The balance between promoting greater global connectivity via air travel and protecting the environment against increasing emissions has been a complex and nuanced discussion between regulators, airlines, commercial and financial stakeholders, as well as environmental/social justice organizations. The growing COVID-19 Coronavirus health crisis and the economic impact on the airline industry has only re-energised the debate on how far emission countering measures, including carbon pricing instruments, should go, and how these measures might impact the aviation sector in the years to come.

In this client alert, we consider the International Civil Aviation Organisation's1 (ICAO) ratification of the rules governing the eligibility of the carbon offset programmes of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA has been hailed as proof of the aviation industry's continuing commitment to climate change.

What is CORSIA?

In October 2016, ICAO adopted CORSIA, a global market-based mechanism to combat the CO2 emissions produced from international aviation. CORSIA requires flight operators to offset a part of their emissions through the purchase and cancellation of CORSIA eligible emissions units (also known as carbon credits).

The CORSIA obligations came into force on 01 January 2019, and were adopted as an Annex to the Chicago Convention2. Aircraft operators conducting international flights between countries signatories to the Annex and producing annual CO2 emissions greater than 10,000 tonnes must:

  • have prepared and submitted an Emissions Monitoring Plan (EMP)3 4 to their national competent authority5 by 28 February 2019;
  • monitor and record fuel use on each flight from 01 January 2019. This can be done using ICAO's estimation and reporting tool (CERT);
  • submit an annual Emissions Report (ER) to their competent authority containing the number of international flights and CO2 emissions; and
  • cancel emissions units at the end of each 3-year compliance period. Operators will be required to submit a cancellation report to their competent authority demonstrating that they have satisfied their offsetting requirements by cancelling the appropriate number of emissions units. Flight operators that took part in the CORSIA pilot phase be will required to do this by 31 January 2025.

Emissions from domestic flights are outside the scope of CORSIA.

Carbon Offsetting

The idea behind carbon offsetting is that airlines can compensate for their CO2 emission output by funding an equivalent reduction in emissions elsewhere (e.g. investing in a project, which reduces CO2 emissions). Carbon offsetting is considered to be an essential tool to slow the airline sector's emissions growth and to be more effective than regional and national measures such as carbon "eco" taxes, which do not guarantee emission reductions.

Under CORSIA, airlines will have to buy emissions reduction offsets from other sectors to compensate for any increase in their own emissions. Alternatively, they can opt to use lower carbon "CORSIA eligible" fuels.6

ICAO set an aspirational goal of making all growth in international flights after 2020 carbon neutral. In other words, the members agreed that the average emissions for 2019/2020 should be used as the baseline for future carbon offsetting.

When will these offsetting measures start to apply?

CORSIA will be implemented in phases in order to take into account the special circumstances and respective capabilities of member states. Offsetting requirements are to apply from 2021 as follows:

  • From 2021 until 2026, only flights between states that volunteer to participate in the pilot phase (2021-2023) and/or first phase (2024-2026) will be subject to offsetting requirements. Member states can volunteer by notifying ICAO of their intent to participate by 30 June of the preceding year (see Annex A for the list of States that have signalled their intent to voluntarily participate from the outset).
  • From 2027 until 2035, all international flights across ICAO member states will be subject to offsetting requirements, unless exempted. Exemptions relate to flights to and from Least Developed Countries7, Small Island Developing States8, Landlocked Developing Countries9 and states, which represent less than 0.5% of international Revenue Tonne-kilometres10.

Each participating Member State will be responsible for introducing domestic legislation that requires airline operators to comply with CORSIA and sets out the enforcement measures for non-compliance (i.e. not purchasing enough credits, failing to accurately report emissions etc.)

Has COVID-19 put CORSIA in jeopardy?

The decline in commercial air traffic due to the COVID 19 pandemic began during the third week of January and has been accelerating since. The average number of daily departures from China's 25 busiest airports fell by 8,000 (an 80% drop) during the period from January to February alone11.  During last March, global commercial air traffic was down 21.6% from March 2019, and in the final week of March, commercial air traffic was down 62.9% from the same period in 2019.12

As explained above, ICAO had agreed to use the 2020 emission figures as the baseline figure for CORSIA. However, given the unprecedented interruptions to global travel flows due to COVID-19, the 2020 figures will most likely be significantly lower than anticipated. The unexpected shift in the baseline, and the anticipated rebound in air traffic (and hence emissions) in coming years, could increase the number of offsets airlines to make more carbon offsets than previously anticipated. This means a potential increase in compliance costs as airlines will need to purchase more carbon credits to comply with CORSIA than factored in by the industry.

This potential cost increase does not seem to deter the ICAO’s commitment to CO2 reductions. Indeed, the ICAO published, in the midst of the pandemic, the eligible emissions units for CORSIA. However, whether ICAO relaxes the requirements to help facilitate the sector's rebound remains to be seen.

New Eligible Emissions Units

On 13 March 2020, ICAO approved the eligible emissions unit programmes that airlines will be able to use to meet their offsetting obligations for the initial pilot phase of CORSIA. The decision confirms that the following six emission unit programmes out of the fourteen applicants immediately met CORSIA's Emission Unit Criteria (EUC)13 as judged by the 2019 Technical Advisory Body’s (TAB)14 assessment:

The above six emission unit programmes:

  • were able to "generate units that represent emissions reductions, avoidance, or removals that are additional"; and
  • provided information as to how they addressed the issue of "double counting, issuance and claiming in the context of evolving national and international regimes for carbon markets and emissions trading".17

The eligible emissions units will be those issued to activities which commenced as of 1 January 2016, and in respect of emissions reductions occurring through 31 December 2020, subject to each programme’s respective scope of eligibility.

ICAO launched the 2020 TAB assessment of emissions unit programmes on 23 March 2020 (two 2019 applicants, British Columbia Offset Program and Thailand Voluntary Emission Reduction Program, were invited to re-apply here). Applicants had until 20 April 2020 to submit their application.

Looking ahead

It is too early to say with certainty what the ultimate impact of COVID-19 will be on CORSIA. However, given the financial hardship it caused to the industry, ICAO may face growing calls to revise the baseline year to reflect more conventional flight demand levels. No indication has yet been given by ICAO as to how it will handle this issue. For now, ICAO has simply decided to postpone the 2020 ICAO CORSIA Regional Seminars to a later date18. These two-day seminars were scheduled to provide Member States with additional clarity on CO2 verification procedures.

One thing is for certain, in light of heightened stakeholder activism, growing environmental, social, and governance reporting requirements and the pressing need to address climate change, CORSIA is here to stay. Airlines will need to factor-in compliance with CORSIA in their post-COVID-19 business model and beyond.

See further

ICAO CORSIA Implementation Elements

Annex A - Official List of ICAO Contracting States (193)

*As of 27 February 2020, 82 States signalled their intent to voluntarily participate in CORSIA from its outset in 2021.

Afghanistan

Cambodia

Ethiopia

Albania*

Cameroon*

Fiji

Algeria

Canada*

Finland*

Andorra

Central African Republic

France*

Angola

Chad

Gabon*

Antigua and Barbuda

Chile

Gambia

Argentina

China

Georgia*

Armenia*

Colombia

Germany*

Australia*

Comoros

Ghana*

Austria*

Congo

Greece*

Azerbaijan*

Cook Islands

Grenada

Bahamas

Costa Rica*

Guatemala*

Bahrain

Cote D'Ivoire*

Guinea

Bangladesh

Croatia*

Guinea-Bissau

Barbados

Cuba

Guyana*

Belarus

Cyprus*

Haiti

Belgium*

Czech Republic*

Honduras

Belize

Democratic People's Republic of Korea

Hungary*

Benin

Democratic Republic of Congo*

Iceland*

Bhutan

Denmark*

India

Bolivia

Djibouti

Indonesia*

Bosnia and Herzegovina*

Dominica

Iran

Botswana*

Dominican Republic*

Iraq

Brazil

Ecuador

Ireland*

Brunei Darussalam

Egypt

Israel*

Bulgaria*

El Salvador*

Italy*

Burkina Faso*

Equatorial Guinea*

Jamaica*

Burundi

Eritrea

Japan*

Cabo Verde

Estonia*

Jordan

Kazakhstan

Namibia*

San Marino*

Kenya*

Nauru

Sao Tome and Principe

Kiribati

Nepal

Saudi Arabia*

Kuwait

Netherlands*

Senegal

Kyrgyzstan

New Zealand*

Serbia*

Laos

Nicaragua

Seychelles

Latvia*

Niger

Sierra Leone

Lebanon

Nigeria*

Singapore*

Lesotho

North Macedonia*

Slovakia*

Liberia

Norway*

Slovenia*

Libya

Oman

Solomon Islands

Lithuania*

Pakistan

Somalia

Luxembourg*

Palau

South Africa

Madagascar

Panama

South Sudan

Malawi

Papua New Guinea*

Spain*

Malaysia*

Paraguay

Sri Lanka

Maldives

Peru

Sudan

Mali

Philippines*

Suriname

Malta*

Poland*

Swaziland

Marshall Islands*

Portugal*

Sweden*

Mauritania

Qatar*

Switzerland*

Mauritius

Republic of Korea*

Syria

Mexico*

Republic of Moldova*

Tajikistan

Micronesia

Romania*

Thailand*

Monaco*

Russian Federation

Timor-Leste

Mongolia

Rwanda

Togo

Montenegro*

Saint Kitts and Nevis

Tonga

Morocco

Saint Lucia

Trinidad and Tobago

Mozambique

Saint Vincent and the Grenadines

Tunisia

Myanmar

Samoa

Turkey*

Turkmenistan

United Republic of Tanzania*

Venezuela

Tuvalu

United States*

Vietnam

Uganda*

Uruguay

Yemen

Ukraine*

Uzbekistan

Zambia*

United Arab Emirates*

Vanuatu

Zimbabwe

United Kingdom*

 

 

 


 

1 CAO is the United Nation's aviation agency. It has 193 member states (see Annex A for a list of these member states).

2 The Convention on International Civil Aviation (commonly referred to as the Chicago Convention) was drafted in December 1944 by 54 signatory states and later established ICAO and the core rules governing aircraft safety, security and sustainability. Aviation is not covered in the Paris Agreement.

3 This known as the “route-based approach”.

4 The EMP gives the competent authority details about the operator's fleet, the countries the operator flies to and the operator's record keeping plan to keep CORSIA related information.

5 Each participating Member State is required to identify an institution that will be responsible for undertaking data monitoring and verification. The UK Environment Agency will be taking on the role of the UK administering authority for CORSIA purposes.

6 CORSIA eligible fuels include Sustainable Aviation Fuels and Lower Carbon Aviation Fuels. The ICAO Secretariat detailed certification and implementation requirements in its paper: "Overview of CORSIA Eligible Fuels" (linked here).

7 See link for the list of Least Developed Countries.

8 See link for the list of Small Island Developing States.

9 See link for the list of Landlocked Developing Countries.

10 A Member State's Revenue Tonne-kilometres (RTK) is calculated by adding up the RTKs of the aircraft operators attributed to this Member State.

11 https://www.flightradar24.com/blog/commercial-air-traffic-down-4-3-in-february-2020/

12 https://www.flightradar24.com/blog/tracking-marchs-historic-drop-in-air-traffic/

13 The ICAO document "CORSIA Emissions Unit Eligibility Criteria" details the 8 eligibility criteria needed to be satisfied by an offset credit program.

14 In principle, the TAB is comprised of 14 to 16 experts (currently 19), nominated by States, with the mandate of making recommendations to the ICAO Council on the eligible emissions units for use by the CORSIA (TAB Terms of Reference linked here). See here for an excerpt of the January 2020 TAB Report to the ICAO council on CORSIA eligible emissions units.

15 Strict exclusions means that a unit programme "is eligible…with exclusion of XYZ".

16 Reconcilable exclusions means that a unit programme "is eligible…but only for projects that fulfil requirement x".

17 The TAB also looked to the CORSIA Standards and Recommended Practices (SARPs) and the Environmental Technical Manual (ETM) when making its assessment.

18 https://www.icao.int/Meetings/RS2020/Pages/default.aspx

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