Analysis of a proposed mechanism for carbon-neutral growth in international aviation Parth Vaishnav a,⇑ , Annie Petsonk b , Rafael Alberto Grillo Avila b , M. Granger Morgan a , Paul S. Fischbeck a a Department of Engineering and Public Policy, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213, United States b Environmental Defense Fund, 1875 Connecticut Avenue NW, Washington, DC 20009, United States article info Article history: Received 10 August 2015 Revised 17 January 2016 Accepted 16 February 2016 Available online 7 March 2016 Keywords: Aviation emissions Market-based mechanism Climate change Offsets International Civil Aviation Organization Cluster analysis abstract In October 2013, the International Civil Aviation Organization (ICAO) announced that it would put in place a market-based mechanism to cap net greenhouse gas emissions from international civil aviation at 2020 levels. This paper analyses the obligations that would be placed on real airlines under an initial draft ‘‘Strawman” proposal that was originally for- mulated as a starting point for discussions within ICAO, and the extent to which such a pro- posal would succeed in keeping emissions at or below the desired level. The provisions of the ICAO proposal were then applied to more than 100 existing airlines. In order to protect commercial sensitivities, we used hierarchical cluster analysis to identify groups of differ- ent types of airlines. We report the results for these groups rather than for individual air- lines. While ambiguities in the Strawman proposal complicated the analysis, we found that, depending on their size and rate of growth, airlines will be required to offset very dif- ferent proportions of their emissions from international flights. A system of de minimis exemptions, as currently proposed, would benefit some rich countries as well as poor ones. Targeting such exemptions more narrowly would raise practical difficulties, which we describe. We conclude by recommending that ICAO design and implement a much simpler system; and propose one alternative. Ó 2016 Elsevier Ltd. All rights reserved. Introduction In October 2013, the International Civil Aviation Organization (ICAO) resolved to finalize, by its October 2016 Assembly, a market-based measure (MBM) to address greenhouse gas emissions from international civil aviation (ICAO, 2013a). ICAO’s Council, a 36-member Executive Body, has formed a subsidiary Environmental Advisory Group (EAG) to consider, among other issues, options for the structure of the MBM. In May 2014 an initial ‘‘Strawman v.1.1” document (hereinafter referred to simply as ‘‘the Strawman”) 1 was circulated outlining one possible structure for the MBM; various nations are in the process of formulating their own proposals. The Strawman and the various national proposals provide alternatives for structuring a mechanism in which airlines would offset their emissions in such a way that ‘‘net” sectoral 2 emissions (actual emissions less offsets) would remain capped at 2020 levels. http://dx.doi.org/10.1016/j.trd.2016.02.017 1361-9209/Ó 2016 Elsevier Ltd. All rights reserved. ⇑ Corresponding author. E-mail address: parth.vaishnav@gmail.com (P. Vaishnav). 1 This text of this document is available from: http://clacsec.lima.icao.int/Reuniones/2014/GEPEJTA33/NE/NERstgd/33GENE18.pdf. 2 In this case, the ‘‘sector” is defined as international civil aviation, including passenger and freight transport. The Strawman defines international flights as those ‘‘departing from an airport of a State and arriving at an airport of another State.” Transportation Research Part D 45 (2016) 126–138 Contents lists available at ScienceDirect Transportation Research Part D journal homepage: www.elsevier.com/locate/trd