3. What would be the impact of a global MBM scheme for international aviation?

 

​Total aviation emissions are forecasted to grow in the coming decades; projected total annual improvements in aircraft fuel efficiency of the order of 1–2% are expected to be largely surpassed by traffic growth of around 5% each year. The most recent estimates anticipate international aviation fuel consumption growing somewhere between 2.8 to 3.9 times by 2040 compared to the 2010 levels.

A global MBM scheme is a cost-effective and complementary way for international aviation to meet its aspirational goal of keeping the global net CO₂ emissions from international aviation from 2020 at the same level (so-called “carbon neutral growth from 2020”), as part of a basket of measures. Some States have requested an assessment of the impact of the global MBM scheme on international aviation, and more specifically on those States participating in the scheme.

CAEP provided a significant amount of technical analyses on the impacts of different approaches for a global MBM scheme design, as requested by the Council and the Environment Advisory Group (EAG). This analysis was originally based on the Strawman proposal, and supported the development of the draft Assembly Resolution text. Analysis included quantification of the total quantities of CO2 emissions from international aviation based on ICAO forecasts, and estimating the total expected quantities to offset. Based on the analysis, the estimated quantity to be offset by the whole sector would be of the order of 142 to 174 million tons of CO2 in 2025; and 443 to 596 million tons of CO2 in 2035, with these ranges being determined by the definitions of a total of nine scenarios going from the most optimistic scenario to the less optimistic one.

(Source: CAEP analysis presented at EAG/15)

CAEP also analysed possible costs of the proposed global MBM scheme by multiplying the estimated quantities of offsets with the assumed various emissions unit prices. It should be noted that the emissions unit prices drive significant uncertainty in total cost impacts of offsetting CO₂ emissions from international aviation.

In this analysis, total cost estimates vary, depending on the emissions unit price scenarios. Considering carbon prices ranging from 6 - 10 $/ton CO₂-eq to 20 - 33 $/ton CO2-eq (based on 2020 and 2030 estimates), costs vary from 1.5 to 6.2 billion US$ in 2025; with carbon prices ranging from 12 $/ton CO₂-eq to 40 $/ton CO2-eq, costs vary from 5.3 to 23.9 billion US$ in 2035. Putting in perspective with the reality of the business, the analysis also shows that the cost of carbon offsetting for operators would range from 0.2 to 0.6 % of total revenues from international aviation in 2025; and 0.5 to 1.4 % of total revenues from international aviation in 2035.

(Source: CAEP analysis presented at EAG/15)

According to a related cost analysis conducted by IATA, the offsetting costs related to the implementation of a global MBM scheme are expected to have a much lesser impact on international aviation than that caused by fuel price volatility. The estimated offsetting cost in 2030 is equivalent to that of a 2.6 US$ rise in jet fuel price (per barrel); an extra 10 US$ per barrel on the price of jet fuel would cost the industry about four times the estimated cost of offsets in 2030. To give a reference on magnitude, over the past decade the standard deviation of the jet fuel price annually has been almost 40 US$ per barrel, meaning that airlines have managed to cope with oil price volatility (mostly upwards) of more than 15 times the size of the estimated offsetting cost in 2030.
When it comes to the cost impacts of a global MBM scheme for individual States or individual aircraft operators, we need to take into account the specific design features of a global MBM scheme, such as phased implementation and exemptions (coverage of total emissions by the scheme), as well as the way to distribute the total offsetting requirements to individual operators participating in the scheme. Please refer to Question 2.3. for details on the proposed phased implementation of the global MBM scheme, and to Question 2.5. for details on the proposed distribution of offsetting requirements.