The carbon offsetting scheme, the first such industry-wide initiative, will start in 2021 with at least 65 participating countries in its voluntary phases, following the deal's approval on Thursday by the International Civil Aviation Organization, a U.N. agency.
"It should be a great boost for carbon credit markets in general," said Dirk Forrister, Chief Executive of the International Emissions Trading Association. "I would expect pricing to respond to this increase in demand."
He said carbon credits now sell for as little as 40 cents a tonne, but can rise to $10 a tonne depending on the quality of the carbon-emission reduction project, which can range from efforts to counter deforestation, to more efficient stoves.
Carbon market analysts estimate demand will rise closer to the deal's mandatory phase in 2027, but the completion of ICAO's eligibility rules for credits in 2018 could prompt earlier purchases by airlines.
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To meet the industry's own goal of capping aviation pollution at 2020 levels, airlines would have to offset more than 3 billion tonnes of carbon emissions between 2021 and 2035 by buying designated credits set up through the private sector, governments. and the United Nations.
It is not yet clear which carbon credit projects would be available for purchase by airlines.
The deal has run into criticism from European lawmakers for pursuing carbon neutral growth as opposed to emissions reduction.
ICAO president Olumuyiwa Benard Aliu told reporters the agency will now lead work to come up with criteria on how to select eligible projects, to verify their efficiency in reducing carbon emissions and to address concerns of double counting. An airline would not be able to use the same carbon credit to comply both with the deal and any separate offsets programs.
Read more at Global Aviation Deal Seen as Long-Term Carbon Market Boost
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