Policy Update #27

Emissions from International Transport (AKA the Elephant in the Climate Change Policy Room)

Global aviation and maritime shipping combined produce about 5% of global carbon dioxide (CO2) emissions. This is a sizeable share of global emissions: if these sectors were a country, they would be the seventh largest emitter. Furthermore, both sectors are among the fastest growing sources of emissions at the global level. Their share is projected to rise between 10-32% by 2050. Business as usual in the shipping and aviation industry alone would make unreachable the long-term global goal adopted by Parties to the UNFCCC at their 21st session (COP 21), namely to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels,” let alone the 1.5°C target.

Given international transport's impact on global emissions, many advocates at the Paris Climate Change Conference encouraged a new focus on this matter. Effective decision making on this issue will need to take into account a key distinction in the way that these “bunker fuels” (the fuels used in shipping and aviation) are addressed. Domestic aviation and shipping are covered under national policies and emission inventories, and would therefore be addressed through the bottom-up, nationally determined contributions (NDC) process under the UNFCCC. However, this is not the case for emissions from international aviation and shipping activities, which make up a majority of emissions in each sector. While fuels used for other transport modes are taxed, there is no tax on global bunker fuels. They are the “elephant in the room.” So far, only the EU has subjected its domestic and intra-EU aviation emissions to a reduction target under the EU emissions trading scheme (ETS). International shipping greenhouse gas (GHG) emissions are not subject to any limitation or reduction target.

Due to the transboundary character of international aviation and shipping, international cooperation is necessary if the growth of the emissions of these two “elephants” in the climate change negotiating rooms is to be stemmed. Internationally-coordinated policies will have to be developed to curb these emissions, in order to ensure efficiency in these global markets while minimizing potential competitiveness impacts. Furthermore, the benefits of international action are expected to trickle down to the national level, as some have pointed out that approaches to reducing international emissions, such as through fuel-efficient technologies or new fuels, also are likely to lead to reduced domestic emissions.

What is the Institutional Framework to Address GHG Emissions from International Transport?

At its first session, in 1995, the COP requested the Subsidiary Body for Scientific and Technological Advice (SBSTA) and the Subsidiary Body for Implementation (SBI) to address the issue of allocation and control of emissions from international bunker fuels and to report on this work to COP 2. In response to this request, emissions from bunker fuels have been continuously addressed under the SBSTA. In 1997, the Kyoto Protocol (Paragraph 2.2) handed responsibility to limit and reduce international aviation and shipping emissions to the UN specialized agencies responsible for regulating these sectors, namely the International Civil Aviation Organization (ICAO) and the International Maritime Organization (IMO).

In 1998, the COP requested the Secretariat to invite representatives of ICAO and IMO to report on their work to the SBSTA at its next session and thereafter, ICAO and IMO continuously reported on their activities regarding GHG emissions from international aviation and maritime transport to the SBSTA. Typically, the Subsidiary Bodies do little more than note the information received from the Secretariats of ICAO and IMO on their relevant work and invite them to report at future sessions on the outcomes of their work on this issue.

ICAO is the specialized agency of the UN to promote the safe and orderly development of international civil aviation throughout the world. It sets standards and regulations necessary for aviation safety, security, efficiency and regularity, as well as for aviation environmental protection. Addressing climate change is a central element of the work of ICAO's Environment Branch.

IMO is the UN specialized agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships. The Marine Environment Protection Committee (MEPC) is IMO's senior technical body on marine pollution related matters. The IMO's Marine Environment Division is responsible for the limitation and reduction of GHG emissions from international shipping.

Both bodies have made efforts to adopt policies for reducing international emissions for which they are responsible, but progress has been slow.

What Progress Has Been Made So Far by ICAO and IMO?

Emissions from maritime transport: The regulations on energy-efficiency for ships were adopted by IMO in July 2011 and entered into force in January 2013. IMO is currently carrying on work on the development of guidelines to support the uniform implementation of the regulations. The Organization is also pursuing work on the development of a data collection system for fuel consumption of ships.

Furthermore, IMO is continuing its efforts with regard to technical cooperation and capacity building to ensure effective implementation and enforcement of the above-mentioned regulations worldwide, as well as activities to support the implementation of the resolution it adopted in 2013 on the Promotion of technical cooperation and transfer of technology relating to the improvement of energy efficiency of ships.

Emissions from international aviation: At the 37th ICAO Assembly in 2010, governments agreed to set two aspirational goals in the aviation sector, namely annually improving fuel efficiency by 2%, and maintaining CO2 emissions at 2020 levels in the post-2020 period (carbon neutral growth from 2020). This “carbon neutrality” in terms of net CO2 emissions is to be achieved principally by “offsetting” them elsewhere in the economy. Both goals were reaffirmed by the 38th ICAO Assembly in 2013. However, these commitments are not binding, and an analysis shows that even meeting the carbon-neutral growth target would be unlikely to achieve the reductions needed for a 2°C scenario.

Like IMO, ICAO carries out capacity building activities to support the enhancement of member States' capacities to develop and/or improve their Action Plans on Aviation CO2 Emissions Reduction Activities. ICAO is also promoting and facilitating the development and deployment of sustainable alternative fuels for aviation, including through information sharing on best practices among States and other stakeholders via the ICAO Global Framework for Aviation Alternative Fuels (GFAAF) website, and the promotion of global initiatives.

Furthermore, ICAO is working, through the Alternative Fuels Task Force (AFTF) under the ICAO Committee on Aviation Environmental Protection (CAEP), to develop a methodology for the assessment of full life-cycle CO2 emissions, assess the future production of alternative jet fuel, and apply the life-cycle methodology to evaluate the associated emissions reductions in the future.

In September 2014, ICAO held a 'Fuelling Aviation with Green Technology' Seminar, in Montréal, Canada, which addressed a range of subjects, including current and future green technologies to reduce aircraft emissions, technologies for green aircraft operations, eco airports, renewable energy, sustainable alternative fuels for aviation and financing and assistance. The event also sought to highlight innovative and novel technologies and energy sources for aviation that can be implemented to facilitate the aviation sector's move toward environmental sustainability.

Early February 2016, ICAO's Committee on Aviation Environmental Protection (CAEP) recommended an aircraft CO2 emissions standard, paving the way for its ultimate adoption by the UN agency's 36-State Governing Council. The new CO2 emissions standard would be applicable to new aircraft type designs as of 2020, as well as to new deliveries of current in-production aircraft types from 2023. The CAEP also recommended a cut-off date of 2028 for production of aircraft that do not comply with the standard. While this is a positive development, environmental observers argue that the proposed standard is too weak as it is already being complied with by the best performing aircrafts and does not cover aircraft that are already in use. Since most aircraft have a lifetime of 20-30 years, it will likely take decades before the current fleet would turn over under this scenario.

In 2010, the ICAO General Assembly passed a resolution to explore the guiding principles for the design and implementation of a global market-based mechanism (MBM). The formal decision was adopted in 2013 by the ICAO General Assembly, which decided to develop an MBM to “bridge the gap” between achievable in-sector reductions and the 2020 goal. The decision was, in part, in response to EU legislation that, since 2012, included emissions from all flights from, to and within the European Economic Area - the 28 EU member States, plus Iceland, Liechtenstein and Norway, in the EU Emissions Trading System (EU ETS). The EU legislation applies to both EU and non-EU airlines, and sparked protests from airlines, manufacturers, trade groups and aviation officials from non-EU countries. These protesters argued that the EU legislation was extraterritorial and therefore illegal under international law. In response to a backlash from the aviation sector, and to allow time for negotiations on a global MBM through ICAO applying to aviation emissions, the EU ETS requirements were suspended for flights in 2012 to and from non-European countries. For the period from 2013-2016, the EU legislation has also been amended so that only emissions from flights within the EEA fall under the EU ETS. The temporary EU ETS exemption puts additional pressure on ICAO and its members to establish an MBM in 2016, as the full EU ETS requirements will otherwise revert in 2017.

The 2013 meeting of the ICAO General Assembly also requested the Council to organize seminars and workshops on a global scheme for international aviation. The first round of Global Aviation Dialogues (GLADs) on MBMs, which was carried out in April 2015, involved two-day sessions in five regions, where participants heard updates on ICAO's development of a global MBM scheme and offered feedback. A second round of GLADs is scheduled to take place in March-April 2016.

Taxing Bunker Fuels: A Potential Source of Climate Finance?

Given the size and growth of carbon emissions of international maritime and aviation transport, as well as the fact that they are unregulated, some have said that taxes on the fuels in these sectors would address their contribution to global emissions as well as provide a source of revenue for other global climate change objectives. Others have pointed out that the idea of a tax on bunker fuels as part of the effort to secure funding for climate change mitigation and adaptation is nothing new. For example, Mexico tabled such a proposal at the June 2009 session of the UNFCCC negotiations. However, the issue was dropped and the Copenhagen Accord, which was taken note of by the COP in December 2009, makes no mention of bunker fuels. In the negotiations leading up to the 2015 Paris Agreement, various iterations of the draft negotiating text included a provision encouraging ICAO and IMO to “develop a levy scheme to provide financial support for the Adaptation Fund.” However, several months before the Paris Climate Change Conference, this language was dropped from the draft and the final Paris Agreement does not consider this potential source of climate finance.

Despite the lack of agreement on this matter in the lead up to and during the Paris Conference, the idea of taxing bunker fuels is still under consideration in a number of circles. In January 2016, experts from the International Monetary Fund (IMF) examined the role that fiscal policies can play in assisting countries to implement the Paris Agreement, calling for correctly pricing energy and using taxation to account for externalities such as carbon emissions. These experts also recommend taxing international aviation and maritime fuels. Those watching this issue are now focused on the deliberations within the IMO and ICAO. Both of these bodies have scheduled discussions on the emissions under their mandate in the first half of 2016.

What's on the Horizon?

The need to address the growth in emissions from international transport was mentioned in various iterations of the draft text for the Paris Agreement. At one point, draft text would have had Parties to the UNFCCC agree on “the need for global sectoral emission reduction targets for international aviation and maritime transport and on the need for all Parties to work through” ICAO and IMO to develop global policy frameworks to achieve these targets. However, in the second week of the Paris Climate Change Conference, this provision was dropped from the draft, and the final text of the Paris Agreement is conspicuously silent on the issue of bunker fuels.

Nonetheless, both specialized UN organizations are scheduled to hold key meetings in 2016 to address this issue. The ICAO Assembly, which establishes ICAO's policy for the upcoming triennium, will meet in September - October 2016, and is expected to take a decision on the establishment of a MBM in 2016, which would be fully implemented in 2020.

The IMO's Marine Environment Protection Committee (MEPC) will meet in April 2016 to discuss, inter alia, air pollution and energy efficiency, further technical and operational measures for enhancing the energy efficiency of international shipping, and the reduction of GHG emissions from ships.

As a result, both organizations are the focus of international attention. UN Secretary-General Ban Ki-moon has recently officially visited both IMO and ICAO, to deliver a strong message on the urgency to address the growth of emissions under the mandate of these two specialized bodies. At the end of January, he met with the President of ICAO in Addis Ababa, Ethiopia, and encouraged the aviation industry to, through ICAO, "innovatively develop and employ emissions saving technologies wherever possible." In reference to the proposed aircraft CO2 emissions standard, Ban called for further strengthening it as quickly as possible. And in London, on a visit to IMO headquarters, Ban urged the Organization to adopt legally binding energy efficiency measures for ships.

While climate change policy watchers are preparing for the next session of the COP, which will take place in Morocco, in November, some expect that the most significant progress in addressing GHG emissions during 2016 could come during the meetings of the ICAO Assembly and IMO MEPC. It is clear that they will receive greater scrutiny than usual, as the global community watches to see if they are up to the task of taking the ambitious steps that the global climate change challenge requires.