ICAO 2013 Environmental Report - page 146

icao environmental report
market-based measures
Takashi Hongo
Environment and climate change are serious global issues.
Worldwide greenhouse gas (GHG) emission reductions
will be necessary and unavoidable for sustainable
industry and societal growth and international aviation
is no exception to this. The following article looks at the
progress that has been made to date in developing and
implementing emissions trading systems. It also discusses
the possibility of developing an ICAO carbon emissions
trading scheme, and what the criteria and attributes of
such a system would be.
Flexibility Is Key
Generally speaking, it is better to develop a wide variety
of measures to achieve reduction targets effectively and
efficiently. This is because there are many ever-changing
variables in the mix, including the business environment,
available technology, evolving technological innovations and
changing investment strategies. Accordingly, the “flexibility
of reduction measures” is crucial.
Four primary options are considered for reducing emissions
in the aviation sector:
1. Replacement of existing fleet with more efficient aircraft.
2. Route optimization and improvement of
ground services.
3. Use of bio fuels as a zero emissions alternative
energy source.
4. Offset credit mechanisms.
Each of the above options has pros and cons. Design
and commissioning of more efficient aircraft, as well as
implementation of route optimization and ground system
improvements are essential measures that are already
ongoing, and reductions achieved through them will
continue for many years. However, it takes a long time to
deliver new aircraft and to change over to the most optimal
aviation routes. Furthermore, the costs of these measures
are quite high. Drop-in type bio fuels have become almost a
proven technology. However, further technology innovation
is needed to improve their cost competitiveness and to avoid
potential conflicts with food and water supplies.
Offset mechanisms reduce emissions indirectly by
supporting GHG emission reduction activities through the
purchase of offsetting “reductions”. For instance, biomass
can be used for renewable energy (and reduce CO
by reducing fossil fuel) but it requires investment for installing
equipment. Offset mechanisms support the investment
by funding a part of investment cost through purchasing
“reductions”. When costs are high to achieve abatement
reductions by introducing new aircraft or using bio fuels,
an offset mechanism can be a reasonable cost option and
can work as a bridge towards eventual direct reductions in
airline services. Offset mechanisms tend to increase the
flexibility of investment timing and reduce investment costs.
International Emission Trading and
Possible Offset Credits for Aviation
The carbon market is shifting from the two dominant market
systems, Kyoto Credit and EU Allowance, to a fragmented
markets regime. Following this structural change, various
types of credits, both national and sub-national schemes,
as well as project base emission reduction credits and
allowances under ETS will soon be available for offsetting
Figure 1
summarizes the current carbon offset
credit systems that have been implemented.
Takashi Hongo
He is a Senior Fellow at
Mitsui Global Strategic Studies
Institute. Mr. Hongo served in
the Japan Bank for International
cooperation (JBIC). He led
the drafting the Environment Guideline for JBIC’s
financing which was renowned as the most
advance and practical environment guideline for
public finance. He also initiated various carbon
related financial instruments such the “GREEN +
J-MRV”. By using these experiences, he recently
focused on harmonization of the decentralized
Asian Carbon Market including Bilateral Carbon
Offset Mechanism (BOCM) and reforms of financing
for the low carbon economy using MRV such as
the Performance Base Incentive Scheme. He has
contributed to the International Energy Agency
(IEA), International Renewable Agency (IRENA),
International, ADB and APEC in addition to the
Japanese government and local authorities through
various committees.
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