As of the time of writing, 83 countries have signed up to participate in the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) pilot and first phases, which account for approximately 76.64% of international aviation emissions. You can find the latest status of CORSIA here. However, it should be noted that China has yet to confirm its participation in the pilot phase. Additionally, countries such as India, Russia, and Brazil seem inclined to snub at least the pilot phases, and possibly CORSIA as a whole.
In this section, we provide coverage on the following topics:
- Current pricing based on CORSIA offset eligibility criteria
- ICAO’s finalisation of rules for CORSIA offset eligibility
- The impact of COVID-19 on CORSIA baseline emissions
- A simple guide to offsetting under CORSIA
- ICAO’s establishment of rules for CORSIA offset eligibility
After more than three years of negotiations and thorough assessments by ICAO’s expert Technical Advisory Body (TAB), the International Civil Aviation Organisation (ICAO) Council has announced the approved programs whose credits will be eligible for compliance under CORSIA. Out of a total of 14 program applications, only eight have successfully made it through. Two additional programs, the British Columbia Offset Program (BCOP) and Thailand’s Voluntary Emission Reduction (T-VER) scheme, have been invited to reapply based on the TAB’s recommendations.
ICAO is expected to launch a second call for CORSIA program applications in the upcoming weeks. Standards such as REDD+ have already pledged to submit their new deforestation reduction standards. A decision on the next round of applicants, including the two programs invited to reapply, is anticipated within a year.
Here’s what you need to know:
Approved Programs:
Clean Development Mechanism (CDM)
China’s GHG Voluntary Emission Reduction Programme
Gold Standard
American Carbon Registry (ACR)
Climate Action Reserve (CAR)
Verified Carbon Standard (VCS)
Forest Carbon Partnership Facility (FCPF) (Conditional)
Middle Eastern and North African region’s Gulf Organisation for Research and Development’s Global Carbon Council (Conditional)
Offset Vintage Criteria:
The criteria are two-fold. ICAO has followed the TAB’s recommendation to only allow:
Only Eligible Emissions Units (EEUs) generated from 2016-2020 to be used for compliance in the pilot phase of the scheme (2021-2023).
Approved EEUs must have been issued to activities that began their first crediting period between January 1, 2016, and December 31, 2020. Note that two programs are pending further review.
The restriction to emissions reductions generated pre-2021 aims to avoid double counting, especially as countries’ obligations under the Paris Agreement’s Nationally Determined Contributions (NDCs) are expected to commence in 2021.
Double counting issues have been a significant concern in Article 6 negotiations. Under the Paris Agreement’s market-based Article 6, all nations are required to contribute to a global emissions goal, unlike the predecessor Kyoto Protocol that imposed obligations solely on developed nations. The TAB argued that most applicants did not have mechanisms in place to ensure that the credits used within CORSIA are effectively subtracted from the national government’s GHG inventory.
Critics argue that certain ICAO decisions, such as allowing VERs from China’s VER program to qualify as EEUs, are more politically motivated to secure China’s participation in the scheme rather than being solely based on the program’s robustness and merits. There are concerns about the potential influx of EEUs from the recently unveiled Chinese VER program.
ICAO has also chosen to permit all Clean Development Mechanism (CDM) project types for CORSIA compliance, differing from the EU’s approach of banning certain projects with questionable environmental integrity, including industrial gas plants and large hydroelectric projects.
The COVID-19 pandemic has cast doubt on the choice of baseline years for CORSIA. The baseline, which is set at the average of 2019 and 2020 emissions, may face challenges due to the substantial reduction in aviation emissions in 2020 caused by travel restrictions. If aviation emissions recover in 2021, a significant gap between emissions and the lower baseline may necessitate aircraft operators to purchase a larger number of EEUs than anticipated.
The International Air Transport Association (IATA) has called for a revision of the rules so that the baseline figure is based solely on 2019 emissions. They argue that this adjustment would preserve the environmental benefits initially forecasted under CORSIA, as the adjusted baseline would remain more stringent compared to a baseline without considering the COVID-19 crisis.
However, discussions around baseline revision have raised questions about the recovery of airline emissions post-COVID-19. If aviation emissions remain low due to the lingering effects of the pandemic, there could be limited demand for offsets from airlines. Environmental campaigners argue that this would be a setback for aviation emissions reduction policies, potentially leading to a fragmented approach such as the EU’s potential decision to tax aviation fuel at airports. While the EU is highly unlikely to opt-out of CORSIA, some countries’ opt-outs would have a limited impact.
A decision regarding the baseline is not expected in the near future, leaving aircraft operators grappling with uncertainty regarding climate change mitigation measures.
It’s important to note that the recommendations adopted by the ICAO Council impose temporary program-specific restrictions on the six approved applicants, pending further changes. The TAB excluded emissions units issued to certain projects and programs until they address specific concerns raised by the TAB.
At Redshaw Advisors, we work with aircraft operators worldwide to navigate their compliance requirements under various emissions trading regimes. We provide guidance on their financial implications and procure carbon credits to facilitate compliance with each specific regime. If you require assistance with any of these aspects, please don’t hesitate to contact us. You can reach out to your account manager or email us at info@redshawadvisors.com. We are here to help.
