Hot Topic for Latvia at COP18: Emissions from Aviation and Shipping

As part of our project with Latvian NGO homo ecos:, Kathryn Wright, Bunyod Holmatov, and I are keeping an eye on topics here at COP18 that are important to Latvia. Aviation and maritime transport (shipping) are vital to the Latvian economy, which relies heavily on the sector to maintain connections to other nations in the EU and around the world. The UNFCCC has expressed interest in taking action to limit emissions from this sector, as it is both carbon-intensive and global in nature. Parties agree that regulation of aviation and shipping should occur through the International Civil Aviation Organization (ICAO) and International Maritime Organization (IMO), but disagree over what “signal” the UNFCCC should send to the ICAO and IMO.

The ICAO has not taken any steps to reduce emissions from aviation thus far. As a result of this inaction, the EU moved to include aviation in its emissions trading scheme (ETS) in 2011, but suspended its decision under pressure from China and India—among other countries—on November 12, 2012. Yesterday, November 26, President Obama signed a bill into law that rejects the EU ETS aviation regime by exempting U.S. airlines. The EU is will push even more strongly for global action on aviation emissions through the UNFCCC and ICAO, and may consider reinstating its program if sufficient action on aviation emissions is not taken globally.

The IMO, on the other hand, has already taken some first steps to lowering emissions from shipping. Here at COP18, the IMO hosted a side event to discuss its efforts. Shipping is the first industry sector to voluntarily institute mandatory efficiency standards for its members, and the industry recognizes that CO2 reductions and savings from fuel efficiency go hand in hand. Shipping is already the most efficient form of transport, but there is still much room for improvement. As John Kornerup Bang of shipping company A.P. Moller-Maersk Group stated at the IMO event, “the world is changing around shipping and shipping must change.”

The IMO’s efficiency standards have focused on two areas: (1) ship design efficiency, and (2) operational management efficiency.  Regarding more significant mitigation efforts in this sector via market-based mechanisms (MBM), the IMO has been receptive to UNFCCC guidance. In fact, a lack of global action by the UNFCCC would make it more likely for regional or unilateral carbon regimes for shipping to spring up. There have been rumors that the EU is considering including shipping in its ETS, as it tried to do unsuccessfully with aviation. The IMO wishes to avoid the carbon leakage that would occur in this situation, since shipping operators are likely to move ship registrations abroad to countries with “open registries”—which is not costly to do—to avoid local regulations and avoid mitigating emissions at all. In terms of the type of MBM, the shipping industry prefers a “fuel levy”—a compensation fund linked to fuel consumption—rather than an emissions trading (permit) scheme, but this would require compiling data of fuel consumption worldwide.

The shipping industry would like to see a UNFCCC regulation that does not use the principle of common but differentiated responsibility (CBDR). A CBDR regulation would require larger emissions reductions from Annex I (developed) countries, in effect creating a regional emissions scheme.  The IMO believes that this would result in a flight of shipping operators from Annex I to Annex II countries to avoid mitigation.  Unfortunately, many countries are not willing to compromise their position on CBDR in other areas of UNFCCC negotiations by making concessions in this sector, even if doing so is the only way to achieve real emissions reductions. Though the IMO is opposed to using CBDR for an MBM-based emissions regime, it recognizes that developing countries have a more limited capacity to mitigate than do developed countries, and has already agreed to begin programs of technology transfer and technical cooperation with developing nations. The IMO is also open to making financial contributions to the Green Climate Fund (GCF) in order to further support developing countries, but with the stipulation that any contribution must not be kept by governments and must reflect shipping’s percentage of global emissions.  Ships transport 90% of world trade, and the industry is wary of being considered a “cash cow” or of such GCF contributions becoming a tax on trade.  The position of the IMO on this topic is aligned with the interests of Latvia, which is considered an Annex I country despite its status as a former-USSR transitional economy; Latvia does not want to be singled out for disproportionate mitigations under CBDR, especially since such a regime would result in little real mitigation overall.  Regarding GCF contributions, it would also be in Latvia’s interest to ensure that such contributions were calculated fairly, taking into account percentage of global emissions.

The recent UNFCCC report on climate finance acknowledged the IMO’s progress on efficiency and identified the fuel levy as an MBM option. However, there has been little further effort on the part of the UNFCCC. The industry believes that a high level UNFCCC/ICAO/IMO working group could be a way of overcoming the current impasse.  Considering the impending end to the Ad-hoc Working Group on Long-term Cooperative Action (AWG-LCA), which previously served as the forum for negotiations in this sector, such a high level working group would likely need to be considered within the new and unpredictable Durban Platform (ADP).  With world trade continuing to rise—and emissions from shipping following closely—global action in this sector becomes more important with every passing day.

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