Why Europe should focus on its own airline carbon market and forget the UN scheme

August 3, 2020

At the beginning of the Covid-19 outbreak, it was difficult to imagine how rapidly the virus would impact our daily lives, and the aviation sector in particular. While we grappled with Zoom calls, and while governments rushed to flatten the curve, the aviation sector was knocking on doors asking for more special treatment - on top of the tax exemptions and light-touch climate regulation that it already enjoys.

Even after receiving over €30 billion of taxpayers’ money, it didn’t take long for airlines to ask the UN aviation agency, ICAO, to change the rules of a global offsetting scheme for aviation’s carbon emissions. The scheme, known as Corsia, obliges airlines to purchase offsets for emissions over 2020 levels, taking the average emissions released in 2019 and 2020 as a baseline. When Covid grounded flights, airlines asked for this baseline to be changed to only take into account 2019 figures because emissions would be so low in 2020 that they would have to offset more than they expected.

But whatever the baseline, will this scheme really place a significant financial burden on airlines, and was it ever going to solve aviation’s climate problems?

First, Corsia does not include an actual emissions reduction target. It relies on airlines buying offsets to compensate for their emissions growth, which will never be enough to offset the known damage of flying, and is also at odds with the Paris agreement’s goals. All countries and sectors are expected to reduce their emissions, including you, aviation!

Second, look at the actual quality and price of the offsets that airlines are expected to buy to compensate for their emissions. At the start of 2020, ICAO’s governing body agreed that six offsetting programmes were eligible to be considered within Corsia, one of which is the Clean Development Mechanism (CDM). The European Commission already reported that 85% of the offset projects under the CDM failed to reduce emissions. ICAO did adopt a safeguard on the age of eligible offsets, which slightly improved the environmental integrity of the scheme, but in the end would still lead to an oversupply of offsets. So, not only are the offsets of questionable quality but the amounts available to buy will be so high that airlines can continue polluting with the assurance that there will always be enough cheap offsets to purchase.

Current and potential supplies are expected to be between 2 and 4 times higher than demand estimated in the industry association IATA’s latest Covid-19 scenarios. With offsets expected to cost a few cents, the financial impact of Corsia on airlines is expected to be minimal. Even ICAO says it expects the cost of compliance to range between 0.2 to 0.6% of total revenues from international aviation in 2025. In comparison, the carbon price in the EU’s carbon market (ETS) averaged around €25 a tonne CO2 in 2019. By changing Corsia’s baseline year, airlines might not even have any offsetting obligations for years – depending on how fast traffic bounces back. So, what we knew would be a hopelessly cheap offsetting scheme will, in its initial years, be non-existent.

So what should governments do?

Don’t buy the line that international aviation emissions can only be regulated by ICAO. The aviation geeks of this world will know the argument by heart now: “aviation is an international mode of transport, so it requires international solutions”. But does it, really? A majority of the aviation industry is eager to privilege international solutions when they want to escape their environmental responsibilities, but are very happy to promote national solutions when it comes to getting bailout money. This needs to stop. Aviation can’t have it both ways: it’s unfair for the sector to get support in bad times and refuse to contribute to European and national environmental efforts in good times. Especially when the industry isn’t effectively dealing with aviation’s climate problem by itself.

Publish Corsia’s impact analysis and reform the EU ETS. When the EU ETS was revised in 2017, the Commission was tasked with assessing the environmental effectiveness of Corsia before proposing to integrate the scheme in EU law. As was highlighted by MEPs, this report hasn’t yet been published. Its eventual arrival will give the EU the opportunity to discuss an ambitious reform of the EU’s carbon market rules for aviation, as suggested in the Commission’s inception impact assessment for the aviation ETS rules.

Back in 2012, the scope of the ETS was reduced to give ICAO time to come up with a credible international emission reduction scheme. Now that we see Corsia and ICAO are failing to deliver, isn’t it time for the EU to show true environmental leadership by strengthening the ETS? Who knows what else airlines will succeed in watering down in Corsia when it’s reviewed in 2022? Now is the chance for Europe and its member states to turn off autopilot and steer aviation towards sustainability.

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