ICAO 2013 Environmental Report - page 152

icao environmental report
2013
4. Voluntary Offsets
In addition to the national/regional and Kyoto compliance-
driven markets, there are also voluntary offsets via projects
under the auspices of the Verified Carbon Standard,
Climate Action Reserve, and the Gold Standard, which
are not accredited by the UN
10
but have their own quality
assurance processes. Companies or individuals voluntarily
purchase these to offset their emissions, or as pre-compliance
instruments with the intention that the credits may be used
in some future legally mandated programme. Similar to some
other emissions markets, supply in the voluntary sector is
currently running ahead of demand. Based on recent data
from BNEF and Forest Trends
11
, by the end of 2011 only about
a quarter of the 280 Mt of voluntary credits accumulated had
actually been used to offset emissions. This proportion is
however increasing, and in 2011 just under 50% of verified
credits had been used.
With the voluntary supply growing at about 90 Mt a year, and
an increasing share being retired each year, BNEF estimates
that by 2020 around 360 Mt of voluntary offsets could be
available to aviation.
“Supply” Summary
BNEF estimates that if environmental integrity concerns can
be addressed, the above units present a maximum available
supply of up to 4.4bnt by the year 2020. This supply is
only what is likely to be left unused, based on historic and
expected credit generation activities in existing programmes
and voluntary markets. It does not include the potentially
substantial new supply that could be brought to market to
meet additional demand.
Costs
Taking ICAO’s CAEP 2013 figures, along with an assumption
for alternative fuel reductions, the international aviation sector
could face a shortfall of between 13bnt and 20bnt of CO
2
offsets over the 30 years from 2020 to 2050. On the basis
of a central estimate of around 16.5bnt, the
currently
identifiable
surpluses of 4.4bnt could meet around a quarter
of this demand. Beyond this, additional investment would
be needed to reduce emissions from sources outside the
international aviation sector.
Ultimately what matters is the price paid for these offsets.
Today, different types of carbon allowances and credits have
different prices and these are likely to change over time.
Currently, allowances in the EU ETS trade at around $6/t,
CERs and ERUs are less than $1/t, and voluntary offsets
are about $6/t. Across all offset types, prices are likely to
rise over time.
To model costs, Environmental Defense Fund (EDF) prepared
conservative estimates of offset “supply” and “demand”;
the price at which the intersection of those two curves
implementation (JI) projects in Parties with emissions caps
(see below). Parties with emissions caps may also use
certified emission reductions (CERs) from the Protocol’s
Clean Development Mechanism, which approves projects in
Parties without emissions caps, provided that the projects
and CERs meet various criteria (see below).
Many Protocol Parties have met their targets through a
range of domestic measures and trading. Some countries’
emissions dropped well below their caps as a result of
economic restructuring in the early 1990s, and have banked
or saved large stocks of allowances. BNEF figures show that
Russia has the largest bank of allowances, at 8.8bnt, followed
by Ukraine at 2.8bnt, Poland at 0.89bnt, and Romania at
0.78bnt. Other EU countries collectively account for around
1.4bnt of banked allowances. In total, Kyoto Parties currently
hold around 14bnt of banked allowances.
Whether these allowances, as a practical matter, will come
into future emissions trading programmes is unclear.
Consequently, with the possible exception of allowances
rendered surplus through JI projects, it is prudent to exclude
these when calculating potential supply available to the
aviation sector
9
.
3. UN Registered Emission Reduction Projects
This source of supply includes the JI projects and CDM
projects, noted above. Offsets from these projects are
calculated as the difference between the actual emissions
from a project and what would have happened in the project’s
absence. Projects are subject to a series of validation and
verification steps before they can be approved by the UN.
Questions have been raised about the environmental integrity
of some CDM and JI credits, although ERUs generated by JI
projects are transacted by subtracting allowances from the
host country’s pool of Kyoto allowances, thereby providing
a greater measure of environmental certainty. The EU ETS
and the future Australia programme allow private entities to
meet part of their compliance obligations using ERUs and
CERs; California does not.
By mid-2013 some 6,750 CDM and 600 JI projects had
been registered with the UN. BNEF calculates that together,
both sources are capable of issuing around 5,500 Mt of
offset credits between 2008 and 2020, with actual volumes
depending on price.
Of the 1.3bnt CERs and 730 Mt ERUs already issued, not all
will be available to the aviation sector. BNEF estimates that
between 2008 and 2020, companies and governments in
the EU, Australia, and Japan will purchase around 3bnt, to
offset domestic emissions. In addition, credits from certain
industrial processes cannot be used in the EU and Australia.
This leaves a net surplus of about 2.3bnt of CERs and ERUs
up to the year 2020 that could be used by the aviation sector
post-2020.
chapter 4
global emissions
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