GREENAIR NEWSLETTER 29 MAY 2020

 

 

This is a text-only version. If you would like to see the full version of any article with images, videos, graphs, tables, related articles, etc, then click on the headline of the article.

 

 

ICAO receives eight more applications from carbon programmes seeking offset eligibility under CORSIA

 

Thu 28 May 2020 – ICAO has received eight applications from emissions unit programmes in the second round of assessments by its Technical Advisory Body (TAB), along with material updates to two applications in the first round. The public is invited to comment by June 26 on the new applications and updates, in particular regarding their alignment with ICAO’s emissions unit criteria (EUC). The programmes range from a project to supply geothermal-generated electricity to Kenya’s national grid to the Regional Greenhouse Gas Initiative (RGGI), a cooperative effort of 10 eastern US states to cap and reduce CO2 emissions from the power sector. The TAB’s assessment and recommendations are expected for consideration by the ICAO Council during its session in early November. A third round of applications is planned to begin in January 2021.

 

Under CORSIA, eligible emissions units must originate from programmes that have procedures and measures in place to meet the EUC. Projects generating units must have started their first crediting period from 1 January 2016 and reductions must occur no later than 31 December 2020. Six programmes were deemed eligible in the first round, although not all units from them are eligible for use in CORSIA. The TAB does not assess offset retailers or project developers, which led some in the first round to fail with their applications.

 

The eight second round programmes applying are:

 

1. Architecture for REDD+ Transactions (ART) – Established in June 2018, ART is administered by US non-profit Winrock International and, says its programme submission to ICAO, is a “global voluntary initiative to promote the environmental and social integrity and ambition of carbon emission reductions from the forest sector to catalyse new, large-scale finance for REDD+.”
2. BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL) – The World Bank acts the trustee and secretariat of ISFL, a multilateral fund with financial contributors including the governments of Norway, Germany, Switzerland, United Kingdom and United States that are represented in the governance of the fund. BioCarbon Fund, established in 2004, was the first carbon fund established globally with a focus on land use and the ISFL, established in 2013, collaborates with national governments to reduce emissions from land use through smart land use planning, policies and practices.
3. CERCARBONO – The Colombian-based private voluntary carbon programme offers certification and registration of projects that generate carbon credits through GHG removal or reduction. Its certification programme started in 2018 and operates in the Colombian carbon market. The regulatory framework also allows it to operate internationally.
4. Compte CO2 – The programme is run by French organisation 450, which was created in 2010 and administers standards and procedures for developing activities that generate offsets, and for verifying and issuing offsets created by those activities. With the ending of the first Kyoto period, 450 has moved from being a project developer to an emissions unit programme, focusing on former UNFCCC JI methodologies.
5. Joint Crediting Mechanism between Japan and Mongolia – Administered by Japan’s ministries responsible for environment, trade and foreign affairs, the project-based bilateral crediting mechanism was inaugurated in 2013. It started operations as an internationally non-tradeable credit type mechanism but a transition towards a tradable mechanism is being considered by the two sides.
6. Olkaria IV Geothermal Project – The renewable energy project is administered by Kenya Electricity Generating Company and utilises steam collected from geothermal wells for electricity generation. The project was registered under the CDM and the start of the crediting period was September 2014.
7. Perform, Achieve and Trade Scheme – Administered by India’s Ministry of Power, PAT is an initiative under the National Mission for Enhanced Energy Efficiency, which is one of the eight missions under National Action Plan on Climate Change. PAT is a regulatory instrument to reduce specific energy consumption in energy intensive sectors, with an associated market-based mechanism to enhance the cost-effectiveness through certification of excess energy savings which can be traded.
8. Regional Greenhouse Gas Initiative – RGGI is the first mandatory, market-based CO2 emissions reduction programme in the United States, covering Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont. Each state’s CO2 Budget Trading Program limits CO2 emissions from electric power plants, issues CO2 allowances and establishes participation in regional CO2 allowance auctions.

 

Two programmes that were assessed in the first round, the Forest Carbon Partnership Facility and Verified Carbon Standard (managed by Verra) have supplied the TAB with updates to their original applications. FCPF was not among those recommended by the TAB for CORSIA eligibility but was invited to address shortcomings over standards and procedures, and resubmit its application, which it has now done.

 

VCS was adopted as an eligible programme by the ICAO Council but Verra was recommended to take certain actions, including over its registry system.

 

All 10 applications and updates, along with details on the public consultation, are posted on the ICAO TAB website.

 

Programmes are only approved to supply CORSIA-eligible emissions units in the 2021-2023 pilot phase. To be eligible for future compliance cycles, the TAB has indicated programmes will need to be re-assessed.

 

 

Lufthansa Group to collaborate with Swiss ventures developing renewable jet fuel from sunlight

 

Wed 27 May 2020 – Lufthansa Group has signed a letter of intent with the Swiss Federal Institute of Technology Zurich (ETH Zurich) and its two spin-offs Climeworks and Synhelion to develop renewable jet fuel from sunlight. The collaborative partnership, initiated by Lufthansa Group subsidiaries SWISS and Edelweiss, will include cooperation in technology and economic efficiency, with an intention to agree at a later date on quotas of the renewable fuel to support demonstration projects. Researchers and engineers at ETH Zurich have developed processes that make it possible to extract CO2 from the atmosphere and together with water and the help of concentrated sunlight, convert it into a synthesis gas that can be used to produce jet fuel. The fuel releases only as much CO2 as was previously extracted from the atmosphere.

 

Founded at ETH Zurich in 2016 and 2009 respectively, Synhelion is working on bringing solar fuels to the market, while Climeworks is pursuing CO2 air separation to provide the carbon required for fuel synthesis in a sustainable manner.

 

“In contrast to other modes of transport, air transport will depend on sustainable liquid fuels in the foreseeable future. Their market launch requires a joint effort by fuel manufacturers and airlines,” said Dr Aldo Steinfeld, Professor for Renewable Energy Carriers at ETH Zurich. “This letter of intent is intended to support the energy turnaround in aviation.”

 

Synhelion is working to commercialise two routes to solar jet fuel with the help of Italy’s Eni, the 10th largest oil company in the world. In the first, it plans by 2022 to market aviation fuel based on solar reforming of methane, which the start-up claims will have 50% lower carbon emissions than conventional fuel. The intention is that this will fund development of a more advanced product by 2030, a 100% carbon-free solar jet fuel from air capture of CO2 and H2O, which Synhelion says its research teams have demonstrated successfully. A solar mini-refinery was installed on the roof of ETH Zurich and produced one decilitre of fuel per day. Steinfeld and his group are already working on a large-scale test of their solar reactor in a solar tower near Madrid.

 

“The pure water and CO2 splitting process we proved is our long-term vision, but it still requires quite some development and its product is more expensive than the current fossil fuel price, so it is currently too far away from the market. In this more advanced pure thermochemical route we are putting in 1500°C of heat to drive the chemical process. We aim to introduce this technology by 2030,” explained Synhelion CTO Philipp Furler, whose solar fuels research at ETH Zurich formed the basis of the technology.

 

“But we also plan to introduce a product before that time. In order to enter the market much faster we want to launch a simpler solar reforming-based route first. The solar reforming approach is more efficient than the pure water and carbon dioxide splitting process and is based on existing industrial technology. This is why we are developing both processes in parallel.”

 

Jet fuel made through a solar reforming-based approach would be commercially viable in the short term and cost little more than today’s jet fuel because reforming is a mature, standard technology, claims Synhelion.

 

Furler said a solar plant spanning an area of one square kilometre could produce 20,000 litres of kerosene a day. “Theoretically, a plant the size of Switzerland – or a third of the Californian Mojave Desert – could cover the kerosene needs of the entire aviation industry,” he claimed.

 

By 2030, Synhelion plans to have around 100 small plants in operation producing approximately 5 megatons of solar fuel a year using the solar-reforming process and believes that when the roll-out begins commercially, the estimated fuel cost will be between 50 cents and $1 per litre. If the 100 facilities were all in one place, the company says the total land requirement would be about 80 square kilometres. To produce the entire global demand of 300 megatons on one site using solar reforming would require 5,000 square kilometres.

 

The more advanced thermochemical process manufacturing 100% carbon-neutral fuel from CO2 and H2O captured directly from air requires higher temperatures and so more space is needed for solar harvesting.

 

“If we were to cover the whole global jet fuel demand with CO2-neutral fuels from pure H2O/CO2 splitting, we would need around 50,000 square kilometres,” calculates Furler. “We assume that many smaller plants would be distributed all over the world, in all the sunny areas.”

 

A study published earlier this year by Christoph Falter and his team at the German research lab Bauhaus Luftfahrt looked at which countries could produce their own solar jet fuel, or even the entire global demand, from sunlight and CO2 and H2O in air. It took into account the solar resource, the coastal access for fuel shipping and if there was enough suitable space not required for other uses like cities, agriculture, industries and forestry.

 

The study found that many of the countries analysed could easily produce just their own domestic demand, guaranteeing their own supply security as well as meeting national greenhouse gas reduction commitments. Some ten countries could produce the entire global demand.

 

Of these, some countries could produce even more than 100% of global needs – for example, Australia could produce up to 18 times the current global demand. Desert nations like Algeria and Saudi Arabia could produce it four to five times over, and from just its southwest region, the United States could produce almost two and a half times current world demand.

 

This is not the first power-to-liquid venture Lufthansa has joined recently. In February 2019, it signed a letter of intent with Raffinerie Heide (Heide Refinery) for the development and use of synthetic kerosene produced from renewable energy, water and CO2. The fuel is to be produced by using surplus wind energy generated locally. With Hamburg Airport also a partner, the fuel is planned to be used on flights from Hamburg.

 

Raffinerie Heide, under the direction of the University of Bremen and together with five other partners from industry and science, has been involved in the KEROSyN100 research project funded by the German Federal Ministry for Economic Affairs and Energy since summer 2018.

 

“The Lufthansa Group has been working hard for years to make flying ever more sustainable,” said Christina Foerster, Executive Board Member of Deutsche Lufthansa and responsible for Customer & Corporate Responsibility. “Thanks to the forward-looking technologies and the cooperation with innovative partners in two of our home markets, we are on the right track.”

 

 

European Commission recommends EU states back industry proposal for CORSIA baseline change

 

Tue 26 May 2020 – The European Commission has recommended EU states should support a proposal by the airline industry to change the CORSIA baseline to take account of the expected sharp decline in carbon emissions this year. Under the scheme, airlines must offset the carbon emissions above a 2019-2020 baseline, but a lower baseline would likely mean a higher than expected carbon offsetting obligation. IATA estimates the baseline would be about 30% more stringent than originally anticipated before the Covid-19 crisis and is calling for a 2019-only baseline. ICAO’s environment committee CAEP has carried out its own analysis on the impact of changing the baseline to 2019 and found offsetting requirements in the three-year pilot phase starting in 2021 would be close to zero and be reduced by between 9 and 32 per cent in all phases up to 2035. Meanwhile, backed by an Oeko-Institut analysis, a group of NGOs and carbon market stakeholders has urged ICAO Council members not to make the change at next month’s 220th Council session and instead wait until the scheme’s first review in 2022.

 

However, in its proposal to the EU Council, the Commission says that in order to ensure support for CORSIA under the circumstances created by the pandemic and to avoid “unravelling” key CORSIA design elements, a prudent initial approach would be to accept an adjustment to set CORSIA’s baseline to 2019 only.

 

“A decision by the Council to adjust the CORSIA baseline during this session would send the signal that ICAO is actively taking steps to adapt to the crisis and preserve States’ support for and participation in CORSIA,” it says.

 

The Commission suggests that such a decision by the Council during its June 8-26 session could be followed by a consultation with ICAO member states and a formal adoption at the following 221st session starting in late October. Eight European countries are represented on the current 36-member ICAO Council.

 

The proposal notes that some countries have indicated they might try to use the opportunity of a possible baseline change to call for having different baselines for different countries, depending on their level of development, year of joining CORSIA or other criteria.

 

“Such a change would go against the principles of Resolution A40-19 and the Chicago Convention and its principle of non-discrimination, and would lead to major risks of unravelling CORSIA,” argues the Commission.

 

It acknowledges a higher 2019 emissions baseline is likely to lead to no or minimal offsetting requirements during the pilot phase but says the issue of the baseline, the extent to which international air traffic rebounds and the level of CORSIA’s ambition could be re-examined at the scheme’s first review in 2022.

 

Alongside the baseline, another change to the scheme proposed by the Commission is to remove the option states can select for calculating aeroplane operators’ offsetting requirements during the 2021-2023 pilot phase. The Commission recommends the option of 2021, 2022 and 2023 emissions respectively, for each year of the pilot phase, is selected, rather than 2020 emissions for each respective year.

 

“This approach takes into account the expected environmental and international transport benefits, the need to provide incentives to operators to reduce their environmental impacts and the importance of early action, while also taking into consideration the size of potential offsetting costs for European operators and any impact on their international competitiveness,” it says. Removing the option of selecting 2020, when emissions are expected to be lower than the following years, should lead to greater environmental effectiveness, argues the Commission.

 

Subject to differences filed in 2018 to the CORSIA SARPS, the Commission also proposes EU member states should notify ICAO by June 30 of their voluntary participation from the start of the pilot phase on 1 January 2021, as required by the scheme’s rules.

 

The number of ICAO member states that have indicated they will participate in CORSIA from the start stands at 83 and so far excludes key aviation states such as Brazil, Russia, India and China. Of the 83, over half are members of the European Civil Aviation Conference (ECAC), which signed the Bratislava Declaration in September 2016 that committed the 44 states to implementing the global scheme.

 

Last month, ECAC consulted with its member states on a preferred option for an adjustment of the CORSIA baseline and provided an analysis of four possible choices, including maintaining the 2019-2020 status quo. In addition to the 2019-only baseline, ECAC’s environment group (EAEG) looked at an option using 2019 emissions and extrapolated 2020 emissions, and another option using 2019 and 2021 emissions.

 

The 2019-only baseline has the advantage of having early certainty on the baseline and the 2019 level of emissions alone is lower than the one anticipated at the time of CORSIA’s adoption, so providing a stronger environmental ambition, reasons the group. It would, it says, avoid an “inappropriate economic burden” on operators as a result of the crisis and the initial signs of support for such an option at ICAO would allow for a quick decision.

 

The disadvantages seen by the EAEG include the risk of a lack of momentum for reporting and verifying 2020 emissions by operators and an undermining of support for CORSIA, especially in Europe, if the crisis is prolonged and offsetting requirements do not kick-in for several years.

 

In an open letter to ICAO Council members sent yesterday (May 25), environmental NGOs Environmental Defense Fund (EDF), WWF and Carbon Market Watch, plus 10 other carbon market stakeholders, including Gold Standard, Climate Action Reserve and atmosfair, urged the Council not to modify the baseline.

 

Under most post-crisis recovery scenarios, a 2019-only baseline change would eliminate all offsetting requirements for the duration of the pilot phase and potentially several years after, resulting in a de facto postponement of the start of CORSIA by three to five years, they wrote.

 

“Changing the rules and thereby eliminating three to five years of offset obligations would damage the credibility and long-term stability of CORSIA,” argues the letter. “While we fully acknowledge the difficult times that the aviation industry is experiencing at the moment, CORSIA’s built-in tools – special flexibility during the pilot phase and triennial reviews – can be used to address the current situation.

 

“CORSIA is an important mechanism for carbon markets around the world. Changes to elements as fundamental to its design as the baseline should be treated very cautiously.”

 

According to the Commission’s baseline proposal to the EU Council, ICAO CAEP estimates CO2 emissions in 2020 could be around 40% lower than levels anticipated in 2016, when CORSIA was adopted by ICAO, and a lower 2019/2020 baseline than anticipated would have a substantial impact on total offsetting requirements.

 

In the pilot phase, this could be +280% in a V-shaped recovery scenario to +150% in a U-shaped recovery with permanent loss scenario. In all phases up to 2035, offsetting requirements could change from +45% (V-shaped) to -24% (U-shaped with permanent loss).

 

Changing the baseline to 2019 could result in total offsetting requirements in the pilot phase becoming zero or close to zero until 2023 and in all phases up to 2035 ranging from -9% in a V-shaped recovery scenario to -32% in a U-shaped recovery with permanent loss.

 

IATA currently estimates international aviation emissions levels in 2020 could fall by half to around 250 million tonnes of CO2, which would lower the 2019-2020 average baseline calculation to levels equivalent to the sector’s emissions in 2010. A 2019-2020 baseline would therefore be around 30% lower than originally anticipated.

 

“An adjusted methodology will still produce a more stringent baseline than would have been the case without the Covid-19 crisis, although emissions levels may not reach the baseline in the early stages of what is expected to be a slow recovery for aviation,” it says. “A 2019 baseline limits the impact of the pandemic on financially struggling airlines and, critically, ensures continued political support from all states for CORSIA and the global approach.”

 

IATA argues using 2019 emissions would still maintain a level of ambition that underpins CORSIA, namely the goal to stabilise net emissions from international aviation close to the pre-crisis forecast of around 600 million tonnes of CO2. It notes that changing the baseline also does not impact CORSIA’s role as complementing a broader package of measures to achieve the global aspirational goal, “thereby underlining the subsidiary nature of offsetting to the primary objective of in-sector emissions reductions.”

 

A paper dated May 19 by IATA states: “It should be emphasised that CORSIA was never envisaged as a mechanism for financing the carbon markets beyond what is necessary to offset the sector’s emissions above the baseline. Maintaining the current baseline methodology on the justification that offsetting requirements would otherwise not be “sufficient” would go well beyond ICAO’s aspirational target and likely raise widespread concerns as to the intent of CORSIA.”

 

A recent report and analysis by EDF said the 2019/2020 baseline should be retained until the 2022 ICAO review and states should make use of the pilot phase offsetting requirement flexibility mechanism to mitigate the impact on their operators of a lower baseline.

 

“However,” counters IATA, “the reality is that it would only provide some marginal relief for airlines in the first three years of the scheme and would not address the increased impact on airlines in any of the subsequent compliance periods.”

 

Support for retaining the 2019-2020 baseline for the initial phase of CORSIA and revisiting the issue in 2022 when the implications of the crisis may be clearer has come from Germany’s Oeko-Institut. In a paper published yesterday (May 25), it says fears that a lower baseline resulting from the pandemic would lead to much higher offsetting obligations is unfounded as emissions from international aviation will be affected for many years to come. It expects the effect of a lower baseline and lower carbon emissions in the future largely cancel each other out, so resulting in little change to offsetting obligations.

 

Oeko says a 2019-only baseline proposal delays climate action by the industry for several years and could reduce the overall mitigation achieved through CORSIA by between 25 and 75 per cent. It analysed three scenarios of a recovery of aviation demand: V-shaped (a brief period of sharp decline followed by a quick recovery), U-shaped (a prolonged contraction and muted recovery) and L-shaped (a long downturn with slow recovery).

 

An important consideration, it says, is whether emissions will ultimately return to the trend level expected before the crisis, or whether the crisis will lead to a sustained lower emissions trend. Learning from past recessions, Oeko says it took two to six years for aviation emissions to reach pre-crisis levels and notes IATA’s expectation that international air travel may not recover to 2019 levels until 2023-24. Past recessions have also resulted in a sustained lower trend line, with IATA assuming passenger kilometres being 10% below pre-Covid expected levels in 2025 and other industry experts predicting sustained lower growth rates even after recovery.

 

“Overall, the implications of the Covid-19 crisis are relatively limited in our scenarios. This is because the effects of a lower baseline and a lower trend of future aviation emissions partially net out,” says the paper’s author, Dr Lambert Schneider, Research Coordinator for International Climate Policy at Oeko-Institut. 

 

“A significant increase in offsetting requirements would only occur if aviation emissions were to quickly bounce back to pre-crisis levels. This is, however, neither supported by historical data from previous crises nor expected by the aviation industry. Conversely, a significant decrease in offsetting requirements might occur if the Covid-19 crisis were to have longer and more far-reaching consequences, leading to an even slower recovery than assumed in our scenarios.”

 

A 2019-only baseline would cut airlines’ offsetting requirements considerably, finds Oeko. In a scenario where there is a smaller drop in aviation demand and a faster recovery, offsetting requirements would be entirely waived in the pilot phase, halved in the first phase (2024-2026) and be reduced by more than a quarter over the operational lifetime of CORSIA (2021-2035). In a scenario where there is a stronger drop in aviation demand and a slower recovery, offsetting requirements under a 2019-only baseline would be waived both in the pilot phase and the first phase and be reduced by about three-quarters over the CORSIA lifetime.

 

“We recommend maintaining the current rules until the review scheduled for 2022, which should be used to revisit the overall ambition and impacts of the scheme,” said the paper’s co-author, Jakob Graichen.

 

However, IATA’s paper says there is an urgent need for a decision by the Council next month to allow the necessary amendments to the CORSIA SARPs be adopted in time for the start of the pilot phase. Deferring a decision until after the pilot phase has already begun would result in airlines being subject to a compliance mechanism whose scope is unclear and without knowing the level of stringency they will have to comply with, it argues.

 

“Regardless of the near-term outlook for the aviation industry, what is important from an environmental perspective is that net emissions are stabilised from 2021 at pre-crisis levels to ensure ICAO’s aspirational target can be met,” says the industry body. “Using 2019 emissions only will achieve this and the verified emissions for 2019 will be available in the coming months. In contrast, deferring a decision until verified emissions for 2020 (or later years) are available would unnecessarily delay a decision on the baseline.”

 

 

The UK’s first waste-to-jet fuel plant takes a step forward as Velocys secures planning permission

 

Thu 21 May 2020 – Sustainable fuels technology company Velocys has received planning approval to build its proposed Altalto Immingham waste-to-jet fuel plant on a site in the north-east of England. Subject to completion of legal agreements with the local council and final funding, the company says it plans to begin construction in 2022 and to start producing commercial volumes of sustainable aviation fuel (SAF) in 2025. The plant will convert “hundreds of thousands” of tonnes of non-recyclable household and commercial waste, otherwise destined for landfill or incineration, into SAF for the partners in the project, Shell and British Airways. The planning approval had been subject to an objection by the government-sponsored body Natural England, which expressed concern over the plant’s location near an estuary site rich in wildlife but the objection was withdrawn and the council unanimously approved the application.

 

The £500 million ($600m) Altalto plant on an 80-acre (32ha) site by the Humber estuary is expected to create up to 130 permanent skilled jobs and many more during construction. It was given the go-ahead in a report by officers from the North East Lincolnshire Council (NELC) last week and recommended, subject to conditions, for approval by councillors. The site would not only bring socio-economic benefits but would also not harm the area’s character or local amenity, said the report.

 

“This development cements north-east Lincolnshire’s place at the heart of the UK’s green industrial revolution, an area already renowned for its fuels production and offshore wind industry,” said Councillor Philip Jackson, Leader of the NELC. “I look forward to seeing what this will mean in terms of real jobs for local people, both during the construction phase and when the project is operational in the longer term.”

 

Velocys CEO Henrik Wareborn said the approval was “fantastic news”, adding SAF was essential for decarbonising the aviation sector and achieving net zero emissions by 2050.

 

“That’s why Velocys is calling on the government to coordinate policy between departments to help us fund a fleet of world-leading SAF facilities in the UK,” he said.

 

The planning permission has been welcomed by the UK Department for Transport. “It’s great to see the industry leading the way in creating new technologies to help achieve our target of net zero emissions by 2050, while also bringing new jobs to the local area,” said Aviation Minister Kelly Tolhurst. “Innovative technologies – like the development of sustainable aviation fuels – firms up the UK’s position as a leader in aviation and shows the determination the industry has in continuing to operate, but in a more environmentally-friendly way.”

 

Velocys claims its fuel will offer net GHG savings of around 70% for each tonne of conventional jet fuel it displaces, along with up to 90% reduction in particulate matter from aircraft engine exhausts and nearly 100% reduction in sulphur oxides.

 

Alongside the Bayou Fuels woody biomass-to-fuels project it is currently developing in Natchez, Mississippi, Fischer-Tropsch specialist Velocys has assembled all the technology components for Altalto into a standardised integrated design. It is also supplying the central processing unit that turns a gas mixture of carbon and hydrogen into the liquid hydrocarbons required to create SAF. In February, the company appointed engineering contractor Worley to manage the delivery of the integrated technology package.

 

As well as intending to purchase fuel from Altalto for its aviation customers, Shell will also provide technical expertise to the project, based on its experience of gasification and Fischer-Tropsch conversion.

 

The site is close to an existing direct pipeline to Heathrow Airport from the nearby Total Lindsey Oil Refinery. Looking to the future, the plant could be producing carbon-negative fuels if a mooted Humber-wide carbon capture and storage cluster comes to fruition.

 

Altalto is being executed under a Joint Development Agreement between Velocys, Shell and British Airways, which has now been extended as planned in order to support the continued technical and commercial development of the project. BA and Shell have been granted an option to take a one-third share in Altalto’s equity capital at a strike price of £1, which Velocys says is a pre-cursor to a full shareholder’s agreement “in due course”.

 

To be payable before the end of June, BA and Shell have agreed to a further £1 million towards the project’s funding.

 

British Airways is also expected to purchase jet fuel produced at the plant for its own aircraft. Commenting on the planning permission approval, a spokesperson for the airline said: “Last year, we committed to achieving net zero carbon emissions by 2050 through a range of initiatives, including in the development of sustainable aviation fuels. We welcome this announcement which is excellent news and reaffirms the importance of this project.”

 

 

COMMENTARY: Five key takeaways on what CORSIA eligibility decisions mean for carbon markets

 

Wed 20 May 2020 – On March 13, the International Civil Aviation Organization (ICAO) announced that credits from Gold Standard and five other standards will be eligible for CORSIA, the aviation sector’s carbon market scheme, for the pilot phase 2021-2023. While Gold Standard believes the requirement for a carbon-intensive sector like aviation to take accountability only for emissions for growth compared to a baseline is insufficient, especially without more ambitious decarbonisation expectations, it is a testimony to the integrity of the voluntary carbon market that some of its standards are among those recognised for this new compliance mechanism. Drilling down deeper, the selection criteria yield five key takeaways that stand to set a new minimum bar in carbon markets, writes Gold Standard’s Sarah Leugers.

 

In the view of Gold Standard:

 

1. Only carbon credits with sustainable development considerations are credible.

 

We should now officially put to rest any debate that sustainable development is too complex to be central to carbon markets. If we are serious about climate justice then climate mitigation and sustainable development must go hand in hand.

 

Gold Standard has pioneered this twin approach to climate and development, and we continue to advocate for strong sustainable development provisions in Article 6 negotiations through our work with the Sustainable Development Initiative (SDI). The CORSIA decision shows this is becoming required practice, not an optional add-on. We view this as a positive development, hopefully an indication for COP26.

 

Yet concerns remain. As we have argued with the UN Sustainable Development Solutions Network (SDSN) and other partners in our guidance for measuring SDG impact, it is not credible to claim positive contributions to sustainable development without a) safeguards to ensure no negative impacts and b) independent verification. New tools that are expected to be used to retroactively demonstrate adherence to safeguards and contributions to sustainable development fall short of this credibility requirement.

 

Gold Standard is ready to serve the CORSIA market by extending our labelling approach to new CORSIA-eligible schemes. This was Gold Standard’s original remit more than 15 years ago – ensuring quality for projects developed under the Clean Development Mechanism. Gold Standard can offer a similar quality label certification approach for those airlines looking to ensure higher assurance on sustainable development within their compliance commitments.

 

 

2. Carbon credits are only appropriate for some types of Land Use activities, and even these must be managed with special caution.

 

While climate-smart management of land use is critical to meeting the goal of the Paris Agreement to balance emissions with sinks by mid-century, we must be deliberate in our use of market mechanisms towards this aim.

 

Despite the recent spike in popularity of nature-based solutions, spurred on largely by efforts from oil and gas companies seeking high volumes of cheap credits, it is telling that the number of CORSIA eligible land use credits is very low. CORSIA will accept no CDM credits from Afforestation/Reforestation (A/R) projects – highlighting the problems with permanence, as CDM projects have no compliance buffer, insurance, or other provisions to address permanence. Project-level REDD+ credits are also not eligible due to important concerns about leakage.

 

Gold Standard Verified Emission Reductions from A/R projects are eligible because of the management of both permanence and leakage. We have now applied these same principles to our new Soil Organic Carbon Framework Methodology with a goal of scaling this important new opportunity to sequester carbon in soils in the context of agricultural practices, grasslands and livestock management, and more.

 

 

3. Market mechanisms must be designed for resilience – striking the right balance to drive desired change.  

 

Notably, CORSIA acknowledged campaigners who lobbied for vintage restrictions to avoid a glut of credits that would mean a low price that does not do what carbon pricing is designed to achieve: provide an incentive for further internal emission reductions. This structural weakness plagued the EU ETS for years as overallotment of allowances meant prices in the low single digits, providing no driver for change to most companies under the compliance cap. CORSIA seems to note this lesson by limiting eligibility to projects with start of first crediting, and hence vintages, to 2016 or later.  

 

This was important to ensure that CORSIA, as a new mechanism for a new ‘Party’ to the Paris Agreement, stimulates additional climate action, both within the aviation industry itself and in the project activities the airlines support. Will this have implications for the COP26 negotiations? Hard to say. But it ought to. Markets now have an opportunity to reset and ensure they are structured to deliver their intended impact – to drive meaningful global emission reductions. 

 

Does this mean that pre-2016 vintages in the voluntary market are somehow less important or valuable? No. Assuming these are to credible standards, this perversely punishes project developers who took risks as early movers. Climate impact in 2015 is as valuable as climate impact in 2017. Gold Standard’s view is that ICAO’s Technical Advisory Body (TAB) might have rather required the safeguards and sustainable development provisions with more rigour across some of the compliance mechanisms it has ushered in, rather than using the more blunt vintage restriction. 

 

 

4. More than ever, it is critical to support vulnerable communities and drive finance to assist those least responsible for climate change yet most affected by its impacts.  

 

Carbon finance has often overlooked the poorest communities that are also too often on the front line of a changing climate. This is the reason the German government supported Gold Standard in a programme of work including suppressed demand methodologies, microscale provisions and its objective observer programme, which grant flexible measures to overcome the barriers that had prevented carbon finance from reaching these marginalised groups. The trade-off to greater development impact is the potential for less precision in the emission reduction quantification. 

 

For this reason, some of these activities are not eligible under CORSIA. It presents an opportunity to build in new conservative principles to ensure that these high-impact projects serving marginalised populations are not left behind in a transition to carbon markets of the future.  

 

 

5. Corresponding adjustments may set an expectation beyond compliance. 

 

As CORSIA is a compliance mechanism, it is non-negotiable that corresponding adjustments are made in host countries as credits are sold to CORSIA buyers. While this does not have a direct bearing on environmental integrity of purely voluntary climate action, a growing number of civil society organisations maintain that corresponding adjustments do serve as a way to ensure that host countries recognise the climate action supported by the voluntary carbon market in their inventories or their domestic policies, to avoid unintentionally reducing the incentive for strong domestic policies. Gold Standard is examining this issue closely and will share proposals in an upcoming policy brief. 

 

Gold Standard believes that market participants should take note of these decisions as the harbinger of a new level of expectations for carbon markets, whether adopted by Article 6 negotiators or simply expected by a new generation of carbon credit buyers. While noting that the expectations for absolute reductions in the aviation sector are not sufficient, we endorse some of the measures discussed here to bring some additional quality provisions. We will continue to advocate for even more robust measures to ensure market credibility and maximise impact beyond climate mitigation to advance the SDG agenda. 

 

 

The author, Sarah Leugers, is Director of Communications at Geneva-based Gold Standard.