scope:

SCOPE AND STRUCTURE

This study is limited to considering and assessing emissions trading systems for GHGs.¹⁴ For aviation, only the CO2 emissions are considered.¹⁵ It would be more technically challenging to include the non-CO₂ effects of aviation, such as NO_x, contrails and water vapour, in a trading system as such a system would need to take into consideration the scientific evidence related to these effects, their duration and their variability over time and location. So far such a scheme has not been implemented anywhere.¹⁶

The trading activities described in this study focus on trading at the source, facility, project or corporate level. Trading between countries of assigned amount units (AAUs), or other credits used by countries for the purposes of balancing national accounts to maintain compliance with international commitments, is considered only in the context of describing direct or indirect links between emissions trading systems.

Arrangements for linking emissions trading systems are reviewed in Chapter 3. The experience with linking and the prospects for future links are discussed in Chapter 4. Options for linking trading systems involving international aviation with other emissions trading systems are considered in Chapter 5, as well as issues that could affect the compatibility of a trading system for international aviation with other emissions trading systems.

PURPOSE

The purpose of this scoping study is to review issues related to the linking of GHG emissions trading systems. Two systems are linked if entities can trade compliance units across scheme boundaries, with a participant in one system able to use a compliance unit issued by the administrator of the other system to achieve its voluntary commitment or regulatory obligation. More specifically, it is the linking of schemes that will result in open emissions trading involving international aviation that is of interest. Although different definitions for open emissions trading can be found, the concept as used here is aligned with the way it has been used in recent ICAO publications. Thus, a system is regarded as open when the international aviation sector has access to compliance units from outside the aviation sector; a closed emissions trading system would occur if compliance units could be traded within the aviation sector only.

It is noted that the definitions used in Guidance on the Use of Emissions Trading for Aviation (Doc 9885) characterize "open" and "closed" with reference to whether or not the sector has access to allowances and credits from outside an aviation trading scheme. Earlier analysis of emissions trading by Working Group 5 and FESG during CAEP/5, describe an open system as one in which emissions from all aviation sources are treated identically, with bilateral trading allowed between the aviation sector and other sectors.^11,12 A closed system, on the other hand, was described as a system in which aviation emissions could only be traded within the aviation sector with a fixed cap. The CAEP/5 conclusion was that "a closed emissions trading system does not show cost benefit results to justify further consideration".¹³

11. ICAO. CAEP/5-WP/16, "Report Overview from Working Group 5 on Development of Market-based Measures to Limit or Reduce Emissions from Civil Aviation." 1 December 2000.

12. ---. CAEP/5-WP/24, "Economic Analysis of Potential Market-based Options for Reduction of CO₂ Emissions from Aviation." 8 December 2000.

13. ---. Report of the Fifth Meeting of the Committee on Aviation Environmental Protection (Doc 9777). Montréal, 2001.

14. The six gases covered by the Kyoto Protocol are Carbon dioxide (CO₂), Methane (CH₄), Nitrous oxide (N₂O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs) and Sulphur hexafluoride (SF₆).

15. As indicated in the 2006 IPCC Guidelines for National Greenhouse Gas Inventories, aircraft engine emissions are roughly composed of about 70 per cent CO₂, a little less than 30 per cent H₂O, and less than 1 per cent each of NO_x, CO, SO_x, NMVOC, particulates, and other trace components including hazardous air pollutants. Little or no N₂O emissions occur from modern gas turbines (IPCC, 1999). Methane (CH₄) may be emitted by gas turbines during idle and by older technology engines, but recent data suggest that little or no CH₄ is emitted by modern engines. Emissions also depend on the number and type of aircraft operations; the types and efficiency of the aircraft engines; the fuel used; the length of flight; the power setting; the time spent at each stage of flight; and, to a lesser degree, the altitude at which exhaust gases are emitted. For more information see: http://www.ipcc-nggip.iges.or.jp/public/2006gl/pdf/2_Volume2/V2_3_Ch3_Mobile_Combustion.pdf

16. It is also noted that CO₂ emissions have impacts that extend beyond climate change/global warming. For more information, see: http://www.iata.org/whatwedo/environment/climate_change.aspx