Air and sea transport must start trading carbon

European finance ministers meeting in Brussels yesterday called for international shipping and aviation greenhouse gas emissions to be included in a global carbon pricing system.

In a decision immediately hailed by Oxfam's climate change adviser Lies Craeynest as a ″double win", they said that this would become ″potential source of revenues that would also generate the price signal necessary to efficiently achieve emission reductions from these sectors".

The EU is already resolute that aviation will be included in its Emissions Trading Scheme after 2012, despite opposition registered by at least 120 countries at an International Civil Aviation Organisation (ICAO) meeting last October.

The finance ministers issued a statement on climate finance which said that although raising the $100 billion per year by 2020 to tackle climate change - as agreed by world leaders in Copenhagen 2009 - is challenging, it is feasible.

They noted that Euros 7.2 billion will be available up to the end of 2012 in Europe, and challenged other countries to come up with their share of the cash.

One of the mechanisms for raising this cash must be a ″robust carbon market" to drive ″the carbon price necessary for low carbon investment to achieve global mitigation objectives in an efficient way".

They acknowledged that public finance is a particularly important source for developing countries striving to meet their reduction targets, that is difficult to provide in the current economic climate.

It says therefore that ″the carbon pricing of global aviation and maritime transportation is a potential source of revenues that would also generate the price signal necessary to efficiently achieve emission reductions from these sectors".

The International Maritime Organisation (IMO) and ICAO must therefore "develop without delay a global policy framework that avoids competitive distortions or carbon leakage".

However the statement also squarely challenges developing countries to develop "improved general business and policy frameworks". If these are in place it will inspire confidence for cooperation between public and private climate financiers and the development of ″an effective and efficient Green Climate Fund", as proposed by the UNFCC and delegates at Cancun last December, and currently being designed.

The system finance ministers are proposing would work by imposing a global cap on carbon dioxide-equivalent emissions. Companies that then emitted more than their share of the gases would have to trade permits.

"It is a unique opportunity to control a major and rising source of climate changing emissions and at the same time generate desperately needed cash," said Oxfam's Craeynest.

Shipping companies - close to agreement?

The IMO was tasked with the job of reducing emissions from shipping in 1997 and has so far failed to come up with a solution.

On April 27 this year, Climate Action Commissioner Connie Hedegaard signalled that she had lost patience with them.

In response, a spokesperson for the IMO argued that ″the work is heavily advanced", and promised it will be discussed further at the next meeting of the group's Marine Environment Protection Committee during 4-15 July.

This body's meetings occur but twice a year. At the last one, there was no consensus reached on how to proceed with the next stage of its climate change strategy, but delegates did decide to force new ships to include an Energy Efficiency Design Index (EEDI) and a Ship Energy Efficiency Management Plan (SEEMP), and that as long as the required energy-efficiency level is attained, ship designers and builders can be free to use the most cost-efficient solutions for the ship. This is a strategy that is compatible with a carbon pricing system.

It also decided to task a Working Group on GHG Emissions with preparing details of a carbon trading system. At the end of March, this Group came up with a variety of proposals, ranging from a contribution or levy on all CO2 emissions from international shipping; or only from those ships not meeting the requirements of the EEDI, via emission trading systems; to schemes based on a ship's actual efficiency, both by design and operation, based on the SEEMP.

It's these that will be discussed at the July meeting, and the European finance ministers will be hoping that at last, after 14 years of deliberation, the IMO will finally reach a consensus.

Airlines resist change

The ICAO has also been looking at the issue for a long time since 2000 - and is also considering market-based mechanisms. This is the body tasked by the Kyodo Protocol with working with developing countries to reduce emissions from international aviation.

It has issued draft guidance on the voluntary use of emissions trading and on levies, but it has consistently resisted taxes of any sort on aviation fuel.

Last October all member nations committed to increasing fuel efficiency by 2% a year up to 2020; to achieving carbon neutrality for the industry by 2020; and to producing international standards for aeroplane engine emissions by 2013. But these are general goals with no specific requirements for individual member nations. There is no forum for discussing such requirements until the ICAO's next session - in 2013.

Biofuels are considered to be the only viable option for reducing aircraft emissions, and several companies are successfully trialling various fuels.

Air travel is responsible for some 700 million tonnes of carbon emissions each year (around half of which comes from international aviation), representing 2.4% of the world's total emissions. It is highly debatable whether all such journeys could be propelled by renewable fuels.

It's clear that Europe believes that a global carbon pricing scheme is the only mechanism which will deliver the emission savings required and this is why it is is piling the pressure on to these two crucial industries.