First Ever Global Regime For Aviation Emissions: ICAO Adopts Global Market-Based Measure To Combat Aircraft CO2 Emissions

On Friday, 7th October the General Assembly of the International Civil Aviation Organisation (ICAO) passed a resolution (the ICAO Resolution), resolving to implement the world's first global regime for combatting CO2 emissions from aircraft. This marks the airline industry as the first industry sector ever to adopt a global carbon market. This article explains what has been agreed, and not agreed, its implications for airlines, financiers, carbon traders and others and the impact on the EU's aviation emissions trading scheme.

Much of the detail of the so-called 'Global Market-Based Measure' (GMBM) is yet to be worked out in what is, given the amount of work to be done, a very short space of time before it formally takes effect in 2021.

However, after around 25 years of negotiation concerning the role of aviation in tackling global emissions, this represents an historic moment. The resolution has significant implications for international airlines around the globe, as well as more indirect implications for aircraft manufacturers, financiers, carbon-offset project developers, carbon traders, carbon trading registries and many others.

Lawyers in Reed Smith's environmental and climate change practice have been working with the aviation sector on emissions issues for over 10 years at EU and international level. In this article, we highlight the most important features of the new GMBM, some of the key legal and practical issues arising from both the agreed features and those yet to be resolved and, finally, the implications of all this for the EU's flagship Aviation Emissions Trading Scheme (the Aviation EU ETS).

What has been agreed?

Offsetting, not cap and trade

ICAO has agreed that the GMBM will take the form of a Carbon Offsetting and Reduction Scheme for International Aviation (referred to in the ICAO Resolution as the "CORSIA").

Unlike the 'cap and trade' approach of the Aviation EU ETS, this scheme will oblige airlines to offset their emissions, but not necessarily (or indeed at all) to reduce them at source.

The scheme will only apply to CO2, not other emissions such as NOx and particulates, and will operate on the basis of a three-year compliance cycle.

The scheme will also be subject to three-year reviews of its effectiveness and ambition.

It is intended to be the only market-based measure applicable (MBM) to CO2 emissions from the international aviation sector.

How 'global' is global?

It is being trumpeted as a truly global scheme, and in some respects rightly so. However, it is important to be clear what 'global' means for these purposes.

First, it is important to understand that it only applies to international flights: that is, flights that take off and land in different countries. So, while the scheme will apply to a flight from the United States to China or Europe, it will not apply at all to a domestic flight between two airports in the same country.

Given the distances that may be flown between domestic airports in certain of the world's largest countries (such as the United States, Canada and China) this is a major gap in global coverage (albeit one that individual countries are expected to plug with their own domestic aviation emissions reduction initiatives).

Secondly, there are some important exemptions that reduce the scope of the scheme further. These include:

Exemption of airlines responsible for only low (de minimis) levels of activity (operators emitting less than 10,000 tonnes of CO2 p.a.). Exemption of small aircraft (below 5,700 kg maximum take-off mass). Exemption for certain special categories of flight (humanitarian, medical or firefighting). Exclusion of flights to/from Least Developed Countries (LDCs), Small Island Developing States (SIDS) and Landlocked Developing Countries (LLDCs), unless they volunteer to participate. Thus, a flight from a developed country airport in, say, Paris or London to an LDC, SIDS or LLDC will not be...