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CHAPTER 4 State of the Global Carbon Markets and Aviation: Regulatory Requirements and Voluntary Stewardship While most traditional pollutants have local impacts, the increase of GHG concentrations in the atmosphere presents a unique environmental policy issue, because GHG emissions are global and collective in nature. Many proponents of a market-based solution to reducing GHG emis- sions envision a global market for allowances and offset credits where every GHG emitting per- son, company, or government in the world would be linked by a common regulatory cap-and- trade system and would be required to retire an allowance or offset credit to account for all emissions. Allowances and offset credits would then be tradable across national borders while collectively the world cap would steadily decline, ensuring lower concentrations of GHGs and slowing the impacts of global warming. The following section describes the current state of carbon markets internationally. Because the United States does not have a national compliance carbon market at this time, it is impor- tant to look at operational compliance markets, like Europe and New Zealand, for guidance on how the United States compliance market might operate. 4.1 Global Compliance Carbon Market Overview Key Takeaways for Airports No operating compliance carbon markets target airports themselves as regulated entities. Global carbon offset credit markets exist at this time to serve international markets. By regulating aircraft emissions, Europe's cap-and-trade scheme will be the first to regulate existing emission sources from the aviation sector, beginning in 2012. The global carbon market is characterized by national policies driving compliance markets and voluntary emission trading programs. Voluntary emission trading occurs both regionally and globally, through a number of different protocols, largely to meet individual and corporate altruistic initiatives to claim emission reductions. The United Nations Framework Convention on Climate Change (UNFCCC) is the predominant forum for international discussions and agreements relating to climate change. The Kyoto Protocol Treaty is an international and binding agreement to reduce GHG emissions for industrialized countries and to promote clean develop- 34

OCR for page 34
State of the Global Carbon Markets and Aviation: Regulatory Requirements and Voluntary Stewardship 35 ment in less developed nations. This agreement came out of the Kyoto UNFCCC conference in Kyoto, Japan, in December 1997. A total of 37 industrialized nations ratified the Kyoto Protocol, linking them to meet binding national emission reduction commitments (an average of 5% from 1990 emission year baseline) over the 20082012 time period. The United States is the only major developed economy not to ratify the Kyoto Protocol and take on binding emission reduction tar- gets. Although most countries committed to Kyoto emission reduction targets have developed national plans for meeting emission reduction targets, Kyoto also establishes global carbon off- set programs, known as flexibility mechanisms, to provide additional opportunities for meeting targets. Figure 5 presents a summary of Kyoto participation status by country. The Kyoto flexibility mechanisms include: Clean Development Mechanism (CDM): a developed nation with emission reduction com- mitments sponsors an emission reduction project in a less developed nation in return for a certified emission reduction ("CER") credit. Joint Implementation (JI): a country with an emission reduction commitment hosts an emis- sion reduction project to generate emission reduction units (ERUs). The host country essen- tially gives away the right to claim these reductions and sells them to another country. Source: United Nations - Environmental Indicator. Environmental Indicator - Climate Change. Figure 5. Summary of global Kyoto participation.