The current work in ICAO

Besides focusing on a global jet fuel tax, some European countries as well as the European Commission and the European Parliament⁶⁰ are discussing the possibility of introducing a tax in Europe. In a 2000 Communication the European Commission pushes for the idea of a not yet adopted Commission proposal⁶¹ to allow member countries to tax domestic and intra-EU flights [CEC 2000a]. The proposal is strongly backed by Germany, but opposition led by Spain has so far been enough to block the tax measures, which under EU rules require unanimity [Reuters 2000a]. By March 2000 the proposal was presented to European Union Finance Ministers that agreed only to tax jet fuel if there was an agreement at the international level [Reuters 2000b].

Therefore, the initiative to introduce measures for reducing greenhouse gas emissions from Commercial Civil Air Transport currently seems to be in the hands of ICAO.

also reviewed how greenhouse gas emissions might be reduced through optimising operational measures and through laying down voluntary agreements on fuel efficiency improvements as well as through implementing market-based measures such as a global tax on kerosene or emissions and emission trading schemes. Concerning the market-based measures, CAEP concluded in its assessment report that an “open emission trading scheme” allowing the commercial civil air transport industry to buy emission quotas in other energy consuming sectors would be a better and cheaper solution (than a tax on emissions or fuel) [Wickrama 2001] [CAEP 2000a and 2000b].

“This is because it appears that less costly reductions are possible in other sectors (the aviation sector faces higher abatement costs), and hence the potential savings from trading with other sectors would be substantial...compliance costs would be reduced by over 95 percent (compared to other options) if the aviation sector could participate in an “open” emissions trading regime with other sectors” [Seidel and Rossell 2001].

The written comments posted by CAEPs members to the session at the January 2001 meeting dealing with market-based measures exemplifies that there is not common agreement on which strategies to propose to ICAO [CAEP 2000c and CAEP 2000d]

[T&E/ICSA 2001] [IATA/ICCAIA 2001]. Some of the differences in views can be seen from the Boxes below describing the positions of the environmental NGOs (Box 2.1) and of the commercial civil air transport industry (Box 2.2).

One critique is that almost all existing production aircraft already today comply with the new noise standard. Another critique is that new noise standard does not consider the phasing out of some of the older and more noisy Chapter 3 aircraft [Airports Council International 2001] [CEC 2000f] [T&E Bulletin August/September 2001] [ICAO 2001d]. (Chapter 3 is the current noise standard that will function until 2006). On this background, the European Civil Aviation Conference states that “...the new standard will not encourage the introduction of more advanced noise reduction technology and nor will it lead to a significant improvement in noise exposure as traffic grows in the longer term. The proposed new standard can only be a first step” [ICAO 2001d, p. 2]. The United States, Russia and Brazil as well as some African States oppose the plans to impose operating restrictions on Chapter 2 aircraft that are hush-kitted to apply to the Chapter 3 standard [ICAO 2001e].

One main disagreement between the NGOs and the industry is whether the total emissions of CO2 from the commercial civil air transport sector should be allowed to grow or if they should be reduced in accordance to the goals set up in the Kyoto Protocol, as suggested by the NGOs. The industry seems to prefer voluntary agreements for improving the fuel efficiency and an open CO₂ emission-trading scheme that will allow the industry to buy emission permits in other sectors [IATA/ICCAIA 2001]. NGOs seem to prefer a tax that considers all types of emissions in all phases of flight. If no agreement can be reached the NGOs furthermore urge the UNFCCC to take over the obligation to introduce measures that can contribute to reduce emissions from commercial civil air transport [T&E/ICSA 2001].

Box 2.1: The position of the International Coalition for Sustainable Aviation (ICSA) towards market-based options to limit or reduce emissions.

♦ CAEP has mainly been focusing on possibilities to reduce emissions of CO2. ICSA therefore suggests that ICAO and CAEP should urgently develop a strategy that addresses all greenhouse gas emissions.

♦ Voluntary agreements are not considered sufficient to respond to the provisions laid out for commercial civil air transport in the Kyoto Protocol and ICAO is therefore urged not to develop this concept further.

♦ ICAO is furthermore urged to establish a CO2 target that is consistent with the Kyoto Protocol and aiming at a reduction of 5% in the period 2008-2012 as compared to 1990 levels.

♦ ICAO should introduce an emission charge (on both the LTO and the cruise cycle) by its 34^th Assembly at the latest. If the charge is not adequate for achieving the 5% reduction target, it should be supplemented by an emission-trading scheme that would begin no later than 2008.

♦ ICAO should establish a NOx cruise standard and a market-based mechanism to control all emissions during the cruise phase, including potentially weighing CO2

emissions to fully reflect the total radiative forcing.

♦ If no appropriate solutions are decided by at the next ICAO Assembly, COP7 of the UNFCCC should decide on a workplan and immediate implementation plan, by COP8 at the latest.

Source: [T&E/ICSA 2001].

At its January 2001 meeting CAEP recommended the continued development⁶³ of market based measures and the ICAO Council will report the further work to the 33rd ICAO Assembly in the fall 2001. It is therefore up to the ICAO Council and the ICAO Assembly to assess whether they can reach an agreement on a resolution calling for additional work with, for example, voluntary agreements and market based measures.

Currently, voluntary agreements and an open emissions trading system seems to have more support from CAEP members than do for example a global CO₂ tax [Seidel and Rossell 2001]. In a September 2001 White Paper on the European transport policy the European Commission assesses that ICAOs 33^rd Assembly will not agree upon a jet fuel tax [CEC 2001b]. 38 European countries, that are all members of the European Civil Aviation Conference (ECAC), now seem to accept that ICAO maintains its existing policy on charges and taxes [ICAO 2001b] but hopes for ICAOs acceptance of the implementation of stringent operating restrictions in Europe for the noisiest aircraft [ICAO 2001d]. However, the Europeans still encourage ICAO to investigate further

63 An important part of the additional analysis will consider the impact of market-based measures on developing countries and examine ways to ensure that their concerns are taken into account [Seidel and Rossell 2001]

Box 2.2: The position of the International Air Transport Association (IATA) and the International Coordinating Council of Aerospace Industries Associations

(ICCAIA) towards market-based options to limit or reduce emissions.

♦ Compared to environmental charges or taxes the combined use of open emissions trading and voluntary mechanisms is likely to be more conducive to the development of a sustainable commercial civil air transport sector. A CO2-related charge is likely to be less economically efficient than an open emission trading scheme and the industry would have to carry an unacceptable cost burden and severe demand reductions, for relatively little environmental benefit.

♦ Emissions trading is likely to provide the most promising and cost-effective option for maximising the contribution of commercial civil air transport to the reduction of global CO2 emissions. ICAO should therefore investigate further the key issues concerning the design and implementation of an open emissions trading system, such as the reporting of emissions, the establishment and distribution of emissions caps and permits and the monitoring, verification and enforcement of the system.

♦ Voluntary mechanisms could help to establish the basis for future emission abatement at lower costs than market-based options. IATA member airlines have adopted a fuel efficiency goal that aim at improving the fuel efficiency by 10 percent over the next ten years. This goal could serve as a basis for a voluntary mechanism. IATA is also prepared to agree upon fuel efficiency goals to be delivered from improvements in CNS/ATM systems.

Source: [IATA/ICCAIA 2001]

(after the 33^rd Assembly) the development of a trading system for aircraft emissions as well as the establishment of long-term technology goals [ICAO 2001c]. The ICAO Council notes that the establishment of a framework for setting up a scheme for emissions trading is a long-term process [ICAO 2001b], and no immediate actions are therefore to be expected.

Therefore, at least until the next ICAO Assembly in 2004, it seems unlikely that the 187 countries that are represented in ICAO will agree upon any global market based measures to reduce the GHG emissions from civil air transport. The focus seems to be directed towards agreeing upon a new noise standard as well as at studying further the possibility of setting up a regime for emissions trading. Furthermore, ICAO seems to be focusing on the necessity to improve operational practices. Both the reduction of noise and the improvement of operational procedures seem to be strategies that will allow air traffic to grow further. As will be discussed in Chapters 3 and 5, better operational procedures offer some reduction of the specific GHG emissions, but are likely by far to be overridden by growth in demand in a business as usual scenario.

Even the long-term emissions trading solution may most likely be constructed in a way that will allow passenger air travel to grow further, if emissions reductions are traded in an open system⁶⁴ between sectors with air transport as a net buyer. Some critics argue that a regime for emissions trading would have to consider not only the emissions of CO₂ from air transport, but also the emissions of water vapour and NO_x, because these gases contribute to climate change at high altitudes [Lee 2000]. Furthermore, the settlement on a cap for emissions and the distribution of quotas or emission permits between countries and airlines will pose challenges to CAEP [Wickrama 2001] [Hewitt and Foley 2000]. The possible impact of emissions trading is not discussed further in this report. Rather, Chapter 4 looks into the possible impact of a jet fuel tax. The reason for this choice of focus is that the aim of this project is to assess the possibilities for reducing the emissions from commercial civil air transport.

Since CAEPs January meeting, the European environmental NGO’s have expressed disappointment with the ICAO process. Their hope for ICAO to agree upon a global tax

64 The opposite, a closed system, would only allow internal trading within the commercial civil air transport sector, see Hewitt and Foley [2000] for a further discussion of these issues.

on emissions or jet fuel does not seem to be realistically feasible in the near future.

They therefore urge the European countries to go it alone by implementing measures to reduce the environmental impact of commercial civil air transport [T&E Bulletin August/September 2001].