Industry’s CORSIA carbon scheme already under sustainability pressure

With a global offsetting scheme confirmed as the near-term mechanism for capping growth in carbon emissions from international flights, the aviation sector’s focus is shifting to the long term. And pressure on the industry to reduce emissions is growing.

The triennial Assembly of ICAO in Montreal in the fall of 2019 may have endorsed the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), but it drew criticism from environmental groups for failing to set a long-term goal to reduce the sector’s contribution to climate change.

The industry has had three targets in place since 2009: to continue improving aircraft fuel efficiency at its historical average rate of 1.5% a year to 2020, to achieve carbon-neutral growth from 2020 and to reduce net aviation CO₂ emissions 50% by 2050 relative to 2005 levels. It is on that third “aspirational” goal that attention—and criticism—is now focusing.

ICAO at its 2010 Assembly agreed to two of the three goals, setting targets for a 2% annual fuel efficiency improvement through 2050 and carbon-neutral growth from 2020. Environmental groups wanted the 2019 Assembly to act on the third goal. But the organization’s sovereign body decided it was not ready to commit the sector to a path to 2050.

It took a decade to turn an industry aspiration, carbon-neutral growth, into a global commitment—one that is still voluntary, or “opt-in,” for its initial years. The concern of environment groups is that delaying a decision on a long-term goal until the next ICAO Assembly in 2022 will cost precious time.

“People will take a snapshot of 2019 and say, ‘you didn’t move the ball all that far forward,’ but we have to recognize we are in the implementation phase for that second goal, which is carbon-neutral growth from 2020,” Airlines for America (A4A) VP-environmental affairs Nancy Young told ATW in a briefing in Washington DC.

“I think 2019 was significant in that the aircraft operators of the world began the emissions monitoring, reporting and verification under CORSIA that’s necessary to build the 2020 baseline of emissions from which the growth will be measured,” she says.

ICAO is in the final stages of agreeing on the terms for offsetting under CORSIA.

“We know when it starts; we know that there will be emissions units agreed within ICAO,” Young notes. “That process is going through its adjudication now, and in 2020 we’ll see the outcome of that with the specific carbon offset programs that will be eligible under CORSIA.”

With the 2019 Assembly reaffirming the goal of carbon-neutral growth from 2020, and CORSIA as the mechanism, the issue now on the table is the long term.

“The question before the countries at ICAO is: How do you want to deal with that? Do you want to just grab a goal and say industry has to meet it? Or do we need more of a process?” Young says.

“When the countries made the decision on carbon-neutral growth back in 2010, a lot of work went into informing what was possible and where the gaps would be. But there wasn’t the data put in front of either the ICAO Council or the Assembly to make an informed decision on [the long-term goal],” she says.

“What happened at the Assembly was a confirmation that they weren’t ready to adopt a long-term goal but wanted to see a concerted analysis and process to put before them a potential long-term target,” Young says. “What would that be? What is behind it? Where would the gaps be? What types of mechanisms? So they directed the ICAO Council and the Committee on Aviation Environmental Protection [CAEP] to do that work.”

Detailed study

CAEP has done the trends analysis, Young says, but it falls short of a detailed study on how hard aviation can push each of the levers that could reduce emissions.

“From industry’s point of view, we have always been working on our own 2050 goal and how we push those levers, and the real variable in that tends to be the relative role of governments versus industry,” she says.

“A key example would be air traffic management, and governments controlling the airspace. Another is sustainable aviation fuels,” Young says. “Ground-based alternative fuels have long had [government] support, but sustainable aviation fuels haven’t had a policy framework. And those are the things that make it harder to say exactly what [a long-term goal] is going to look like.”

While ICAO edges toward a long-term goal, there is work still to do on CORSIA. The gathering of data on international CO₂ emissions that began Jan. 1, 2019, will continue to the end of 2020. The data will then be averaged. This two-year baseline is intended to smooth out the effects of business disruptions, such as a volcano erupting, strikes or having an aircraft type out of service.

“At the end of 2021, the same emissions monitoring reporting and verification system that established the baseline will say there were either growth emissions or there weren’t,” Young says. “If there were growth emissions, those have to be offset. And the CORSIA mechanism says to the countries, and then the aircraft operators, ‘here is the bucket of growth emissions that have to be offset across the industry.’”

Offset obligations

Airlines will know each year what they owe, but under CORSIA the offset obligations will be on three-year cycles.

“So over 2021, 2022 and 2023, Acme Airlines has this much that they’re required to have offset, to buy carbon offsets, surrender those allowances and demonstrate they did, so that in 2024 that three-year set of activity is trued up,” Young says.

Airlines could buy and retire carbon offsets each year, but there is a reason not to do it annually, she says, “which is you’d make the market go crazy. If every year you had all the aircraft operators diving into the market at same time, retiring emissions units, the market would respond in a way that you wouldn’t have much fluidity.”

Aircraft operators will access an existing and still-emerging carbon market, but under a common set of rules “so it’s not the wild, wild west,” she says. “Here are rules [ICAO says]. This is what your share will be of the offsetting, and you can’t just buy any carbon offset. You have to buy one that meets the rigorous emissions units criteria that ICAO sets.”

In essence, those criteria require that carbon offsets provided to the market are managed by programs with governance protocols that ensure projects generate real emissions reductions. US examples include the American Carbon Registry, Verra and the Gold Standard.

“It has to be something that wasn’t mandated already by a government. It has to be something that’s additional,” Young says. “An easy example to grasp is anti-deforestation in Brazil. You have to establish an emissions baseline and what you’re going to do to preserve that.”

ICAO has set 11 governance criteria for programs and another eight for the projects they administer.

“In 2020, the ICAO Council will issue a list of approved governance programs and the projects underneath them that meet those criteria so that aircraft operators can buy on the open market,” Young says.

ICAO projects a lower price for carbon offsets in the early years, increasing as supply becomes more constrained, “because it’s not just aviation going into those markets,” Young says. The result for airlines will be a regulatory cost that, as with fuel costs, “is not totally predictable, but for which you can have some reasonable projections,” she says.

“In our estimation this is a rational program for regulatory expenses, particularly when you compare it to every country doing their own thing and piling on emissions trading schemes. The regulatory cost is more manageable and consistent with emissions reduction, but also ensures that the industry continues to be a big driver of economic and social good.”

The next steps for offsetting, and particularly the European Union’s existing Emissions Trading System (ETS), are a matter of hot debate. The EU has stayed the extraterritorial application of ETS through 2024, the end of the first three-year period of offset obligations under CORSIA. “What the Europeans are saying is, ‘Let those first three years happen … [and] we’ll see if CORSIA is doing the job,’” Young says.

“The Assembly reaffirmed that CORSIA is supposed to be the market-based measure to the exclusion of others for international aviation,” she adds. “The two things that countries could do beyond that are for domestic aviation, where they can do whatever they want, and if two countries want to agree with each other to do something in addition to CORSIA, they can.”

ICAO considers intra-EU flights to be international flights “by definition,” Young says, setting the stage for a battle with Europe and environmental groups.

“Theoretically, the European governments could say that for European airlines flying intra-EU, we’re going to have this hybrid thing, which is some version of CORSIA and some version of ETS,” she says. “I think these are going to be some of the pernicious diplomatic issues as we get to 2021.”