A global carbon market mechanism for aviation is being tipped to shape international emissions trade as governments are likely to move more slowly in crafting new measures under the Paris Agreement, a conference heard on Wednesday.

December’s Paris pact rang in a new era of international carbon trading by enabling countries to collaborate in meeting their goals and establishing a new market mechanism, but both are expected to take years to be elaborated enough to stimulate activity.

“Responsibility for elaborating rules is put on [UN negotiating body] SBSTA, which when it meets in May in Bonn will start thinking about how this can be implemented,” UNFCCC official Niclas Svenningsen told the Argus Emissions Markets conference in Amsterdam.

“The first place the rules can be agreed is at the [UN climate conference] in November, though most likely it will be in 2017, 2018. Once that is done we can come into operation.”

These talks are likely to run into headwinds from the start as negotiators will have different interpretations of the Paris text, according to Andrei Marcu, head of the Carbon Market Forum at think tank CEPS.

“There is an enormous amount of interpretation to be had, from the Bonn discussion, because people put their hooks in the text,” he said.

He added that one potential sticking point could be the Agreement’s references to transparency and governance, which some parties might try to interpret as a centralised governance that other negotiators would oppose.

It is also unclear where demand under the new market mechanisms would emerge as only a handful of smaller nations are initially likely to be buyers.

AVIATION DEAL

In the meantime, many of the same expert government negotiators are working on a deal for an aviation market mechanism due to be struck in October at UN aviation agency ICAO, to take effect from 2020.

“The work that happens in ICAO will have relevance to the UNFCCC. It will set a precedent for the types of instruments and architecture that carbon markets will use in the future, so it might be a good first taste,” said Jeff Swartz of carbon market business association IETA.

The closed-door ICAO talks have focused on a global offset mechanism that would require airlines to buy a yet-to-be-agreed type of carbon unit to ensure the aviation sector has no net emissions growth after 2020. One study suggests this demand could amount to 3.3 billion tonnes-worth of carbon units over 2021-2035.

The ICAO and UNFCCC processes might even connect.

“We don’t know what will come out of ICAO and I know the discussions at the moment are very much about using a whole range of offset sources including the voluntary market,” said Martin Hession, a European Commission official and one of the bloc’s senior international climate negotiatiors.

“But I think [the EU is] interested in seeing whether potentially significant demand in the ICAO sector could be as a prompt start for the new mechanism. I think we will be looking at pre-2020 demand for credits for that mechanism.”

By Ben Garside – ben@carbon-pulse.com