EU airline credits program comes under renewed scrutiny

A highly critical EU study of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) has sparked a fresh round of scrutiny in a long-running debate over the program's ability to mitigate the industry's carbon footprint.

One of the main backers of CORSIA is the International Air Transport Association (IATA). The agency, representing nearly 300 airlines, is pushing back at suggestions that the scheme will not help reduce aviation emissions.

"CORSIA was created as a mid-term solution for dealing with carbon dioxide (CO2) emissions until new technology and sustainable aviation fuels (SAF) could be implemented and scaled up," Michael Gill, director of aviation environment at IATA, said on 26 March. "It was never meant to be the end-solution for aviation emissions," he said in an email to OPIS.

Under CORSIA, which was adopted by the International Civil Aviation Organization (ICAO) in 2016, airlines can offset the growth in emissions by purchasing credits and moving toward the use of SAF. In 2019, the last year for which data is available, global aviation accounted for 2.8% of total CO2 emissions, according to the International Energy Agency.

CORSIA is in its pilot phase until 2023, which will be followed by a voluntary phase before participation becomes mandatory in 2027 for all states, except for the least developed countries.

According to a draft of an EU study, obtained by the Brussels-based climate activist group Transport and Environment (T&E), "CORSIA is unlikely to materially alter the direct climate impact associated with air travel as the price signal that airlines will face under the scheme is, on its own, not expected to provide sufficient financial incentives for them to reduce emissions materially."

The politically independent T&E, established 30 years ago, is a major campaigner for clean transportation in Europe.

CORSIA "is not going to deliver emissions reduction, because it is based on an environmentally flawed offsetting principle … CORSIA allows airlines to continue polluting and releasing CO2 emissions into the atmosphere, instead of actually reducing them," Jo Dardenne, aviation manager at T&E, told OPIS in an interview in March.

Dardenne also questioned the quality of the credits. For example, she said none of the CORSIA-eligible programs have comprehensive provisions to avoid double counting and ensure that a particular emissions project is not already counted within a country's nationally determined contribution to reduce carbon emissions. She added that three of the major programs approved by ICAO as part of the CORSIA program "do not meet the additionality criterion, which means that the emissions reductions these programs include would have happened anyway with or without CORSIA."

IATA's Gill defended the vetting process. "Regarding the integrity of the CORSIA carbon credits, eligibility criteria have been put in place by technical experts, including experts from the European Commission, EU governments and NGOs at ICAO to guarantee that emissions units deliver the desired CO2 reductions," he said. "The criteria are based on principles commonly applied under existing trading mechanisms and well-accepted carbon offset certification standards."

A spokesperson for the ICAO refused to comment on the report, saying the organization does not react to national and regional developments.

"It is, of course, not uncommon for stakeholders in a given country or region to determine that some part of an ICAO-agreed approach may fall short with respect to their specific value or objective," the spokesperson said. "It is important to recognize in this context that every major development achieved through our agency must of course be adopted for global applicability and therefore be informed by a wide negotiated consensus among all countries and all regions."

EU Emissions Trading System

The EU report was published ahead of a planned revision of the EU Emissions Trading System (EU ETS) in summer, when the EC will decide whether to include intercontinental flights in the scheme. Currently, flights within the EU as well as Iceland, Liechtenstein, and Norway are covered.

The EC conducted a public consultation on the updated rules for aviation in the ETS between 1 October 2020 and 14 January, an EC official told OPIS by email, adding: "It is now assessing the feedback received and will include it in the impact assessment that will accompany our proposal in June."

One part of the anticipated new regulation, known informally as "ReFuel EU," will address intercontinental flights and a possible mandate for SAF for flights that refuel in the EU, even if they continue afterwards to other parts of the world. The matter of intercontinental flights pits budget short-haul airlines that do all or most of their business within the EU against long-haul airlines.

But the EU ETS has numerous other issues to address as well. The EU study obtained by T&E does acknowledge, as Dardenne said, that CORSIA allows airlines to compensate for emissions, rather than incentivize actual reductions. The report also cites issues including an oversupply of cheap credits, non-participation by key markets, and a lack of transparency and enforceability.

"There are a number of features of CORSIA, which imply its level of ambition for the international aviation sector is mis-aligned with, and weaker than, the global level of ambition required to keep within the temperature goals of the Paris Agreement," the study said.

The Paris Agreement seeks to limit global warming to well below 2 degree Celsius, and preferably to 1.5 degrees above pre-industrial levels, with net-zero emissions by 2050 the generally recognized need to achieve that goal.

The EU study also pointed out China, Russia, India, Brazil, and Vietnam are among nations with large aviation markets that have not joined CORSIA, also therefore limiting its effectiveness.

Another criticism made by activists is that last June, citing the COVID-19 pandemic, the ICAO changed CORSIA's baseline year against which emissions are measured from 2019-2020 to just 2019. Activists say emissions growth is unlikely to climb back above 2019 levels during the pilot phase of CORSIA because of reduced air travel, and the EU report said the baseline adjustment and recovering aviation industry will lead to an excess supply of credits.

When it comes to pricing, the EU report concluded that it is likely to be significantly cheaper for airlines to purchase credits than invest in measures to reduce emissions.

On 31 March, the OPIS CORSIA Eligible Offsets price assessment, used to gauge the cost for voluntary compliance with the program, was $2.28/mt.

Original reporting by Abdul Latheef, OPIS.