By Allison Martell and Valerie Volcovici
MONTREAL/WASHINGTON, May 13 (Reuters) - The global airline industry favors offsetting carbon emissions by buying carbon credits rather than participating in an industry-wide cap-and-trade system, the head of the trade association for global airlines said Monday.
Tony Tyler, chief executive of the International Air Transport Association (IATA), said a global carbon offsetting system was preferred by the industry out of three market-based solutions floated by the United Nations to tackle the sector's growing greenhouse gas emissions.
The International Civil Aviation Organization (ICAO), a United Nations body, has been tasked with trying to develop a global plan to address aviation emissions in time for the body's triennial assembly in September.
Under an offsetting system, either air carriers or countries would have to purchase credits to cover each ton of carbon emitted over a set baseline.
"We are looking for simplicity and ease of administration as a key component of what we go forward with, so it's likely that the industry will come out in favor of a global offsetting scheme rather than emissions trading," Tyler told Reuters at an environmental workshop of aviation executives in Montreal.
A high-level group of representatives from 17 countries is working within ICAO to craft a global agreement on the best way for the airline industry to reduce its global carbon footprint using a market-based measure.
The group has narrowed its options down to three approaches: a mandatory offsetting scheme, mandatory offsetting that would raise revenue to fund joint measures to address climate change and a global emissions trading scheme, similar to the European Union's carbon market.
STOPPING THE CLOCK
If ICAO makes enough progress toward a global agreement on emissions, it would ensure that the EU may no longer need to apply its own emissions trading system to global airlines.
The advent in 2012 of an EU law requiring all aircraft using EU airports to pay for carbon emissions via the bloc's Emissions Trading Scheme stirred threats of a trade war. The United States, China, India and Russia all lobbied fiercely against it.
At the end of 2012, the EU agreed to "stop the clock" on its law requiring all airlines to pay for each ton of emissions associated with flights into and out of its airports, provided that ICAO comes up with a solution by late this year.
Paul Steele, executive director of the Air Transport Action Group, said that there is a general consensus that a mandatory offsetting system could begin sometime after 2020.
Under this option, which is so far the most favored by industry, the ICAO would have to set an emissions baseline, for example an average of the last three years prior to 2020.
Steele said it is not yet clear whether countries or airline operators would be responsible for purchasing offsets under that plan.
Auditor and consultancy PwC estimated in a report last year that offset demand from the aviation sector could grow to more than 100 million tonnes of carbon dioxide by 2020.
This would be a boost to the United Nations' struggling carbon offset market, the Clean Development Mechanism, because potential aviation demand would be more than 25 percent of carbon credits issued in 2012, according to PwC.
"We could see offset demand from the aviation sector growing to more than 100 megatonnes of CO2 per year by 2020, which would provide a significant boost to the carbon markets. This is more than one quarter of the CERs (Certified Emission Reductions) issued in 2012," he said.
The EU has forecast that aviation emissions alone will rise from 640 million tonnes in 2005 to almost 1.1 billion by 2020, even with 2 percent annual growth in fuel efficiency.
ICAO will next discuss the different proposals when the 36-member governing body, the ICAO council, convenes in June. (Reporting by Allison Martell in Montreal; writing by Valerie Volcovici; editing by Andrew Hay)