framework for industry efforts:

  • Improving fuel efficiency by 1.5% annually to 2020
  • Capping net emissions with CNG2020
  • Cutting net emissions in half by 2050 compared with 2005

The four-pillar strategy provides the means of achieving these goals. “But the AGM resolution really cuts to the chase and breaks down the responsibility from the collective to the level of individual airlines,” Hardeman informs. “It suggests a way for the industry commitment to offset its growth post-2020 to be equitable and distributed fairly among carriers.” The resolution defines the collective industry emissions baseline for CNG2020 as the average annual total emissions over the period 2018–2020. Individual operator baselines are defined as and fixed at each operator’s average annual total emissions over the same period.

The resolution also states that “individual carrier responsibilities should be fairly determined using an equitable balance between an ‘emissions share’ element (reflecting the individual carrier’s share of total industry emissions) and a post-2020 growth element (reflecting the individual carrier’s growth above baseline emissions after 2020).” There are also provisions for new entrants, different levels of growth, and those early movers that achieve significant reductions prior to 2020. The established principles of MBMs are included in the resolution too, namely that the MBM must be simple to implement, cost-effective, and should avoid double counting to ensure a level playing field. These principles, and the finer details, all point to carbon offsetting as a favoured solution

A global MBM is absolutely vital to the industry’s commitment to carbon-neutral growth post-2020 (CNG2020). It is a key element  of the industry’s four-pillar climate change strategy

Technical arguments

The industry is moving beyond the thought leadership of the AGM resolution to the technical details. For example, there is a vigorous discussion on the monitoring, reporting, and verification (MRV) of aviation emissions under a global MBM. These would be important elements of any mandatory carbon offsetting scheme and will necessitate further detailed discussions with governments.

An obvious question is what types of offset should be eligible? Hardeman suggests ICAO states look at existing United Nations Framework Convention on Climate Change (UNFCCC) criteria for a way forward. As to the types of measures operators should use to mitigate their emissions, it is likely that these will boil down to the decisions of individual airlines. “How they offset their growth will be up to them,” says Hardeman. “It may be that new aircraft alone will be able to offset the anticipated growth in emissions through superior operating performance, for example.” 

Airlines will also have to decide how or if they should pass on the compliance cost to their customers. It could be that an airline will break out a carbon offsetting fee to be transparent to passengers or it may decide to absorb it and simply pay the price.

Options on the table

It should be noted that two other options for a global MBM are under discussion. One is an offsetting scheme combined with extra revenue. In addition to the offsetting cost there is a further charge associated with the amount of credits being bought. It is suggested the extra revenue would then be used as a cash pot to support further environmental mitigation projects.

The other option is a global emission trading scheme, much like the European model. This would need to address sovereignty issues and also prescribe how to spend any money generated. The issue of raising revenue is so fraught with difficulties, however, that a simple carbon offsetting scheme becomes by far the more elegant solution. “Developing an MBM must not become an excuse for revenue generation by cash-strapped governments, or for avoiding incentivizing investments in new technologies and sustainable low-carbon alternative fuels,” says IATA’s Director General and CEO, Tony Tyler. “An MBM should be designed to deliver real emissions reductions.”

The IATA AGM resolution is a first step toward that end. Sustainability is aviation’s license to grow and that means working with governments through ICAO to ensure carbon-neutral growth from 2020.

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