Will governments disappoint again on carbon accounting at upcoming aviation meetings?

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Some major companies, including airlines, took the lead last December in Katowice, Poland in rejecting the use of dubious carbon credits toward their climate efforts. Despite this drumbeat against bad rules for cooperative approaches under Article 6 of the Paris agreement, experienced government negotiators fell short and did not finalize these guidelines in Katowice. This month in Montreal, governments could decide the fate of carbon credits for the Carbon Offsetting and Reduction System for International Aviation (CORSIA), but will they ignore business demand for good credits by allowing aviation emissions reductions to be double counted?

Let’s look behind the negotiating curtain and unpack how companies got involved, why governments should pay attention to companies’ push for environmental integrity and what governments can do in Montreal to maintain the integrity of CORSIA.

What is double counting?
Avoiding double counting is a basic accounting principle. And it’s fundamental to the design of cooperative approaches for international carbon trading. This means that no two entities can count the same emission reduction toward any mitigation effort.

If emissions reductions are double counted, for example counted once in the host country and again by an airline under CORSIA, the atmosphere only “sees” one set of reductions. This cheats the atmosphere and undermines the global efforts to reduce the impact of climate change. Several studies show that double counting could negate the entire ambition of efforts under the Paris Agreement. This would leave no hope for those most vulnerable to climate change, especially small island developing states and least developed countries.

The Paris agreement prohibits double counting, though Parties have yet to formalize the rules for cooperative approaches. This is not least because, after two weeks of late night negotiations at COP24, Brazil refused to change its position on accounting for the new Article 6 mechanism, a position which would create double counting, and made a deal on markets’ guidelines impossible.

Although the Paris agreement gives Parties the space to act responsibly even in the absence of agreed guidance, the failure to complete the rulebook for market accounting in Katowice increases the risk of double counting, a serious threat to the environment under international market mechanisms, including CORSIA.

Business sector demands sound accounting
While governments missed an opportunity to stand up carbon markets, more than 50 non-government signatories, with a total employment footprint of a billion people in 130 countries, stepped forward to reject double counting, through the Katowice Declaration on Sound Carbon Accounting, drafted with the International Emissions Trading Association.

This even prompted the International Air Transport Association, which represents over 80 percent of the world’s airlines, to release their own statement on the topic.

Companies and airlines want ICAO and the UNFCCC to provide clear rules to ensure no double counting. They don’t want to be criticized by the public for their climate protection efforts. And they don’t want the financial and reputational risks associated with double counted units to negatively affect their bottom line.

Governments get a second chance
In the coming months, ICAO will host meetings to finalize CORSIA’s Standards and Recommended Practices, which may include the adoption of the emissions unit criteria, or EUCs, and the start of work to determine eligible emissions units. A proposed emissions unit criterion states generally that emissions reductions should only be counted once toward a mitigation effort.

What happens if international organizations fumble on these rules?

1. Nothing: Since COP24 produced no markets rules, ICAO could postpone its decisions on double counting until COP25, to be held in Santiago, Chile and await guidance from the UNFCCC. But this will further delay climate action and leave airlines in limbo, as they seek clarity and certainty on which emissions units to purchase to meet obligations under CORSIA. This is not a great option for airlines.
2. Countries can commit to implementing the nearly agreed guidance on double counting under Article 6 while working to clear the way to agreement in the UNFCCC. At the same time, Airlines can commit to purchasing only units that are not double counted. How will they know that units aren’t double counted? Stay tuned for a future blog post on this topic.

The urgency of climate action cannot be overstated. Every effort counts, which is why we need market based measures like CORSIA and Article 6 of the Paris Agreement. The UNFCCC and ICAO cannot ignore the calls from private sector and other non-state actors to adopt rules that encourage and support environmental integrity in carbon markets, with principles such as strong safeguards, good governance and avoidance of double counting.

Despite the lack of agreed rules at the Katowice COP, businesses, including airlines, are sending strong reminders to the UNFCCC and ICAO that carbon markets require sound accounting rules in order to be successful and to promote business confidence. They warn that, in the absence of agreed rules, they will look elsewhere for guidance on good credits and environmental integrity.