The ICAO Global Market-Based Measure (GMBM): What does CORSIA mean for industry and other stakeholders?

Posted by Nick Asselin-Miller, Gareth Horton & Margaret-Ann Splawn on 26 January 2017


What is the new GMBM?

ETS vs CORSIA

Impacts to Airlines

Impacts to Airports

Impacts to National governments

Impacts to fuel
 companies

Impacts to alternative fuel companies

Join our webinar


What is the new GMBM being introduced? 

As of 07 October 2016, 65 of the International Civil Aviation Organisation (ICAO) Member States had committed to joining the Global Market-based Measure (GMBM) scheme from 2021.

The mechanism proposed is known as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

The CORSIA is expected to come into force in 2021; however, its adoption will be voluntary until 2027. The interim period will encompass a pilot phase (2021 to 2023) and the “first phase” (2024 to 2026). From 2027, the adoption of CORSIA will be mandatory for all ICAO Member States.

All 28 EU Member States and another 16 European Civil Aviation Conference (ECAC) Member States have committed to joining the CORSIA from the start of the pilot phase.

There are, however, some significant omissions (such as Russia and India), which will limit the flights that need to be included in the scheme at the start.

The definition of CORSIA excludes flights to and from developing states, including least developed countries (LDCs), small island developing states (SIDS) and landlocked developing countries (LLDCs). Also excluded are countries with a low share of global international aviation.

The EU introduced the first major market-based measure for aviation in 2012 with its inclusion in the EU emissions trading scheme (EU ETS). This required airlines flying to and from EU airports to surrender allowances for the CO2 emissions from those flights. A number of allowances were available for free (based on the emissions in 2006); the airlines needed to purchase the rest through auctions. But the inclusion of aviation in the EU ETS faced strong international opposition. The International Civil Aviation Organisation (ICAO) was also working to develop its own GMBM that would be aimed at covering all airlines internationally. As a result, the EU announced in 2013 that the scope of the EU ETS was temporarily reduced to covering just internal flights within the EU (both domestic and international). This was known as the “Stop the Clock” derogation, which ran to the end of 2016. The EU is currently considering the options for the aviation EU ETS from 2017 onwards.

What are the differences between ETS and CORSIA? 

CORSIA differs from the EU ETS in a number of significant ways (beyond being a global scheme):

•  CORSIA only applies to international aviation, whereas the EU ETS applies to both domestic and international.
•  Under CORSIA, airlines only need to offset emissions above 2020 levels, whereas the EU ETS requires the surrender of allowances for all emissions (though allowances equivalent to 80% of emissions in 2006 are provided for free).
•  The CORSIA is based on an offsetting scheme, via international credits, whereas the EU ETS is based on the purchase of allowances. Currently, the cost of an EU ETS allowance is significantly higher than an international credit.
•  An allowance allows the holder the right to pollute up to a certain level and companies surrender these permits for their compliance
•  An offset represents emission reductions outside of the regulated industries in other countries where one tonne of CO2 is saved because of the additional benefits

For example, under the current EU ETS requirements, the cost of allowances for a flight from London to Rome in 2025 might be about €44 (approximately 1.8% of fuel costs), whereas the cost of offsets under CORSIA might be about €0.50 (assuming no changes in the price of EU ETS allowances and international credits from current levels).


What does it mean for different stakeholders?

The main stakeholders in CORSIA are the airlines and the countries that are expected to participate in the scheme, EU and beyond

 

Under CORSIA, airlines will need to purchase international credits for their emissions on international flights above 2020 levels. The details of how these “2020 levels” will be calculated are still being determined; however, it is likely that they will be based on a Member State’s emissions rather than an individual airline’s (to allow for new entrant airlines, for example).

The requirements for an airline will include verifying its emissions on international flights and producing evidence of its acquisition of international credits to the correct value. The emissions of CO2 from a modern aircraft engine are directly proportional to its fuel consumption (with an emission index of 3.16 kg/kg), so the verification requirement is based on the fuel consumed. Larger airlines have very accurate records of the fuel consumed on each flight, so they will be able to demonstrate how much is consumed on qualifying flights.

Smaller airlines may not have such accurate records and may find it more difficult to provide the required evidence. However, airlines that operate in Europe will already have several years’ experience of calculating and verifying their fuel consumption under the EU ETS requirements.

The other requirement for airlines will be to purchase international credits to cover their emissions. Under the EU ETS, airlines are required to purchase allowances at specific auctions; however, under CORSIA, they will be free to identify offset schemes themselves. Whilst this may appear to place an additional burden on the airlines, other industries will already be acquiring offsets (under the obligations of the Paris Agreement), so there is likely to be a considerable quantity of advice and assistance available.

The compliance cycle for CORSIA is to be three yearly, starting with the 2021-2023 cycle. ICAO is to establish its own central registry by 2021 and there is scope for states to establish their own national or regional registries. There are plans for a coordinated registry system to ensure that these different registries will be able to link and transfer eligible emissions units between them. The processes and rules for the coordinated registry system are being developed.

The offsets that will be accepted for compliance under CORSIA will be referred to as Emission Units. The compliance criteria for these Emission Units is yet to be formalised by ICAO. Thus far the criteria stipulate that credits must be additional and be based on a realistic and credible baseline. Emission Units will be required to be quantified, monitored, reported and verified as well as have a clear and transparent chain of custody. ICAO has stated that UNFCCC credits will be eligible in the scheme as long as they meet the offset criteria being developed by ICAO, including on avoiding double counting and representing permanent emissions reductions. ICAO is keen to maintain the environmental integrity of the scheme and it is likely that credits and programmes with more robust standards will be admitted.

 

There are no direct obligations on airports arising from CORSIA. However, the need for some airlines to monitor their fuel consumption more accurately (and, potentially, to apportion it to individual flights) may lead to some need to monitor the fuel supplied to airlines and loaded onto aircraft. Therefore, airports may wish to monitor developments and make sure that they are able to offer the support that airlines may need.

 

Under the EU ETS, the responsibility for ensuring that the airlines comply with the requirements falls on the EU Member State. In the UK, this is split between the Environment Agency, the Scottish Environmental Protection Agency and Natural Resources Wales, depending on the location of the airline’s head office (or where most of its emissions occur).

It is to be expected that a similar responsibility for ensuring compliance with the CORSIA will rest with the ICAO Member States; this is supported by it being the ICAO Member States who have committed to participating in the CORSIA from the start of the pilot phase (and not, for example, the airlines themselves). This will include the determination of the ICAO Member State’s 2020 emissions and their distribution to airlines registered in that State (as part of the emissions that they do not need to account for). As for the airlines, the European Member States will have several years’ experience of administering such a scheme.

 

Like airports, fuel suppliers do not have any direct obligations under CORSIA. Again, however (and possibly to a greater extent), they may need to deal with airlines’ requirements to monitor their fuel consumption more accurately.

 

The specification for aviation fuel is very precise. Currently, most alternative fuels (“biofuels”) must be blended with petroleum kerosene (up to a 50-50 mix) before they can be used on commercial flights. There have been suggestions that biofuels should be exempt from the offsetting requirements under the CORSIA. However, it is not clear which fuels can be truly considered “sustainable” (including not interfering with the production of crops for food); to date, there has been no indication that biofuels will be exempted from the CORSIA requirements. Fuel companies involved in the development of alternative aviation fuels may have an interest in how CORSIA develops.

Organisations involved in carbon offsets

The CORSIA requires that emissions should be offset by the acquisition of international credits, as specified by the Paris Agreement (Article 6). Organisations, such as the UNFCCC's Clean Development Mechanism or programs such as Gold Standard Foundation, Verified Carbon Standard, Reducing Emissions from Deforestation and Forest Degradation (REDD+) etc, involved in such schemes will have a clear interest in CORSIA as a demand driven market for their offsets.


Join our webinar 

To help provide further information and guidance on the introduction of CORSIA we are provide a complimentary webinar at 10:00 on 7 March 2017In this webinar we will provide you with:

• Insight into CORSIA

• The difference between CORSIA and EU ETS

• The impact to different stakeholder

• Short-term carbon reduction opportunities and benefits

• Next steps

The webinar will by co-hosted by the Climate Markets & Investment Authority (CMIA).

To register for the webinar click here