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Greenhouse gas emissions from international aviation and allocation options

10 Allocation options - discussion on data requirements

Parties to the UN Climate Convention have not yet been able to agree upon a methodology for allocating emissions from international aviation to Parties. Therefore, these emissions are not included in the national emission inventories that are to be reported the UNFCCC by Annex I countries, but are reported separately under international bunkers in conjunction with emissions from international marine transport. This chapter briefly summarises the options for allocation that have been considered by SBSTA and discusses the data requirements for each option. We note, that this report is not intended to point out which options may be politically feasible.

10.1 Allocation options considered by SBSTA

SBSTA has considered the following options for allocating emissions from international aviation [UNFCCC 1996a]:

1. No allocation
2. Allocation in proportion to national emissions of Parties
3. Allocation to the country where the fuel is sold
4. Allocation to the nationality of airlines
5. Allocation to the country of destination or departure of aircraft. Alternatively, the emissions related to the journey of an aircraft could be shared by the country of departure and the country of arrival
6. Allocation to Parties according to the country of departure or destination of passenger or cargo. Alternatively, the emissions related to the journey of passengers or cargo could be shared by the country of departure and the country of arrival
7. Allocation to the country of origin of passengers or owner of cargo
8. Allocation according to emissions generated within each party's national space

In relation to the discussion of options for allocating emissions from international aviation SBSTA considers the following questions relevant [UNFCCC 1996b]:

1. Would it be feasible for the Party to control the emissions allocated to it?
2. Could the required data be generated with sufficient precision?
3. Is the method based on the "polluter pays" principle?
4. Is the method equitable?
5. Does the allocation method cover all international emissions?
6. Is the method suitable for all greenhouse gases?
7. Should the method apply to both aviation and marine emissions?
8. Does the method provide a suitable basis for making projections?

In 1996 SBSTA concluded that options 1, 3, 4, 5 and 6 should be the basis for the further work and that with respect to option 1 (non-allocation) the responsibilities of the international community to address issues related to international bunker fuels should be recognised [UNFCCC 1996b, paragraph 55].

10.2 The European Commission's considerations over allocation

By 1999, Parties were given the chance to comment on the conclusions of an informal paper, "Methods used to Collect Data, Estimate and Report Emissions from International Bunker Fuels" [UNFCCC 1999f] requested from a consultant by the UNFCCC Secretariat. On that occasion some Parties gave their views on which allocation methodologies that might be preferable if emissions from international bunker fuels were to be allocated to Parties. Finland commented the informal paper on behalf of the European Community and its member states, and stated that "…any decision on the inclusion of emissions from international bunker fuels in the national inventories of Parties (i.e. on allocation) should enter into force during the second commitment period, because such a decision would require a change in the Revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories, which shall be applied in the first commitment period pursuant to Article 5 of the Kyoto Protocol and Decision 2/CP.3. Therefore, Parties should continue to report these emissions separately from national totals in the first commitment period.

Based on the conclusions of SBSTA 4, the EU sees the following twintrack approach (main options I and II) noting that different options could be pursued for aviation and marine bunker fuels.

1. No inclusion of emissions from international bunker fuels in the national inventories of Parties (option 1) as in the current situation. Limitation or reduction of these emissions would be under the general responsibility of the international community (as acknowledged in FCCC/SBSTA/1996/20, para. 55), to be pursued through ICAO and IMO. The EU may consider option 1 (no allocation) further, if ICAO and IMO make demonstrable progress, taking into account the overall emission reduction target of the Kyoto Protocol, in accordance with the timetables and mitigation plans set out above.
     
2. Inclusion of emissions from international bunker fuels in the national inventory of the Party (options 3, 4, 5 and 6).

With regard to the allocation options (options 3, 4, 5, and 6), the SBSTA should compare and discuss these with a view to being in a position to reach agreement on one option by 2005. In that context, the EU presents the following initial views.

The EU also believes it necessary to explore ways to further strengthen the exchange of information between ICAO, IMO and SBSTA. In addition, the EU requests that the Secretariat give recommendations on the possibility of forming a joint working group of the FCCC (SBSTA/SBI) with ICAO (CAEP) as well as with IMO (MEPC) as a means to strengthen the exchange of information between these bodies and the co-operation at the working level" [UNFCCC 1999e].

In the October 2001 Conclusions by the European Environment Council on the preparation of CoP7 in Marrakesh 29 October to 9 November 2001, the European Environment Council reiterates that urgent action remains necessary to curb the expected growth in emissions from international aviation. The European Council of Ministers notes that ICAO's Assembly Resolution A33-7 endorses the establishment of an open emissions trading system for international aviation (see section 6.3 for a description of the contents of ICAO's Assembly Resolution A33-7). The European Council of Ministers stresses that in order for this emissions trading system to be compatible with the Kyoto Protocol, it will be necessary to submit international aviation to emission limitation and reduction commitments and to establish a methodology for allocating emissions to Parties. Therefore, the European Environment Council considers that this question should be examined by the SBSTA jointly with ICAO. The European Council of Ministers furthermore recalls the need for further development with ICAO of practical guidance on the use of voluntary mechanisms and gaseous emissions related levies as soon as possible, while taking into account the economic, environmental and competitive impact of such measures. Finally, the Council recalls that it agreed in its common position on the 6th Environmental Action Programme that the Community should identify and undertake specific action to reduce greenhouse gas emissions from aviation if no such action is agreed within ICAO by 2002 [EU Environment Council Conclusions 29th October 2001; article 5].

10.3 December 2002 survey on preferences among European Union Member States and the European Commission towards the allocation issue

In a December 2002 survey performed by the Danish EU Presidency on behalf of EUs group of climate change policy experts (PAM) EU Member States and the European Commission were asked to give their initial views on the allocation issue. At the deadline of this report responses had been received from 6 Member States and the European Commission.

In the survey a questionnaire was circulated to Member States and the European Commission asking, among other things, which types of allocation options seem feasible (data availability and legal aspects), which advantages and disadvantages MS see for each allocation option, which data would be needed for each allocation option and how long time would it take MS to set up a system for collecting the data needed for each type of allocation option.

It should be noted that Member States and the European Commission emphasize in their responses that the initial views given to the questions on the feasibility and preferability of different options for allocation are preliminary views that may not necessarily reflect the official views of MS or the European Commission. As can be seen from the table below, at the deadline for this report, only relatively few respondents have stated preliminary preferences for allocation options, and these preferences differ widely (1 indicates first preference).

*Allocation to airlines and shipping companies but not to countries, combined with individual caps for companies. The overall reduction cap for Annex I Parties should be reflected in the overall cap for Airlines.
** Member States that cannot provide any ranking at this stage.
*** The ranking is based on aviation.

The Commission confirms its earlier statement (see section 10.2) that emissions from international aviation (and shipping) should be allocated to Parties, beginning in the second commitment period under the Kyoto Protocol.

The Commission feels that the most important criteria for allocating bunker fuel emissions should be that for any option chosen:

	it should be consistent with the 'polluter pays' principle and therefore should be equitable - although it is not always clear who should be considered as the 'polluter' (the passengers/cargo exporters/importers, the airline/shipping company or the company selling the bunker fuel);
	it should allow the Party (either the EC or the individual Member States) to exercise a degree of control over the emissions allocated to it;
	it should be possible to ensure the accuracy of the required data; and
	it should cover all international bunker fuel emissions.

In addition to this, there are other criteria that should ideally be met:

	the allocation option should to the widest extent possible depend on existing data rather than require setting up completely new, complex data collection systems
	the method chosen should not encourage the use of strategies simply to avoid emissions being allocated to a particular Party e.g. 'tankering' of fuel by over-loading with fuel in another country or registering aircraft or ships in a different country to that where they normally operate.

10.4 Description of allocation options and data requirements

This section briefly describes the 8 allocation options considered by SBSTA and discusses data requirements for each option. Much of this discussion is being based on a literature review²³ of some earlier studies that have discussed different allocation options examining several aspects such as data requirements and data availability and concerns over equity and efficiency (in terms of giving Parties an incentive to reduce emissions from international aviation). Furthermore the discussion is based on the response given by the European Commission to the questionnaire mentioned in section 10.3. In this report we focus on describing the data availability and data requirements, and the issue of equity is also briefly discussed.

10.4.1 No allocation (option 1)

Option 1 is among the options chosen by SBSTA for further investigation.

Under this option the emissions from international aviation are not allocated to Parties. This option represents the status quo where Parties report emissions from international aviation separately from national emissions. This option merely requires data on the global emissions due to international aviation activities. As discussed in chapter 6 it is generally acknowledged that the international statistics on fuel consumption and emissions related to international aviation activities needs to be improved. Parties are generally having difficulties in estimating the split between fuel consumed for domestic and international aviation This subject is scheduled for discussion at SBSTA 18 and CAEP has decided to organize a "scoping meeting" in 2003, involving the UNFCCC Secretariat, the rapporteurs of some of CAEPs working groups and experts on emissions inventory and data reporting (see chapter 7).

The underlying idea of the option not to allocate emissions is that Parties may consider implementing control options at the global level, for example through ICAO, to reduce emissions from international aviation activities. Any such control options may require specific types of data. Therefore, the type of data needed will depend on the types of control options chosen. As described in section 6.3 CAEP is currently investigating the possibilities for setting up voluntary agreements with airlines on future improvement of their energy efficiency. CAEP is furthermore investigating the possible option of implementing an open scheme for emissions trading. Such control options, if implemented, may likely require that airlines begin reporting in detail on their fuel consumption and emissions. For this purpose some of the methodological aspects discussed in chapter 8 may become relevant. Additionally, as recently pointed out by the UK Royal Commission on Environmental Pollution, if an emissions trading scheme is implemented, emissions from international aviation would have to be included in national greenhouse gas inventories of Parties to avoid double-counting of emission reductions attained in other sectors [Royal Commission on Environmental Pollution 2002]. Therefore, on the longer term, it seems that emissions from international aviation may have to be included also in the case where emissions reduction is pursued through ICAO.

10.4.2 Allocation in proportion to national emissions of Parties (option 2)

Option 2 is not among the options chosen by SBSTA for further investigation.

This option would allocate emissions in proportion to the contribution of a Party to global emissions. For example, the 1990 share of global international aviation was about 1,3% per cent of the global CO₂ emissions from all sources [IEA 2001]. With proportional allocation, each Party would add about 1,3 per cent to its domestic emissions in order to cover all international emissions jointly. For this allocation data is needed merely on the total national emissions of each Party and the total emissions from international aviation.

Under option 2 countries with relatively low national emissions in the base year will be allocated a similarly small share of international aviation emissions. Examples are countries such as Austria, France, Sweden and Switzerland, where national CO₂ emissions per capita are relatively low owing to the high share of hydro and/or nuclear power in national energy production. In contrast, countries with relatively high national CO₂ emissions per capita, would be allocated a comparatively large share of international aviation emissions. See Table 21 in Appendix J for a comparison between CO₂ emission allocated to each country under option 2 and the other seven options as given in a Dutch study on "National allocation of international aviation and marine CO₂ emissions" [Velzen 2000].

Option 2 does not allocate emissions in proportion to each Party's level of aviation activities and is therefore not based on the "polluter pays principle" and thereby also raises fundamental equity considerations.

10.4.3 Allocation to the country where the fuel is sold (option 3)

Option 3 is among the options chosen by SBSTA for further investigation.

There does not seem to be major problems with getting data for option 3 since data on fuel sales are already available and because no distinction is needed between domestic and international.

This option would allocate emissions to Annex I Parties on the basis of aviation fuel sales. The option appears to resemble the way emissions from fuel use in road transport are allocated since fuel for road transport may be sold in one country and emissions may occur in another.

For aviation, in the majority of cases, the option is consistent with the 'polluter pays' principle because the aircraft is likely to depart from the country where it buys the fuel. However, it should be mentioned that this option does not take into account the problem of fuel "tankering", e.g. aircraft taking extra fuel onboard to be used for its next flight stage. If, for example, an aircraft take onboard extra fuel in one country, then flies on to another country without using all the fuel, and finally uses the rest of the fuel on a second flight stage to a third destination, the fuel spent at the second flight stage is attributed to the country where the fuel was originally loaded. Therefore, countries that sell the fuel at the lowest cost are likely to be accredited for extra fuel sales because the airlines will tend to buy the fuel where it is cheapest. Thus, option 3 does not fully allocate emissions in proportion to each Party's level of aviation activities and thereby raises some equity considerations.

Furthermore, as it is also the case with options 5 and 6, for option 3 more than one third of the emissions from international aviation will be allocated to non-Annex I countries. From an equity point of view this allocation could be questioned due to the fact that much of the fuel sold for international aviation in these countries may actually relate to air travel performed by people living in Annex I countries.

Finally, as it is also the case for options 5 and 6, option 3 disfavours countries with a high level of aviation activities (for example countries that house large international hub airports) and this can cause equity considerations in cases where a large portion of the passengers and the freight is transported through the country in transit.

10.4.4 Allocation to the nationality of airlines (option 4)

Option 4 is among the options chosen by SBSTA for further investigation.

Option 4 involves allocation to Parties according to the nationality of the transporting company, the country where the aircraft is registered, or the country of the operator. This set of three options has the common feature that the owner/operator relationship is a primary determinant for allocation. The first case has the advantage that national airlines typically maintain information on the amount of fuel they have uplifted. States/Parties would need to ensure that its airlines collected and reported information on the amount of fuel it used over the course of each year splitting that usage into domestic and international according to the IPCC reporting guidelines. One question is whether Parties could start collecting these fuel consumption data from airlines in a consistent and adequate way.

One problem related to option 4 is whether airlines could change flag, for example to non-Annex I countries. Similarly, as airlines are increasingly privatised and have fewer links with a particular country, option 4 does not necessarily always apply the 'polluter pays' principle. Countries with large national airlines would be allocated a large proportion of global emissions, even if many of the flights does not depart or arrive within the country itself.

Option 4 may involve that a higher share of the emissions from international aviation will be allocated to Annex I countries, because much of the fuel sold in non-Annex I countries is lifted by airlines registered in Annex I countries (see the comparison between option 4 and the other options in Table 21 in Appendix J). From an equity point of view option 4 could be considered more equitable for non-Annex I countries due to the fact that much of the fuel sold for international aviation in these countries may likely relate to air travel performed by people living in Annex I countries.

10.4.5 Allocation to the country of destination or departure of aircraft (option 5)

Option 5 is among the options chosen by SBSTA for further investigation.

Option 5 involves allocation to Parties according to the country of departure or destination of an aircraft. Alternatively the emissions related to the journey of an aircraft or vessel could be shared between the country of departure and the country of arrival.

This option would require sharing information between Parties. It might be feasible, in particular for long flights, but it would be much more complex for short flights, in so far as it would require breaking fuel intake or consumption down by country of departure and destination. Nevertheless, if aircraft movements could be broken down by aircraft types this allocation option could account for differences in emissions between various aircraft. Fuel consumption and emissions would need to be estimated from movement data (for example by use of the detailed CORINAIR methodology described in section 8.1). Reliable civil air traffic data are stored by air traffic control authorities such as Eurocontrol and, provided they agree to make them available, no new data collection would be needed. However, the data needed for this type of calculation may take some time to collect since many countries are today not using the more detailed methodologies discussed in chapter 8.

Option 5 seems to result in a similar allocation of CO₂ emissions between countries as options 3 and 6 (see Table 21 in Appendix J), although options 5 and 6 might be able to take fuel tankering better into account than option 3.

Furthermore, as it is also the case with options 3 and 6, for option 5 more than one third of the emissions from international aviation will be allocated to non-Annex I countries. From an equity point of view this allocation could be questioned due to the fact that much of the fuel sold for international aviation in these countries may actually relate to air travel performed by people living in Annex I countries.

Finally, as it is also the case for options 3 and 6, option 5 disfavours countries with a high level of aviation activities (for example countries that house large international hub airports) and this can cause equity considerations in cases where a large portion of the passengers and the freight is transported through the country in transit.

10.4.6 Allocation to the country of destination or departure of passengers or cargo (option 6)

Option 6 is among the options chosen by SBSTA for further investigation, but is considered to be less practical because of additional data requirements.

Option 6 involves allocation to Parties according to the country of departure or destination of passenger or cargo. Alternatively, the emissions related to the journey of a passenger or cargo could be shared by the country of departure and the country of arrival. This option would require Parties to compile information based on the destination of the cargo and passengers. The statistics would have to be cross-referenced to fuel use. While conceptually possible, at the present time there is no system to acquire the data or methodology to calculate the emissions. Acquiring the detailed information would also involve additional administration and some extra cost [UNFCCC 1996b].

Under this allocation option the allocation of emissions between passengers and cargo would be complex. As discussed in chapter 9 airlines do most often not report such data, and when they do, different methodologies are used. An agreed methodology would therefore be required.

Option 6 seems to result in a similar allocation of CO₂ emissions between countries as options 3 and 5 (see Table 21 in Appendix J). We note that the result in Table 21 is for the case where the fuel consumption is distributed equally between the total weight of passengers and freight on an equal weight basis. As discussed in section 9.3.2 there may be need for the use of other methodologies for allocating fuel consumption between passengers and freight.

Furthermore, as it is also the case with options 3 and 5, for option 6 more than one third of the emissions from international aviation will be allocated to non-Annex I countries. From an equity point of view this allocation could be questioned due to the fact that much of the fuel sold for international aviation in these countries may actually relate to air travel performed by people living in Annex I countries.

Finally, as it is also the case for options 3 and 5, option 6 disfavours countries with a high level of aviation activities (for example countries that house large international hub airports) and this can cause equity considerations in cases where a large portion of the passengers and the freight is transported through the country in transit.

10.4.7 Allocation to the country of origin of passengers or owner of cargo (option 7)

Option 7 is not among the options chosen by SBSTA for further investigation and is considered to be less practical because of its substantial data requirements.

Unlike options 2, 3, 4, 5, 6 and 8 option 7 allocates emissions in proportion to the origin of the passengers and the freight. The transport work could be measured in terms of for example passenger kilometres and freight tonne kilometres. Thereby this option allows for the allocation of emissions to the Party from which the passengers and cargo can be said to originate. This option is thereby based on the "polluter pays principle" and seems to be an equitable solution to the allocation problem. Thereby this allocation option seems to solve the problem that aircraft can carry passengers and freight originating in a variety of different countries and that these aviation activities may not necessarily be beneficial to the countries of departure and destination. One example of this could be transit passengers passing through a country with the sole purpose of shifting from one aircraft to another.

However, it should be mentioned that an equitable allocation is difficult to define. In this context, it appears to be fair to allocate emissions proportionally to the country to which the economic benefit accrues. However, in practice, the benefits generated by a flight may accrue to many different countries. Often, the most obvious beneficiaries are the countries of departure and arrival of a flight, while other beneficiaries include the country of the aircraft operator (the aircraft operator may not necessarily originate in the countries of departure and arrival), and the country of origin of the passengers and freight being transported (an aircraft operator originating in one country may transport passengers and products originating in several other countries).

The main disadvantage of option 7 is that it requires the same data as option 6 plus statistics on the origin of passengers and cargo that are not readily available. As noted in a recent study commissioned by the Danish Energy Agency in conjunction with the Danish Ministry for Transport, the airlines may have statistics on origin of passengers and freight but these are most often not publicly available. It may be possible for airlines to report these data, but the cost is unknown and there may be legal or competition implications. Another possibility mentioned in the Danish study would be to use surveys on travel behaviour [Danish Energy Agency 2001]. However, such surveys are not applicable in all countries and methodologies and accuracy may vary substantially.

As it is the case for option 6, option 7 would have to take into consideration the problems related to estimating aircraft fuel consumption and find ways to allocate these emissions between passengers and freight transported in passenger aircraft. Additionally, these data would have to be cross referenced with data on the origin of passengers and freight.

Option 7 may likely involve that a higher share of the emissions from international aviation will be allocated to Annex I countries than for any of the other options. This is because much of the fuel sold in non-Annex I countries is lifted by airlines registered in Annex I countries (see the comparison between option 7 and the other options in Table 21 in Appendix J). From an equity point of view option 4 could be considered more equitable for non Annex I countries due to the fact that much of the fuel sold for international aviation in these countries may actually relate to air travel performed by people living in Annex I countries. However, it should be noted that emissions are allocated in proportion to GDP for option 7 in the examples shown in Table 21 because data on the nationality of passengers and cargo is generally not available. Thus, the origin of travellers and cargo cannot be estimated at present.

10.4.8 Allocation according to emissions generated within each party's national space (Option 8)

Option 8 is not among the options chosen by SBSTA for further investigation. Under this option emissions from international aviation are not fully allocated to individual countries since emissions over international territories are not allocated. This option has a precedent in other sectors, where emissions are allocated to the Party where the emissions occur in accordance with the IPCC Guidelines. In the case of aviation, it would require cross-referencing between fuel consumption and flight route. A correlation with aircraft type would lead to more accuracy. However, this option would not lead to full coverage of emissions from international aviation, many of which occur above international waters. It is therefore not seen as a feasible option by SBSTA [UNFCCC 1996a].

10.5 Discussion on allocation options

The twin-track approach suggested by the European Community aims at either not allocating emissions from international aviation in the national inventories of Parties (option 1), and to pursue limitation or reduction of these emissions through ICAO, or to include emissions from international aviation in the national inventory of the Parties in the second commitment period of the Kyoto Protocol. The remaining question seems to be whether it may be possible to reach an agreement on the allocation issue before 2005. Furthermore, recent developments suggest that ICAO may be heading towards investigating further the potential use of an open emissions trading scheme for aviation, allowing the aviation industry to buy emission permits in other sectors (see section 6.3). As recently pointed out by the UK Royal Commission on Environmental Pollution, if an emissions trading scheme is implemented, emissions from international aviation would have to be included in national greenhouse gas inventories of Parties to avoid double-counting of emission reductions attained in other sectors [Royal Commission on Environmental Pollution 2002]. Therefore, on the longer term, it seems that emissions from international aviation may have to be included also in the case where emissions reduction is pursued through ICAO.

SBSTA and the European Commission seem to agree that any allocation option chosen should be consistent with the 'polluter pays' principle and therefore should be equitable. The problem is that it is not always clear who should be considered as the 'polluter'. Furthermore there is the problem that it should be possible to ensure the availability and accuracy of the data required for allocating emissions. Option 3, allocation to the Party where the fuel is sold, seems to be the easiest way to allocate emissions from aviation because the data are to a wide extent already available. Furthermore, a comparison of options 3, 5 and 6 show that, for most countries, the different methodologies used for each option do not produce radically different results (see Table 21 Appendix J). The main problem with the data reported by Parties to the UNFCCC on fuel consumed for international aviation, is that Member States are having difficulties in separating fuel consumed for domestic and international purposes (see section 7.2). In the case of option 3, the separation of fuel sales into domestic and international does not seem to be necessary if emissions from international aviation are to be included in national totals. However, option 3 does not take into account that aircraft can tanker extra fuel. Some countries that sell aviation fuel at relatively low prices may therefore be disfavoured by option 3 as compared to options 4 (allocation to the nationality of airlines), 5 (allocation to the country of destination or departure of aircraft) and 6 (allocation to Parties according to the country of departure or destination of passenger or cargo). Option 5 may solve the tankering problem but would require that Parties use models to calculate fuel consumption. Option 6 is disfavoured by the fact that it would require even more complicated models and data details than option 5. Options 3, 5 and 6 disfavours countries with a high level of aviation activities (for example countries that house large international hub airports) and this can cause equity considerations in cases where a large portion of the passengers and the freight is transported through the country in transit. Option 4 is disfavoured by the fact that countries do not currently gather data on the fuel consumption of national airlines. However, such data may be relatively easy to collect. The main disadvantage of option 4 seems to be that it does not necessarily always apply the 'polluter pays' principle because countries with large national airlines would be allocated a large proportion of global emissions, even if many of the flights do not depart or arrive within the country itself. However, option 4 may involve that a higher share of the emissions from international aviation will be allocated to Annex I countries than what is the case for options 3, 5 and 6. From an equity point of view option 4 could be considered more equitable for non-Annex I countries due to the fact that much of the fuel sold for international aviation in these countries may actually relate to air travel performed by people living in Annex I countries. Finally it should be mentioned that option 7 (allocation to the country of origin of passengers or owner of cargo) is probably the option which is most in line with the "polluter pays principle" and would most likely be favourable to non-Annex I countries and countries that house large international hub airports, but this option was discarded by SBSTA due to its substantial data requirements.

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