A brief summary of the Carbon Offsetting and Reduction Scheme for International Aviation, CORSIA, and what airlines should be ready for in 2018.
What is it?
The global aviation industry is said to contribute currently 1.5-2.5% of the planet’s overall CO2 emissions, and to be one of the fastest growing sources of such emissions. Whilst there are global aviation targets of neutral emissions growth from 2020 and a 50% reduction by 2050 over 2005 levels (set by the International Air Travel Association), these aspirations are complicated by a growth in the sector generally as passenger numbers double and runway capacity increases. A key strategy for achieving these targets is the CORSIA.
The CORSIA is a global market-based measure adopted on 6 October 2016 by the 191member states of the International Civil Aviation Organisation (ICAO), a landmark scheme intended to offset annual increases in CO2 emissions from international civil aviation above 2020 levels. As such, the CORSIA will only apply to emissions growth and not to existing emission levels.
Why do you need to know about it?
As of 31 January 2018, 73 states (including Australia, Canada, China, Indonesia, Japan, Mexico, Qatar; Singapore, Thailand, the UAE, the USA and the 28 EU Member States) representing 87.7% of international aviation activity have indicated that they will volunteer for the pilot and first phases of the CORSIA. However, Russia, India and Brazil have not volunteered and ICAO is actively recruiting outstanding participation.
The CORSIA will be implemented in the following phases:
- pilot phase 2021 to 2023: this phase will apply to operators in states that volunteer to participate;
- first phase 2024 to 2026: this phase will apply to operators in the states that participated in the pilot phase and any other states that volunteer to participate; and
- second phase 2027 to 2035: this phase will be mandatory for operators in all states that have signed up. There will be no mandatory compliance for: (i) operators with annual CO2 emissions of 10,000 metric tonnes or less; (ii) certain aviation activities, such as humanitarian, medical or firefighting operations; or (iii) aircraft with a maximum take-off weight of 5,700 kg or less.
How does it work?
The offsetting scheme works on a three-year compliance cycle and is explained in very brief summary as follows:
- each operator must monitor its fuel consumption from all CORSIA qualifying routes and estimate its annual emissions;
- the operator must then hand that emissions data to a national authority, who in turn will report to ICAO;
- once it has collected data from the national authorities, ICAO then calculates the sectoral growth factor for aviation emissions (against a 2020 emission level baseline);
- each participating operator then must offset an amount of emissions (which is calculated by its annual emissions multiplied by the sectoral growth factor); and
- this offsetting obligation is met through the purchase of qualifying credits from other industries and projects that limit greenhouse gas (GHG) emissions.
The CORSIA will only apply to routes between states that are party to the scheme; thus, if one state has agreed to participate in the CORSIA but another has not, flights between those two states will not be subject to it. In addition, there will be exemptions for certain states, such as LEDCs (Less Economically Developed Countries), SIDs (Small Island Developing States) and LLDCs (Land Locked Developing Countries).
How does it work with EU ETS?
There remains some uncertainty on how the CORSIA may affect the status of the EU ETS and new planned schemes, such as China's domestic emissions trading scheme, which is due to become effective in 2018 for the power sector and will likely include civil aviation in the near future.
CORSIA has yet to establish a system of sanctions for non-compliance and enforcement criteria, which must exist (at least until 2021) alongside the EU ETS sanctions and enforcement criteria. It is unclear how the CORSIA and the EU ETS sanctions systems will interface. Under the EU ETS, civil sanctions can be imposed for a variety of actions carried out by operators, including reporting failures or failing to surrender sufficient allowances in any given year.
In December 2017, Regulation 2017/2392 came into force amending the EU ETS by continuing current limitations of scope for aviation activities in order to prepare to implement CORSIA from 2021. This means that intercontinental flights departing from the EU or landing in the EU from non-EU countries continue to be exempt from the EU ETS. The Regulation will review the position once the nature of CORSIA is more certain. In the absence of a review, the full scope including inter-EEA travel will be reverted to from 1 January 2024.
What should airlines do to get ready for it?
Airlines to which the CORSIA will apply will need to begin the process of implementing monitoring, reporting and compliance programmes, as well as strategies for purchasing emissions units. Airlines will need to factor into their prices the higher operating and compliance costs of monitoring and reporting of emissions, as well as the purchase of emission credits etc.
ICAO has developed a monitoring, reporting and verification system to be used by participating operators consisting of three parts: (i) collection of information on fuel burn per flight to calculate CO2 emissions; (ii) a system of harmonised reporting from airlines to states, and from states to ICAO who then calculates the annual sectoral growth factor; and (iii) verification of the data to ensure accuracy, likely in the form of a third-party audit.
Next steps for the CORSIA
ICAO is currently developing the criteria for emissions units and emissions registries in time for 2021. In addition, they have produced standards and recommended practices (SARPs) which contain technical rules and guidance for implementing the scheme. Under the SARPs, all eligible aircraft operators and airline businesses must start monitoring emissions from international flights starting on 1 January 2019. However, the SARPs have not yet been approved by Member States and are currently under consultation.
Our team of Bird & Bird lawyers specialised in the aviation and environmental sectors are available to assist you should you have any questions in relation to CORSIA or EU ETS.