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36 The Carbon Market: A Primer for Airports A UNFCCC body reviews and approves CDM and JI project methodologies proposed by individual projects and developers. This approval process can be timely and stringent in order to ensure that only high quality offset credits are generated for use. Approved methodologies generally fall into one of the following categories: reducing emissions from energy production, increasing industrial efficiency, methane destruction, or reducing non-combustion GHG emis- sions. Several approved project methodologies reduce emissions in the transportation sector; however, no methodologies in the aviation sector that directly reduce emissions and meet the financial and permanence criteria of the CDM have been approved at this time. Offset credits from United States projects are not eligible to supply Kyoto markets because the United States did not ratify the Kyoto Protocol. The UNFCCC as well as other less inclusive conventions occur regularly to discuss global cli- mate change and strategies to reduce emissions. Conversations of late have focused on global carbon commitments and reduction strategies post-Kyoto (post 2012). No specific plan has been set to date and conversations are ongoing. At this time, the aviation sector is not directly covered by carbon markets, although Europe has a definitive timeline for including the sector under its trading scheme. However, indirectly the aviation sector can be impacted by rising fuel costs to cover compliance costs. Opportunities for airport sponsors to participate in the carbon offset credit market by hosting or sponsoring projects exist but have not been widely undertaken to date. Key policies and carbon markets, as well as the treatment of the aviation sector, are dis- cussed herein at both the regional and national levels. 4.1.1 European Union Key Takeaways for Airports Europe's carbon trading scheme represents the most mature carbon market glob- ally and can be viewed as a precedent of what others might look like in the future. 2012 and beyond, emissions from aircraft taking off or landing in Europe will be regulated under the EU ETS. Emissions from airports themselves will not be regulated. The European Union Emission Trading System (EU ETS) is the world's first and largest bind- ing international trading system for CO2 emissions. It covers over 11,000 energy-intensive instal- lations across Europe and serves as an integrated emission trading system designed to reduce GHG emissions across Europe. The program requires installations to procure European Union Emissions Allowances (EUAs) for every tonne of CO2e that they emitted the previous year. The EU ETS officially commenced in January 2005 with 15 member states and was designed to operate in three phases. The initial phase of the EU ETS spanned from 2005 to 2007. The program is currently in Phase II, which began in 2008 and continues through the end of 2012, concurrent with the Kyoto timeframe. Only the electric generation sector and selected large industrial sectors are covered at this time. Phase III will begin in 2013 and is likely to shift away from emission caps set nationally and toward a more centralized system in which the majority of the allowances are auctioned by a central EU authority. A number of new industrial sectors are likely to be brought under the com- pliance regime in Phase III but will be freely allocated a portion of their emission allowances. Ultimately, EU leaders have committed to reducing total EU GHG emissions 20% below 1990 levels by 2020, and the Phase III emissions caps are likely to ensure compliance with this target.