ICAO’s CORSIA and EU ETS – December 2016 Newsletter

On 6 October 2016, the ICAO Member States agreed to implement a Global Market-Based Measure (GMBM) to meet their Carbon Neutral Growth 2020 (CNG2020) goal. The Plenary session of ICAO’s 39th Assembly recommended adoption of Resolution A39-3, the Carbon Offset and Reduction Scheme for International Aviation (CORSIA).
 
Overview
 
Aviation accounts for about 2% of global emissions and international aviation represents approximately 1.3%. ICAO has been discussing the topic of CO2 emissions from international aviation for decades. However, in 2010, ICAO adopted two sectoral aspirational goals, 2% annual fuel efficiency improvement and CNG2020.
 
In October 2013, the 38th Session of the ICAO Assembly adopted Resolution A38-18, which resolved that ICAO and its Member States, with relevant organizations, would work together and strive to achieve a collective medium term global aspirational goal of keeping the global net CO2 emissions from international aviation after 2020 at the same level (CNG2020). The Assembly also defined a basket of measures designed to help achieve ICAO's global aspirational goal. This basket includes improved aircraft technologies and procedures such as lighter airframes, higher engine performance and new certification standards, operational improvements (e.g. improved ground operations and air traffic management), sustainable alternative fuels and global market-base measures (GMBM).

   
 
How does the scheme work?
 
ICAO has agreed that the GMBM will be a Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) rather than a cap and trade system like EU ETS. This means that emissions from international aviation exceeding a given baseline (average emissions from international aviation in 2019 and 2020) will be offset by CO2 emission reductions in other sectors (offsets).
 
ICAO has decided on a phase-in implementation to accommodate special circumstances and respective capabilities (SCRC) of contracting States. The Pilot phase (2021-2023) and the First phase (2024-2026) apply to States that have volunteered to participate. The Second phase (2027-2035) applies to all States except the exempted States unless they volunteer to participate. Exempted States are all States that have an individual share of international aviation activities in RTKs in year 2018 below 0.5% of total RTKs (154 States according to 2014 RTKs) or whose cumulative share in the list of States from the highest to the lowest amount of RTKs is less than 90% of total RTKs (157 States according to 2014 RTKs). Exempted States are also Least Developed Countries (LDCs, 24 States), Small Island Developing States (SIDS, 52 States) and Landlocked Developing Countries (LLDCs, 32 States).
 
To ensure a level playing field between all airlines flying on the same route, CORSIA is using a route-based approach. A route is considered to be covered by CORSIA only when both the airport of departure and the airport of arrival are in States participating in the scheme. Consequently, it does not matter where the airline’s AOC is registered because all airlines emitting more than 10,000 metric tonnes of CO2 from international aviation per year are obliged to offset some emissions from the covered routes.
 
Once the air routes covered by CORSIA are known, the offsetting requirements are calculated for each aircraft operator every year. This calculation will gradually move from 100% sectoral rate (0% individual rate) to a higher individual rate for each aircraft operator. The operator then purchases a number of carbon units equivalent to its offsetting requirements from the carbon markets. The first year of emissions monitoring to offset will be 2021.
 
ICAO is currently developing rules and procedures for a Monitoring, Reporting and Verification system (MRV) and criteria for carbon units to be purchased by emitters and registries. ICAO will assist all states to put in place the necessary infrastructure, where priority will be given to the states that volunteered in the scheme. The agreement includes a review clause that will ensure the GMBM is updated if required to make it more robust and ambitious if possible.
 
> Watch the CORSIA video
> See the full list of CORSIA participating and exempted States
> See how to calculate the offsetting requirements
> See the details about CORSIA MRV
> See the details about eligible carbon units 

Impact on Aviation EU ETS
 
In 2012, the EC agreed to exclude extra-EU flights from the EU ETS Phase 3 and only include intra-EU flights, the so-called “stop the clock”, in order to give ICAO time to reach a global agreement. However, this derogation of the regulation will automatically cease from 1 January 2017 and the full scope of Aviation EU ETS will resume, unless the derogation is extended or new legislation is approved.
 
According to the latest news from an inside source from European Commission, the EC understands the urgency of their decision and they will produce a legislative proposal at the beginning of 2017 (probably January) for approval by the European Council and Parliament. There are several options but the extension of the “stop the clock” derogation is most likely with possible adjustments to the scope.
 
> See the T&E report on a comparison study between EU ETS and CORSIA
> Read more from GreenAir Online
> Read more about EU ETS 

What to expect in 2017
 
CORSIA will come to force in 2021 so aviation will most likely remain included in EU ETS. The European Commission is expected to present a proposal for changes in early 2017 but there might not be a final decision before April 2017. 
 
As the EU has not yet clarified whether "stop-the-clock" derogation will continue beyond 2016, it is likely that the distribution of free allowances for 2017, which should take place on 28 February 2017, will be postponed to May 2017 or later. This means that aircraft operators must ensure that they have adequate quotas, without receiving the annual allowances for 2017, before the settlement on 30 April 2017 to cover emissions of 2016. It is currently unclear whether it will be possible to defer settlement for 2016 in light of the postponement of distribution. The EC and Competent Authorities are expected to clarify this and send additional information to aircraft operators in early 2017, including an FAQ guidance for compliance during 2017.
 
> Read more about “stop the clock” derogation
> Visit ICAO’s CORSIA website
> Read more about CORSIA
> Read the FAQs 

The VERIFAVIA team is available for any questions you may have about this newsletter or other ETS and CORSIA related issues.
 
The VERIFAVIA team would like to wish you Merry Christmas, Happy Holidays, Happy New Year and all the best wishes for 2017! Back to all Verifavia News