Exclusive: U.N. aviation agency weighs restrictions on carbon credits under fire by climate activists

MONTREAL/CHICAGO (Reuters) - The United Nations is weighing restrictions for a scheme designed to help airlines offset their carbon emissions, curbing industry funding for older projects whose environmental benefits have been disputed by climate activists.

FILE PHOTO: An aeroplane flies underneath the jet stream of another aircraft above the Italian city of Padova September 18, 2013. REUTERS/David Gray

The move, if approved, would be a blow to operators of older projects in countries including Brazil and India who had hoped a global push by airlines to offset emissions would mop up a glut of carbon credits awarded under earlier climate initiatives.

The International Civil Aviation Organization’s (ICAO) 36-member council, now gathering in Montreal, is due to decide which projects will be eligible under the program for airlines, known as Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

At a separate gathering in Brussels on Tuesday, aviation leaders said regulators must ensure only “good quality” schemes benefit from the rush by airlines to fund green projects, preventing a windfall for the most controversial initiatives.

ICAO’s Technical Advisory Board (TAB) is recommending six programs for CORSIA’s pilot phase, but would exclude projects that issued before 2016 and only recognize emission reductions through end-2020, according to a document seen by Reuters.

One of the six is the UN’s Clean Development Mechanism (CDM), the world’s largest offset scheme set up under the 1997 Kyoto Protocol to help fund emissions reductions in developing countries.

The fate of billions of older CDM credits, the majority of which come from China and India, was a thorny and unresolved issue for climate negotiators in Madrid in December, raising the stakes for ICAO.

Brazil, China and India had pushed for most or all CDM credits, some more than a decade old, to qualify under the aviation sector’s offset program, one source familiar with the talks said.

Restricting CDM offsets credited before 2016 could weed out most – but not all - projects such as hydroelectric dams that have drawn criticism over their environmental benefits, two sources said.

A spokesman for the CDM said each credit undergoes a “rigorous” process, to ensure each “represents a real, measurable, verifiable and attributable emission reduction.”

Post-2015 credits from the China GHG Voluntary Emission Reduction Program, the country’s domestic trading scheme, would also be eligible.

ICAO is under pressure to strike a balance between approving enough credit options for airlines to purchase under the plan without squashing supply, which could push up prices.

“The Council will consider the TAB’s recommendations, which are based on a robust assessment against a set of criteria agreed by member states,” said ICAO council president Salvatore Sciacchitano.

Airlines have committed to spending billions of dollars to neutralize emissions by purchasing carbon credits. But green groups have warned using old projects that cost as little as 0.22 euro a credit to meet new targets would hurt these efforts.

One credit equals 1 ton of CO2.

While the recommendations for CORSIA’s pilot phase from 2021 to 2023 would set tighter restrictions than for credits under Kyoto, they still fall short of some environmentalists’ and European demands for tougher vetting.

Aviation accounts for just over 2% of global greenhouse gas emissions, but with air traffic forecast to grow in coming decades, that number would rise if left unchecked.

“If ICAO gets this right, consumers, governments and the public will be able to hold the aviation sector accountable for its climate commitment,” said Annie Petsonk, international counsel for the Environmental Defense Fund.

Reporting by Allison Lampert in Montreal and Tracy Rucinski in Chicago; Additional reporting by Susanna Twidale in London and Valerie Volcovici in Washington