As a contracting state of ICAO, the DfT says the UK is obliged to adopt into domestic law the relevant Standards and Recommended Practices (SARPs) relating to ICAO’s CORSIA carbon offsetting scheme for international aviation. The consultation considers CORSIA implementation in terms of MRV and offsetting by operators of their CO2 emissions. A second consultation is planned for this summer on detailed proposals for implementing CORSIA offsetting in the UK.

According to the DfT, implementing CORSIA alongside the UK ETS is being guided by two principles: upholding the UK’s international obligations by implementing CORSIA “as closely as possible” to the globally-agreed SARPs and upholding the UK’s domestic climate obligations to ensure carbon pricing is at least as ambitious as the EU ETS. It says it has taken into account that options could lead to operators having to both cancel CORSIA emissions units and surrender UK ETS allowances for the same tonne of CO2 emitted and the potential for competitive distortions between operators and an increased administrative burden. While accepting aviation has significant climate impacts in addition to CO2, the government says these are not yet well enough understood to form policy with any certainty. Operators are therefore not required to monitor, report or address these non-CO2 effects but the DfT says it is possible that either or both schemes may seek to incorporate these effects in the future.

CORSIA is expected to be implemented in the UK through two statutory instruments (SI) under an Air Navigation Order. The first SI, covering CORSIA MRV, is expected to be in force by spring 2021 and the second, covering CORSIA offsetting, is aimed to come into force by the first UK ETS surrender deadline in April 2022. A further instrument called the UK ETS Order, which includes provisions relating to the aviation free allocation, has already come into force but will be amended in future to reflect the chosen policy option for interaction between CORSIA and the UK ETS.

The first SI covers:

• The attribution of aeroplane operators to a state, the role of the state in implementing CORSIA and details the MRV processes and requirements;
• The MRV of CO2 emissions produced using CORSIA eligible fuels; and
• The enforcement action if operators do not comply with their obligations under the scheme.

The government intends that operators attributed to the UK for CORSIA will be regulated by the same four regulators (for England and the devolved administrations of Scotland, Wales and Northern Ireland) as under the UK ETS – for example the Environment Agency (EA) in respect of England. Operators who are attributed to the UK for CORSIA but are not participants in the UK ETS are proposed to be regulated by the EA. A single UK CORSIA focal point will report to ICAO on behalf of all the UK regulators, with the DfT remaining the responsible authority in the UK for CORSIA, in consultation with the Department for Business, Energy and Industrial Strategy (BEIS) and the devolved administrations.

Civil penalties for non-compliance can be issued by the regulator through an enforcement notice when it believes an aspect of CORSIA implementation has been or is likely to be implemented incorrectly, and will mirror those applying to the UK ETS. Failure by an operator to apply for or make a revised application for an emissions monitoring plan, or failure to monitor or report emissions carry a penalty of £20,000 ($27,000) plus a daily rate of £500 up to a maximum of £45,000. The penalties rise to £50,000 for more serious infringements.

CORSIA-UK ETS interaction

The consultation then considers the policy options for interaction between CORSIA and the UK ETS. In its introduction, the DfT says the UK is committed to fully participating in CORSIA from the start of the scheme in 2021 but at the same time recognises further action is required to ensure international aviation contributes to the global temperature goals of the Paris Agreement.

“The UK is therefore negotiating in ICAO for a long-term goal for international emissions that, like our national targets under the Climate Change Act, is consistent with the Paris Agreement,” it says. “The UK is also acutely aware of its responsibility as COP26 President to push for great ambition in tackling climate change across all sectors. The UK will use the platform of COP26 to push for progress in decarbonising all sectors including aviation. In addition, the UK government and the devolved administrations have higher climate change ambitions than those currently set by ICAO.”

Without policy action, the DfT says CO2 emissions above the CORSIA baseline from international flights departing from the UK to the European Economic Area (EEA) would incur obligations from both the UK ETS and CORSIA, leading to operators being charged twice for these emissions. It puts forward six options in the consultation for consideration. With the exception of one, they assume UK domestic flights will only be included in the UK ETS; international flights to or from the UK that are not covered by the UK ETS would only be included in CORSIA (where the other State is also a participant in the scheme); and flights from EEA States to the UK would be covered by the EU ETS.

Option 1: Simple hybrid scheme – An operator’s UK ETS obligations would be reduced by an amount equivalent to their CORSIA obligations on flights from the UK to the EEA. In effect, this would mean that the UK ETS would apply to emissions on these flights unless they are covered by CORSIA. The option does not allow an operator to directly use CORSIA emissions units against their UK ETS obligations. The option is broadly similar to the ETS-CORSIA ‘mix’ option in an inception impact assessment published by the European Commission. This is assessed by the DfT as the simplest method and means the UK is fully compliant with the CORSIA SARPs whilst ensuring operators face obligations either under CORSIA or the UK ETS on all emissions from UK to EEA flights. However, this option would see the demand for allowances reduced without an equivalent adjustment to the supply, which could contribute to a build-up of surplus UK ETS allowances, plus add a level of complexity for operators on UK to EEA flights.

Option 2: Supply-adjusted hybrid scheme – Based on option 1, operators would be entitled to claim a reduction in their UK ETS obligations equivalent to their CORSIA obligations on flights from the UK to EEA States. Additionally, to maintain the supply-demand balance – and therefore the UK ETS auction price – the UK ETS cap would also be adjusted to account for those emissions covered by CORSIA. For every tonne of CO2 that is removed from the UK ETS obligations of an operator due to CORSIA, a tonne of CO2 in UK ETS allowances would also be retired from the system. Allowances could be taken from the overall UK ETS cap or from allowances allocated to the aviation sector. This option would be more environmentally stringent than the simple hybrid as it would go further towards maintaining the integrity of the UK ETS cap and also help to maintain the supply/demand balance of the UK ETS. It would also be fully compliant with the SARPs. Despite being likely to be the most complicated to administer, it is the government’s initial preferred option.

Option 3:  Restricted hybrid scheme – Operators would be allowed to use CORSIA emissions units against their UK ETS obligations but only if those units meet additional criteria to minimise the risk of not representing additional verifiable emissions reductions or that they have been double-counted. This could be capped at a level equal to the CORSIA obligations on UK ETS international routes. Without this safeguard, this option could lead to cheaper CORSIA units being used in place of UK ETS allowances, leading to oversupply and a significantly reduced price, and would also mean the UK developing its own emissions unit criteria.

Option 4: UK ETS and CORSIA implemented independently – Operators with international flights in the UK ETS would be required to comply with both schemes for emissions above the CORSIA baseline and therefore have overlapping obligations on these flights. This would be the most environmentally ambitious option but would mean operators having to pay twice for the same tonne of CO2. The option would be less administratively complex than a hybrid scheme as the two schemes would run largely separately.

Option 5: Domestic offsetting scheme – CORSIA would still be applied to international flights but instead of operators being covered by the UK ETS, an offsetting scheme based on the design of CORSIA would be applied to the flights that would have been in the scope of the UK ETS. The scheme could use CORSIA MRV, thresholds, exemptions and compliance periods, as well use offset credits rather than allowances for all emissions. As a UK policy, the scheme could have a more stringent baseline than CORSIA for international flights, include UK domestic flights and apply its own emissions unit criteria for emissions not covered by CORSIA. Because this option would replace the UK ETS, it would require some time to deliver, says the DfT, but could be introduced by the start of the CORSIA first phase in 2024. The option would be fully compliant with the SARPs and as it uses offset credits rather than ETS allowances, it would provide the highest demand for domestic and potentially international emissions reduction programmes, which the DfT says would be consistent with the government’s carbon finance ambitions. Against the option, the price of offsets is likely to be below the price of allowances for some years and because all emissions obligations would be met through offsetting rather than allowances, there could be a significantly reduced incentive to reduce in-sector aviation emissions.

Option 6: UK ETS only – Only the UK ETS would apply on UK to EEA flights, whilst CORSIA would apply to all other international flights in the scope of the scheme. As UK to EEA flights would not be subject to CORSIA obligations, the UK would need to file a difference against the definition of international flights in the SARPs. The option would ensure the same level of ambition as now on UK to EEA flights, without charging for the same emissions. It is broadly similar to the ETS-CORSIA ‘clean-cut’ option in the Commission’s inception impact assessment.

Summary of options (source: DfT):

Following this consultation, a second consultation on a more detailed preferred CORSIA-UK ETS interaction policy will be published this summer.

Top photo: Heathrow Airport

Commenting on the outcome of the session, Council President Salvatore Sciacchitano said: “ICAO set out a vision for carbon-neutral growth in international aviation and we have now seen that vision bear fruit. The Council’s decisions on eligible emissions units and sustainability certification schemes are the final steps necessary for CORSIA’s timely implementation.”

The approval of EEUs applies for use with offsetting requirements in the pilot phase and are subject to their respective scope of eligibility and eligibility dates. Issued units must be in respect of activities that started their first crediting period from 1 January 2016 and in respect of emissions reductions through 31 December 2020. It requires TAB recommendation and Council approval for an extension to the eligibility timeframes beyond the pilot phase.

TAB has now recommended and the Council approved seven emissions units programmes for eligibility across the two assessment cycles: American Carbon Registry (ACR), Architecture for REDD+ Transactions (ART), China GHG Voluntary Emission Reduction Program, the UN’s Clean Development Mechanism (CDM), Climate Action Reserve (CAR), Gold Standard and Verified Carbon Standard (Verra).

The approval by ICAO of Winrock’s ART and Verra’s Jurisdictional Nested REDD+ (JNR) represents the first acceptance of REDD+ (Reducing Emissions from Deforestation and forest Degradation) standards in a compliance market and is an important moment in the development of REDD+, said the International Emissions Trading Association (IETA).

A paper published by IETA calls for increased investment to prevent deforestation and for carbon markets to channel finance to all pathways that protect, restore and enhance the ecosystems that draw down and store carbon from the atmosphere.

“We need to scale up finance to avoid deforestation – especially tropical deforestation – in a way that contributes to sustainable development goals in forested regions,” said IETA CEO Dirk Forrister.

The paper points out that many countries have included REDD+ activities as part of their Nationally Determined Contributions (NDCs) to the Paris Agreement and that scenario modelling indicates dramatic reductions in deforestation are necessary to help achieve the Paris Agreement’s 1.5C temperature goal.

“Reducing deforestation and the conversion of natural habitats must be prioritised and recognised for its significant climate change mitigation potential in the short-to-medium term,” said Ellen Lourie, Senior Policy Associate at IETA. “If forests are allowed to be destroyed, it won’t be possible to recapture and store the lost carbon in new forests quickly enough to meet the Paris goals.”

Natural Climate Solutions (NCS) is becoming an increasingly large component of the voluntary market, says IETA, and in 2019 forestry and land use represented over 50% of the market by value. The private sector-led Taskforce on Scaling Voluntary Carbon Markets is looking to increase the voluntary market by at least 15-fold by 2030, which, says IETA, represents an opportunity to direct significant new finance into forest protection.

Commenting on the ICAO outcome, Frances Seymour, Chair of the ART board, said: “We applaud the ICAO Council’s decision to approve jurisdictional REDD+ credits from ART. Protecting and restoring tropical forests can contribute up to one-third of the climate results the world needs over the next two decades, representing a massive mitigation opportunity that needs access to private sector capital at scale. ART was designed as a Paris Agreement-aligned, fit-for-purpose crediting programme that provides the assurance of integrity and safeguards that markets need.”

ART, which uses The REDD+ Environmental Excellency Standard (TREES), said its crediting ensures that jurisdictions meet standard market requirements for robust accounting, independent third-party verification and issuance of serialised units on a transparent registry. Despite the impact of the Covid pandemic and the subsequent adjustment to the CORSIA baseline that would delay the need for the airline industry to purchase offsets for compliance with the scheme, the ICAO approval had been interpreted as a ‘seal of quality’ by market participants, said ART. It stated that since the first crediting programmes were approved in March 2020, interest in purchasing CORSIA-eligible credits was increasing from outside the airline industry as a way to ensure they were investing in credible emission reductions.

“ART was established in anticipation of catalytic private sector interest in REDD+, especially in industries with hard-to-abate emissions,” said Mary Grady, Director of the ART Secretariat. “We hope ICAO’s approval provides the needed quality imprimatur for voluntary investments in REDD+ that extends beyond the global aviation sector.”

Mario Boccucci, Head of the UN-REDD Programme Secretariat, commended ICAO’s approval of jurisdictional and national REDD+ crediting programmes, adding: “The UN-REDD Programme is ready to continue to support REDD countries ensure high-quality and environmental integrity, and provide technical assistance to meet NDCs and raise ambition.”

NGO Environmental Defense Fund (EDF) has helped to establish the Emergent Forest Finance Accelerator, a non-profit finance intermediary supported by the Rockefeller Foundation and the Norwegian government’s International Climate and Forest Initiative, to facilitate large-scale REDD+ transactions using the ART framework. It is collaborating with ART, Emergent, the UN REDD Programme and Forest Trends on the ‘Green Gigaton Challenge: Bringing REDD+ to Scale’ that seeks to set a demand signal that can scale up to at least a billion tons per year in emissions reductions transacted from high-integrity jurisdictional REDD+ by 2025.

“ICAO’s decision connects limits on aviation carbon pollution with investments in tropical forest protection and restoration, and is a win for nature, countries, companies and communities,” said Ruben Lubowski, Associate VP for Climate and Forests and Chief Natural Resource Economist at EDF. “After more than a decade of work on REDD+ frameworks under the UNFCCC and other fora, this marks the first time that REDD+ credits have been approved for use within a global compliance carbon market system.

“ICAO’s decision to include large, jurisdictional-scale REDD+ programmes in CORSIA sends a critical signal to companies and policymakers about the value of tropical forest protection to meet climate goals. It shows forest countries that there is a tangible demand for emissions reductions of the highest environmental and social integrity. Approval of these programmes will drive progress in reducing emissions at the scale needed to achieve the climate goals set by the aviation industry and in the Paris Agreement.”

The focus of the TAB and ICAO Council on ensuring programmes obtain from host countries written attestations that they will properly account for the transferred reductions should add to the efforts of Parties in ongoing climate talks to finalise clear guidance to ensure environmental integrity and prevent double-counting of emission reductions, said EDF. The NGO has produced analysis to show global climate cooperation through carbon markets can enable double the emissions reductions under current Paris pledges for the same cost as countries acting alone.

At its November meeting, the ICAO Council also approved two Sustainability Certification Schemes, the Roundtable on Sustainable Biomaterials (RSB) and the International Sustainability and Carbon Certification (ISCC), as eligible to certify CORSIA Eligible Fuels, based on recommendations by ICAO’s Committee on Aviation Environmental Protection (CAEP). The use of such fuels enables aeroplane operators to reduce their CORSIA offsetting requirements from the use of low-carbon and sustainable aviation fuels (SAF) that must be certified by one of the two organisations, although there is a degree of mutual recognition between them. Such fuels must meet the CORSIA Sustainability Criteria, including to achieve net GHG emission reductions of at least 10% compared to the baseline lifecycle emission values for conventional aviation fuel and not be made from biomass obtained from land with high carbon stock.

RSB has developed its own CORSIA Standard which it said goes above and beyond the ICAO scheme’s requirements to ensure that SAF achieves at least 50% GHG reductions on its core lifecycle analysis and a minimum 10% when including CORSIA’s Induced Land Use Change values (ILUC). In addition, it adds, RSB-certified SAF enables further claims around zero deforestation, environmental protection, food security and human rights, as specified in the RSB Principles and Criteria.

RSB is supported and endorsed by many in the aviation industry and also by environmental NGO coalition group ICSA. Airline members of the Sustainable Aviation Fuel Users Group (SAFUG), representing around a third of global commercial aviation fuel consumption, have committed to developing and using fuels consistent with RSB’s sustainability requirements. A third of RSB’s members are from the aviation sector. RSB certificate holders include Gevo, Nuseed, SkyNRG and World Energy, with further commitments to RSB certification from Velocys, LanzaTech and LanzaJet. KLM has committed to sourcing RSB-certified SAF.

Renewable jet producer Neste is also supporting RSB certification standards. “We cordially congratulate RSB for receiving ICAO recognition for its standard and we look forward to continuing the close collaboration,” said the Finnish company’s VP Business Development, Renewable Aviation, Sami Jauhiainen.

“A clear pathway is now available for industry leaders to demonstrate their commitment to sustainability goes above and beyond the legal requirements of CORSIA to also include a full range of social and environmental impacts as well,” commented Rolf Hogan, RSB’s Executive Director, on the ICAO approval. “We look forward to working with these pioneers to implement this new RSB CORSIA Standard to help transform the industry, and the world.”

Added Pedro Piris-Cabezas, Director of Sustainable International Transport and Lead Senior Economist at EDF: “ICAO Council’s approval of RSB is both an outstanding achievement for RSB and a major milestone for CORSIA, which completes CORSIA’s SAF framework. RSB’s CORSIA standard also represents a paradigm shift, moving from RSB’s original focus on sustainable biofuel volumes to a new focus on emissions reductions from the use of SAF for carbon markets.”

ISCC has also expanded the sustainability requirements for CORSIA eligible fuels with additional criteria that aims to protect water, soil, air, biodiversity and workers’ and land rights. “ISCC covers the complete set of CORSIA requirements, allowing economic operators at every point in a fuel’s supply chain to show their compliance with the CORSIA scheme by becoming ISCC CORSIA certified,” said the Germany-based certification body.

Commenting on the Council outcome on eligible units and sustainability certification schemes, ICAO Secretary General Dr Fang Liu said: “The steps that ICAO has taken to address climate change go hand-in-hand with our efforts to promote the sustainable growth and long-term prosperity of international aviation. CORSIA’s implementation elements are ready, and States and airlines are ready to make us of them.”

ICAO has launched a series of videos on ‘Navigating CORSIA’, which are guides to the scheme’s design and implementation.

The Aviation Carbon Exchange becomes the first centralised, real-time marketplace to be integrated with the IATA Clearing House (ICH) for the settlement of funds on trades in carbon offsets. With an annual turnover of around $56 billion, IATA says the ICH provides a fast and secure billing and settlement services for the air transport industry and will ensure that ACE can guarantee payment and delivery of carbon credits.

Although ACE was conceived as a CORSIA tool, IATA still foresees a demand from airlines that have set net-zero emissions targets and those wishing to offset domestic operations, which are outside the scope of CORSIA.

“Airlines are serious in their commitment to reduce emissions. And they need a reliable tool to access quality carbon credits in real time,” said Director General Alexandre de Juniac at the IATA Annual General Meeting held virtually this week. “ACE will be a key tool helping airlines efficiently manage these important transactions.”

Added Sebastian Mikosz, IATA’s SVP for Member and External Relations: “ACE gives airlines access to top quality carbon offsetting schemes in real-time with full transparency. CORSIA is a key enabler of our long-term strategy to reduce emissions to half of 2005 levels by 2050, and this new platform will be of enormous benefit to our members and other industry stakeholders.”

In the first trade on the exchange, JetBlue purchased an undisclosed number of credits in the first phase of the Larimar wind farm project in the Dominican Republic, which began development in 2015 and when completed is expected to reduce average emissions by more than 200,000 tonnes of CO2 per year.

“Our planet is physically changing, as are the expectations of our customers, crew members and investors,” said Robin Hayes, CEO of JetBlue. “While our industry’s short-term priorities are focused on Covid-19 recovery, now is the time to rebuild operations in more sustainable ways such as adopting sustainable aviation fuels and setting clear strategies to reduce net aviation CO2 emissions. The Aviation Carbon Exchange will help us continue to meet our climate commitments by providing simplified and transparent access to legitimate, third-party certified carbon offsets.”

During the AGM, Hayes was appointed Chair of the IATA Board of Governors and his airline will host next year’s AGM in Boston. Also announced was the stepping down of Alexandre de Juniac as Director General and he will be replaced in April 2021 by the former CEO of International Airlines Group, Willie Walsh.

In a revised outlook for airline industry performance in 2020 and 2021, IATA expects the sector to experience a net loss of $118.5 billion in 2020, deeper than forecast in June, to be followed by a net loss of $38.7 billion next year. Passenger numbers are expected to plummet to 1.8 billion, 60.5% down on the 4.5 billion passengers in 2019. This, it says, is about the same number as carried in 2003. International markets have been hit disproportionately harder than domestic markets, which have been propelled by a recovery in Russia and China.

IATA’s Director of Environment, Michael Gill, told this week’s ICAO Green Recovery virtual seminar that the sector’s global CO2 emissions in 2020 would be around 330 million tonnes, a level last seen in 1977.

Meanwhile, Aviation Carbon Exchange’s partner CBL announced record volumes this week, having traded 25.2 million voluntary carbon offsets in the year-to-date, an increase of 235% over the same period in 2019.

Photo: First offset trade on ACE – the Larimar Wind Farm project in the Dominican Republic