The Puerta del Sol in Madrid is the center of all the roads in Spain. But for the next two weeks, Madrid will also be the center for global climate negotiations. Madrid is hosting the 25th session of the Conference of the Parties (COP 25) to the UNFCCC. While international aviation is not within the scope of these negotiations, we can expect the airline industry to closely follow the process. Implementation of the climate agreement on international aviation will be easier if COP 25 finalizes the rules for international cooperation on mitigating climate change, known as Article 6 negotiations.

The Extraordinary Climate Agreement on International Aviation

International aviation is the only sector that has an absolute cap on global net carbon dioxide (CO2) emissions. No other sector can boast of such an accomplishment. The International Air Transport Association (IATA) played a crucial role in developing workable solutions that helped secure a global approach. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) was adopted in October 2016 by the International Civil Aviation Organization (ICAO). The scheme saves the aviation industry tens of billions of US dollars each year by avoiding a costly patchwork of overlapping and distortive measures (watch CORSIA video).

The policy brief, ‘The Extraordinary Climate Agreement on International Aviation,’ of the Harvard Project on Climate Agreements gives a rare insight into policy development from an industry perspective. The brief details how CORSIA was designed. It explains that securing agreement among a diverse and fiercely competitive group of airlines with different growth profiles, business models and fleet characteristics was not simple. The airline industry, represented by IATA, had to work hard to persuade governments that a global offsetting scheme was the best option for the sector. To secure government support, the IATA-designed global offsetting scheme was injected into the ICAO process for government endorsement. Under the scheme, airlines will purchase carbon credits from other sectors to offset the growth in industry CO2 emissions above 2020 levels (some exemptions apply).

Aviation Has an Immediate Need for Carbon Offsets

For the international aviation scheme to work, airlines need to have access to carbon offsets. ICAO is developing criteria and assessing eligible mechanisms, but ICAO cannot set all the rules. That is where the UNFCCC comes in. Offsets used by airlines need to be consistent with the broader climate policy framework under the UNFCCC and ensure against unintended double counting of emission reduction efforts. Reaching agreement on these rules continues to be a sticking point in the UNFCCC negotiations. These rules were supposed to be agreed at last year’s COP in Katowice, Poland, but negotiations reached impasse. Issues relating to Article 6, including internationally transferred mitigation outcomes (ITMOs) and a market mechanism, remain some of the few major issues not completed in the “rulebook” for implementing the Paris Agreement.

From an aviation perspective, not having these rules in place will delay climate action or lead to partly “nationalizing” the international aviation climate agreement. Despite the scheme being voluntary from 2021 to 2026, 81 states representing 76.6% of international aviation activity have expressed their intention to voluntarily participate in CORSIA from its outset. However, if there continues to be uncertainty about the foundational rules governing international offset mechanisms, implementation will either be delayed or start to have national characteristics. States are unlikely to require the purchase of international offsets if there are no agreed international rules. Countries will instead delay implementation or alternatively require airlines to purchase national carbon offsets. The requirement to purchase national offsets should be avoided as ICAO is taking a global approach for developing criteria and determining eligible mechanisms. However, in the absence of international offsetting rules, the temptation to require airlines to use national offsets may be too difficult for States to resist. This would be a blow to the development of a global carbon market and could also give rise to competitive distortions in the airline industry.

More is at Stake Than Aviation Interests

Perhaps more importantly, reaching agreement on Article 6 issues is of global consequence, far beyond aviation considerations. International collaboration is expected to reduce the cost of mitigating climate change by 32% in 2030 and 54% by 2050. That means the sooner we have mechanisms that allow for international collaboration the more we can achieve with the same level of effort. Furthermore, there is an inconvenient gap between the temperature stabilization ambition of the Paris Agreement and reality of planned climate actions communicated through Nationally Determined Contributions (NDCs). International collaboration, including through the use of carbon markets, opens doors for cost-effective approaches to climate action and makes it easier to bridge the gap between ambition and reality. We need Article 6 issues to be resolved at COP 25 with clear rules for international collaboration on climate change mitigation.

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This article is based on the policy brief, ‘The Extraordinary Climate Agreement on International Aviation,’ published by the Harvard Project on Climate Agreements. The article was written by George Anjaparidze, CEO and Founder of Veritas Global, a Swiss economics and strategy advisory and think tank. He is the former UN Chief Negotiator on climate finance for nine developing countries of the Eastern European Group. He also served as Senior Economist in the Chief Economist’s Office of the International Air Transport Association where he led the design of CORSIA and was the lead economist on air cargo and aviation infrastructure.