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Market-Based Measures

Market-Based Measures. Presented by WG 5 Co-Rapporteurs: Stephen Seidel Michael Rossell to ICAO Environmental Colloquium April 9-11, 2001. Overview. Why emissions from aviation need to be addressed? What are market-based measures and why are they attractive?

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Market-Based Measures

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  1. Market-Based Measures Presented by WG 5 Co-Rapporteurs: Stephen Seidel Michael Rossell to ICAO Environmental Colloquium April 9-11, 2001

  2. Overview • Why emissions from aviation need to be addressed? • What are market-based measures and why are they attractive? • What are the key conclusions from CAEP’s work to date? • What are the next steps?-- draft elements of a resolution on next steps.

  3. Basis for Action • Aviation and the Global Atmosphere (IPCC, 1999) assesses aviation’s contribution to climate change: • Aviation currently 2% of global CO2 emissions and 3.5% of radiative forcing • Projected emissions growth of 3% annually • Emissions growth exceeds likely progress in new technologies • Other emissions (Nox, contrails and cirrus cloud formation) could also play a significant role but science more uncertain.

  4. UNFCCC and Kyoto Framework • Framework Convention agreed to in 1992 and entered into force on 21 March 1994. • “stabilization of greenhouse gas concentrations at a level that would prevent dangerous anthropogenic interference with the climate system.” • Kyoto Protocol -- agreed to in 1997, but has not entered into force: • developed nations to reduce ghg emissions • aviation bunker fuels to be limited or reduced through ICAO

  5. Responds to A-32 Mandates • Calls on the Council “….to maintain the initiative in developing policy guidance on all aviation matters related to the environment….” • Calls for the Council through CAEP “...to study policy options to limit or reduce the greenhouse gas emissions from civil aviation….” • Requests the Council to refine the guidance on emission-related levies

  6. Why Market-Based Measures? • More flexible than traditional certification standards -- lets the market work • Provides price signals -- internalizes environmental costs • Provides incentive for technological innovation • Works to minimize costs of achieving reductions • Incorporated into Kyoto Protocol to reduce costs

  7. Market-Based Measures • 1. Taxes and Charges • levy could be placed on amount of fuel or emissions • taxes: revenue goes to national treasury • charges: revenue used to defray the costs of providing facilities and services for civil aviation • increased costs provide incentive to reduce emissions • can be designed to be “revenue-neutral” • used at airports in Sweden and Switzerland for local air quality

  8. Market-Based Measures • 2. EMISSIONS TRADING • sets cap for total emissions • firms can reduce emissions beyond what is required and sell “excess reductions” OR • reduce less than required and buy excess reductions from others • achieves reductions at lowest possible cost • incorporated into Kyoto Protocol • used in US to control acid rain at much lower cost than traditional standards • trading across sectors (open) v. trading within aviation (closed)

  9. Market-Based Measures • 3. Voluntary Initiatives • voluntary agreements to reduce emissions • could set either emissions or efficiency target and/or identify menu of actions • not legally enforceable, but typically requires periodic reporting of progress • Used to reduce ghg emissions in some sectors in US, Netherlands, Canada, UK, EU and Australia.

  10. CAEP 5 Conclusions • Open emissions trading -- cost effective solution in the long term tied to Kyoto entry into force. • Further work needed to develop system • Voluntary mechanisms -- could be a first step to encourage near-term action • guidelines should be developed • Levies -- further studies and guidance should be developed for consideration in shorter term.

  11. CAEP 5 Conclusions • Impacts on developing countries of market-based measures needs to be fully considered • initial work looked at: global application; developed countries only; and flights to and from developed countries. • further analysis required • greater developing country participation encouraged

  12. Draft Elements of an Assembly Resolution • Support continued work by Council to develop policy direction for States and to develop concrete proposals. • 1. Voluntary Mechanisms: • encourage short-term actions to limit or reduce emissions • Council to facilitate action by developing guidelines • cont….

  13. Draft Elements of Resolution • 2. Emissions-Related levies • Confirm existing ICAO guidance (9 Dec 1996) • Urge Council to carry out further studies and develop further guidance • Charges should be based on cost of mitigating environmental impacts of emissions • cont….

  14. Draft Assembly Resolution • 3. Emissions Trading • Implementation of an open emissions trading regime would aim for first commitment period (2008-2012) subject to entry into force of Kyoto. • Request Council to develop urgently the guidelines for open emissions trading

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