Title 36pt Georgia Subtitle 24pt Georgia Italics

1. ICAO: Market-Based Measures Ted Milczarek APEC Aviation Emissions Task Force Meeting 2 Singapore, 15-16 September 2009 Title 36pt Georgia Subtitle 24pt Georgia Italics Presentation Information Arial Narrow 24pt

2. Why market-based measures • Global aviation traffic is projected to grow on average at 5% per year • Efficiency gains of up to 2% per year from operational improvements and new aircraft technology • Alternative low carbon or biofuels for aviation unlikely for many years • Aviation emissions expected to continue to grow at around 3% per year

3. Role of market-based measures

4. Types of MBM considered in ICAO • Emissions related levies • Fuel taxes • Charges • International versus individual levies • Emissions trading • Closed versus open schemes • Global versus integration in national schemes • Mandatory versus voluntary • Other voluntary measures • Voluntary agreements • Carbon offsetting

5. Short history of MBM in ICAO • 1998 Assembly was first to direct a study of policy options to limit or reduce aviation GHG • three CO2 emissions reduction targets for 2010 • examination of emissions related levies, emissions trading, voluntary measures • 2001 Assembly endorsed development of an open emissions trading system for aviation • study of ETS options undertaken by ICF Consulting • concurrent work on emissions levies and voluntary agreements

6. Short history of MBM (cont.) • 2004 Assembly moves away from a global open ETS for international aviation • guidance on inclusion of international aviation in national or regional emissions trading scheme • report on voluntary emissions trading for aviation • 2007 Assembly debate around proposal to include international aviation in the EU ETS • States urged not to include other State’s operators in ETS except on the basis of mutual agreement between States • GIACC tasked with developing program of action on emissions

7. MBM and GIACC • MBM included in GIACC Terms of Reference as one of the elements to be addressed • Basket of measures developed by GIACC includes a range of MBM • GIACC established a Working Group to explore MBM options • GIACC recommended a framework be developed for MBM for international aviation

8. MBM and ICAO HLM • ICAO Secretariat Working Paper/8 on ICAO public web site www.icao.int/Highlevel2009 • responding to GIACC discussions • Industry proposals outlined in WP/8 • IATA • Aviation Global Deal (AGD) • ICAO seeking endorsement to develop a MBM framework before the 2010 Assembly

9. Market-Based Measures Task Force • MBMTF established at 2007 CAEP meeting • 20-25 participants from States and organisations • Five deliverables by 2010 CAEP meeting • Update Report on Voluntary Emissions Trading • Initial report at www.icao.int/icao/en/env/vets_report.pdf • Existing and possible voluntary ETS involving aviation • Study on linking open ETSs involving aviation • Linking important in absence of a global system • Variety of ETSs being developed raises many challenges

10. MBMTF (cont.) 3. Study on application of emissions trading and offsets for local air quality in aviation • focus on ambient air quality around airports • trading or offsetting could be most cost effective approach 4. Offset measures as a further means of mitigating the effects of aviation emissions on climate change • All aviation CO2 emissions offset at $6 per pax at $20/tonne • Opportunities exist to encourage greater offsetting by pax 5. Monitoring voluntary agreed measures • Between industry and governments or regulatory authority • Measures to limit or reduce international aviation emissions

11. Issues for APEC economies • Will MBM be part of emissions strategies? • What support for MBM at ICAO HLM? • What role for MBM in UNFCCC COP/15 discussions in Copenhagen? • What response to European plans to include international aviation in EU ETS from 2012?

12. THANK YOU