There are currently no limits on carbon emissions from international aviation and shipping. International transport was excluded from the 1997 Kyoto Protocol even though the two sectors are significant and growing sources of greenhouse gas emissions (see table).
Neither aviation nor shipping fit comfortably into a framework designed to tackle greenhouse gas emissions on a state-by-state basis. The Kyoto Protocol omitted them from the inventory that Annex 1 countries – the developed nations – were required to consider and report to the secretariat of the UN Framework Convention on Climate Change (UNFCCC).
But if the shipping sector was a nation, it would rank fifth in the league of Annex 1 greenhouse gas emitters, ahead of Australia but behind the US, Russia, Japan and Germany. Aviation, with slightly lower emissions, would rank seventh, behind Canada but ahead of the UK. Together, the sectors’ emissions would weigh in third with over 1,540 million tonnes of CO2 equivalent per year.
Emissions from these two sources have been growing fast in recent decades with the rapid expansion of global trade and travel, even though widespread recession has knocked that back a little. If their growth continues, they alone could cause dangerous climate change.
According to the International Chamber of Shipping (ICS), which represents 33 national associations of ship owners including 75% of the world’s merchant fleet, seaborne trade rose by 37% in the six years to 2007. Over the same period, aviation traffic increased by 39%, according to the International Air Transport Association (IATA), which represents 230 airlines delivering 93% of international air traffic.
The sectors are very different. Shipping’s emissions come from slow, relatively energy-efficient transport of large volumes of goods: 51,500 billion tonne-kilometres in 2008 according to the ICS. Aviation transports much smaller volumes of passengers and freight, but more quickly and much more energy intensively. IATA says the sector transported 559 billion tonne-kilometres in 2008.
In the grand scheme of the Copenhagen meeting, setting these sectors on course for agreeing a mechanism, timetable and target for emissions controls will be a relatively small but significant challenge. But it is also one that could make a big contribution to funding adaptation and mitigation measures in developing countries.
Industry moves ahead
How can emissions from aircraft in international airspace be allocated to a particular country? And how can emissions from ships owned in one country, flying the flag of another and travelling between and carrying goods benefiting several other states be reliably assigned to any one nation?
The difficulty of reaching agreement on these allocations explains why many interests in Annex 1 countries – aviation and shipping businesses, governments and environmental NGOs such as WWF – favour a sectoral agreement that applies to all international air and sea operators regardless of their country of origin or destination.
Industry associations – dominated by interests from Annex 1 countries – see enormous advantage in global sectoral schemes, which prevent distortions in international trade, create a level playing field for business and prevent ‘carbon leakage’, where companies relocate their businesses from countries that control greenhouse gas emissions to others where they are unregulated.
Examples of some operators forging ahead are the Aviation Global Deal Group and a consortium of national shipping industry associations of Australia, Belgium, Norway, Sweden and the UK. Both have issued detailed proposals on how an international cap-and-trade system could be established for their sectors.
The advantages, say these groups, is that a trading scheme will allow the market to determine the cost of carbon, leave companies to decide economical compliance options, prevent carbon leakage, promote innovation and integrate with other schemes such as the EU emissions trading scheme (EU ETS).
But such proposals have not been welcomed by developing, non-Annex 1 countries, which point to the Kyoto Protocol’s overriding principle of ‘common but differentiated responsibilities’.
This recognises the greater historical responsibility of Annex 1 countries in causing climate change and that their wealth gives them more ability to reduce emissions and fund mitigation and adaptation measures. Developing countries believe their aviation and shipping sectors should not have to contribute to offsetting their transport emissions on the same basis as Annex 1 states.
Yet the principle conflicts with those of the UN bodies created to provide international regulation of aviation and shipping and which, up to now, have provided the main fora to discuss emissions reductions agreements. The International Civil Aviation Organization (ICAO) and International Maritime Organization (IMO) each hold to a principle of ‘flag blindness’ or ‘no more favourable treatment’, which treats operators from all nation states equally.
The result is deadlock. Non-Annex 1 countries believe the costs imposed on their aviation and shipping operators by a sectoral agreement will be iniquitous. And they are suspicious that any funds collected by Annex 1 countries from carbon trading will not be passed on to finance emissions reduction measures and adaptation to climate change in developing countries.
Here the EU plan to bring aviation into the EU ETS in 2012 sets a bad precedent. All the revenues raised by auctioning carbon allowances to airlines flying to and within Europe will go into EU coffers. The bloc has refused to allocate any of the proceeds to climate mitigation and adaptation schemes in developing countries.
WWF has tried to broker a deal for both sectors and is suggesting global or near-global trading schemes that will generate revenues for mitigation and adaptation projects under the UNFCCC. It envisages the UNFCCC would set a cap on each sector’s emissions and empower a new body – perhaps a “Bunker Carbon Board” – to distribute allowances and collect revenues. Aircraft and ship operators would have to surrender allowances to cover their annual carbon emissions.
WWF suggests operators should have to buy 100% of the allowances they need at auction from the outset. Where operators’ emissions exceed the sectoral cap, they would be able to buy allowances from other carbon markets such as the EU ETS.
This would contribute to climate protection in three ways. First, by having to pay for all emissions, companies would have a powerful incentive to minimise emissions. Second, funds from allowances bought in the transport scheme would contribute to the central bunker carbon fund to be used for adaptation and mitigation in developing countries. Finally, if they had to buy allowances on the open carbon market this would drive up the price of carbon, increasing the incentives to all players to cut emissions.
Given a carbon price of $30 per tonne – about €20/t, which is probable by 2020 (ENDS Report 417, p 12) – WWF estimates the sectors would raise nearly $45bn a year.
To soften the impact of a global cap-and-trade system on developing countries, WWF is suggesting a series of de minimis exemptions. Flights running only once or twice a week and trade via smaller ships or to small island states, for example, might be exempt from emissions trading. Otherwise, airlines and ships from non-Annex 1 countries would pay for their carbon emissions in line with those from developed nations.
WWF’s estimates of what a scheme might raise are based on industry emission figures and consider only CO2 emissions. For shipping, combustion emissions are by far the most significant climate impact, but for aviation there are non-CO2 impacts which are still not fully understood (ENDS Report 417, p 27). Aircraft emissions of nitrogen oxides (NOx), particulates and water vapour in the upper atmosphere may cause significant additional warming over and above that from aviation CO2.
Peter Lockley, WWF UK’s head of transport policy says: “International emissions are doing international harm. Funds raised should be used for international benefit, clearly mostly in the developing world where the damage is being done.”
He says some clear language from the EU is needed: “Shipping alone could raise €25bn – a third of the money needed to fund adaptation and mitigation in the developing world.”
Whether industry’s willingness to divert funds into international coffers for mitigation and action will be enough to persuade non-Annex 1 parties at Copenhagen remains to be seen.
No final deal will be done and it will take several years for control schemes for aviation and shipping to come into effect. But at the very least, the meeting ought to give renewed impetus to the stagnant and lacklustre progress at the ICAO and IMO.