Market-based measures include: emissions trading, emission
related levies - charges and taxes, and emissions offsetting;
all of which aim to contribute to the achievement of specific
environmental goals, at a lower cost, and in a more flexible
manner, than traditional command and control regulatory
measures. Market-based measures are among the elements of
a comprehensive mitigation strategy to address greenhouse
gas (GHG) emissions from international aviation that are
being considered by ICAO.
In 2001, the ICAO Assembly requested the Council to continue
to develop guidance for States on the application of market-based
measures aimed at reducing or limiting the environmental
impact of aircraft engine emissions, particularly with respect
to mitigating the impact of aviation on climate change.
The Assembly encouraged States and the Council, taking into
account the interests of all parties concerned, to evaluate
the costs and benefits of the various measures with the
goal of addressing aircraft engine emissions in the most
cost-effective manner, emphasizing the need for States to
take action in a consistent manner regarding both domestic
and international aviation emissions (Resolution
A36-22 (PDF), Appendix L).
One of the principal findings is that an emissions-trading
system is a system whereby the total amount of emissions
is capped and allowances, in the form of permits to emit
CO2, can be bought and sold to meet
emission reduction objectives. Such a system could serve
as a cost-effective measure to limit or reduce CO2
emitted by civil aviation in the long term, provided that
it is open to all economic sectors.
The Assembly consequently endorsed the development of
an open emissions trading system for international aviation.
It requested the Council to develop as a matter of priority
the guidelines for open emissions trading, focussing on
establishing the structural and legal basis for aviation's
participation in an open trading system, and including key
elements such as reporting, monitoring, and compliance,
while providing flexibility to the maximum extent possible
consistent with the UNFCCC process. A draft guidance on
the use of emissions trading has been published by ICAO.
[Guidance on the use of Emissions Trading for Aviation
The analyses have also indicated that short-term voluntary
measures – that is, a mechanism under which industry
and governments agree to a target and/or to a set of actions
to reduce emissions – could serve as a first step
towards future actions to further reduce emissions. The
Assembly consequently encouraged short term action by States
and other parties involved to limit or reduce international
aviation emissions, in particular through voluntary measures.
It also urged the Council to facilitate actions by developing
guidelines (such as for quantifying, monitoring and verifying
emission reductions or actions) for such measures, including
a template voluntary agreement as appropriate. The Assembly
also recognized the need to ensure that those taking early
action would benefit from such actions and would not subsequently
be penalized for so doing.
ICAO has published guidance on emission-related levies
[Guidance on Aircraft Emission Charges Related to Local
Air Quality (Doc 9884)] – that is, charges or
taxes. It also has long-standing policies covering charges
in general (ICAO's Policies
on Charges for Airports and Air Navigation Services,
Doc 9082/6). ICAO has also developed separate policy guidance
to States on taxation (ICAO's Policies
on Taxation in the Field of International Air Transport,
Doc 8632), which recommends the reciprocal exemption from
all taxes levied on fuel purchased for international flights,
a policy implemented in practice in the vast majority of
bilateral air services agreements, and also calls on States
to reduce or eliminate taxes related to the sale or use
of international air transport.
In December 1996, the ICAO Council adopted a policy
statement in the form of a resolution, concerning the
use of emission-related levies. While the Council considered
that the development of an internationally agreed environmental
charge or tax that all States would be expected to impose
would appear not to be practicable at that time, given the
differing views of States and the significant organizational
and practical implementation problems that would be likely
to arise, the Council strongly recommended that environmental
levies that States may introduce should be in the form of
charges rather than taxes and that the funds collected should
be applied in the first instance to mitigating the environmental
impact of aircraft engine emissions. Such charges should
be based on the costs of mitigating this impact, to the
extent that such costs can be properly identified and directly
attributed to air transport.
The Assembly recognized the continuing validity of the
1996 policy regarding emission-related levies, urged States
to refrain from unilateral action to introduce emission-related
levies inconsistent with the current guidance, and called
for the Council to carry out further studies and develop
further guidance on the subject.
Since 1998, CAEP has undertaken the development of policies,
guidance material and technical and economic studies on
various market-based measures to address GHG emissions from
international aviation, including emissions trading, emission-related
levies, emissions offsetting. With a view to further developing
information on market-based measures for aviation, CAEP/7
in February 2007 established a Market-based Measures Task
Force (MBMTF) to develop the following three reports:
- Report on Scoping Study of Issues related to Linking
Open Emissions Trading Systems involving International
- Report on Offsetting Emissions from the Aviation Sector;
- Updated Report on Voluntary Emissions Trading for Aviation.
These reports were approved by CAEP/8 in February 2010
and by the Council in June 2010.