well at any rate, in the CoC, section 9 on schedules and remedies and section 10b on involuntary fare refunds do not make mention of downgrades as an eligible cause for either so the airline treats the contract as pertaining to a departure, destination, stopover if applicable, and timing. Whether this is (and would be considered) fair or not is of course debatable.

My sense is still that the right ‘test’ would be the one you mention, ie if an airline considered that it could ‘force’ you to fly in the downgraded cabin and you were refusing to and they considered it a voluntary cancellation on your part. By contrast, in the op’s case where the remedy you mention is mutually agreed, I personally find it hard to consider that one of the parties could then go back to claiming a breach of contract to seek additional compensation over and above the new solution they both agreed. At any rate, if one considered that the rebooking would only be acceptable on condition of some additional compensation, it would be prudent to ideally agree that as part of the process of rebooking/resolution, or at the very least have that claim noted there and then or it seems to me that the default assumption would be that the new booking is the mutually agreed solution to the original incident.

As I see it, part of the problem is that EC261 has resulted in European airlines no longer doing customer service gestures beyond what EC261 requires. Yet, in the involuntary downgrade case, it would be very reasonable to expect the carrier not only to pay duty of care but also make a customer service gesture/apology when a customer must take a later (or earlier if applicable) flight in order to stay in the cabin that was booked.

A business class ticket is not the same as (for instance, use your own probability estimates) a 99% chance of traveling on business class and a 1% chance of flying coach on the same flight with the EC 75% refund. Many people who purchase business tickets do not want to take the trip in coach, at any price, and in fact they're already shown that they would not have preferred to travel in coach for the coach fare, which is why just refunding the price difference is inadequate. [In fact, I suspect that the only people willing to take the price difference refund and sit in coach are those whose employers have purchased the ticket and who plan to just pocket the refund without notifying the employer.]

This is why airlines should be required to solicit volunteers before doing involuntary downgrades or IDBs.

Yet, this very thread proves you wrong on this. BA had no duty of care towards the op yet chose to offer accommodation and some transportation which it was not obliged to pay as well as reaccommodate the op on the service that he chose, which again was not an obligation.

The whole notion that without consumer protection airlines did or would self regulate and be more generous without being forced to is, in my view, non credible. Indeed, each year, I’m still the victim of airlines not subjects to those consumer protection obligations and can sadly testify that you get treated like rubbish and certainly not more likely to get more voluntary costumer service generosity than with, say, BA, AF or LH. The only possible exception is LY which is very ungenerous beyond their high regulatory obligations, but then again they were totally unfenerous before them too and that’s probably why the Israeli legislator has been quite thorough.