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The United Nations International Civil Aviation Organization is poised to take a ground-breaking decision on a global market-based measure to control aviation’s greenhouse gas emissions in a matter of days.

If signed off at ICAO’s general assembly meeting in Montreal running September 27 to October 7, this will be the first time any sector has agreed a global market-based system for controlling emissions.

How significant is this deal, and what does it mean for commodity markets? What will the impact be in the carbon and jet fuel markets?

The short answer is: in the short-term, there won’t be much impact. In the long run however, expect to see airlines buying up carbon credits and increasingly switching to sustainable fuels as they seek to manage their carbon exposure.

Aviation has for a long time enjoyed a special status and been relatively free of environmental regulation at the national level. That’s partly because aviation is a truly international sector and needs a regulatory approach that is also global. Matters including environmental impact, noise and many other aspects of the industry are coordinated at global level to avert the risk of a patchwork of different regulatory frameworks that would distort healthy competition between regions. Aviation is a strategic wealth enabler, boosting economies as well as bringing other social benefits.

But the aviation sector is growing at 4% to 5% per year, making it a rising contributor to the build-up of atmospheric greenhouse gases. The challenge for policymakers lies in finding ways to work with this important sector to promote growth while cleaning up its environmental footprint. Other sectors are increasingly pulling their weight as part of global efforts to reduce GHG emissions. A dramatic and ongoing decarbonization of Europe’s electricity sector is a case in point.

Tackling aviation’s emissions has been a particularly thorny issue. The EU introduced legislation in 2006 to bring aviation within the scope of its legally binding EU Emissions Trading System from 2012, including from flights originating outside of Europe. This prompted accusations of jurisdictional over-reach by many of the bloc’s key trading partners, legal action against the EU legislation and a major diplomatic spat in 2011 that threatened to descend into a trade war.

Those against the EU’s actions argued that...