Carbon Offsetting in International Aviation in Asia and the Pacific

Challenges and Opportunities

• Publisher: Asian Development Bank
• Year: 2020
• ISBN:
  9789292625450
• Topic: Technik & Maschinenbau
• Subtopic: Luftfahrt

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) has an important role to play in the aviation industry's efforts to meet its emission reduction targets. The scheme could also benefit developing countries in Asia and the Pacific as a source of these carbon offsets. This report provides climate policy makers and carbon offset suppliers in the region with detailed information about the CORSIA scheme, including the aviation offset demand outlook in the context of the coronavirus pandemic. It aims to contribute to policy development in the region that supports the supply of carbon offsets to international aviation.

1   Introduction

Participating in international carbon markets offers Asian Development Bank (ADB) developing member countries (DMCs) an opportunity to improve the financing environment for climate-friendly investments that can enable technology transfer and create green jobs. International aviation is expected to be a major buyer of carbon offsets as the sector embarks on meeting industry climate targets. DMCs are particularly well-positioned to benefit from being a source of supply of carbon offsets to international aviation given their relatively low marginal abatement costs.

This report is intended to benefit carbon offset suppliers and national climate policy makers in DMCs by increasing their understanding of emerging challenges and opportunities on the nexus of aviation and climate policy.

1.1   Global Emissions from International Aviation

The aviation sector accounts for approximately 2% of global anthropogenic carbon dioxide (CO₂) emissions, of which about 65% relates to international aviation. The International Civil Aviation Organization (ICAO) estimates that in 2015, international aviation was responsible for emitting about 506 million metric tons of CO₂.¹

Beyond CO₂ emissions, ICAO recognizes that the Intergovernmental Panel on Climate Change (IPCC) special report on Aviation and the Global Atmosphere identified significant scientific uncertainty on the impact of other aircraft emissions on climate and the ozone layer. In this context, ICAO is committed to updating information contained in the IPCC special report and aims to remain at the forefront of developing methods and tools for quantifying aviation’s greenhouse gas (GHG) emissions.²

CO₂ emissions from international aviation are expected to double within 18 to 25 years. The ICAO traffic forecast, used by the 11th Committee on Aviation Environmental Protection, projects international aviation traffic to grow at a compound annual growth rate of about 4.4% per year from 2015 to 2035 (Figure 1). ICAO scenarios for estimating the scale of fuel efficiency improvements from technology and operations point to a range of 0.57% to 1.5% improvement in fuel efficiency per year.

Figure 1: International Carbon Dioxide Emissions from Commercial Air Transport

Notes:

1. Does not include contribution of sustainable aviation fuels.

2. Forecast was undertaken prior to the coronavirus disease (COVID-19).

Source: Asian Development Bank using International Civil Aviation Organization data from Committee on Aviation Environmental Protection 11 revenue passenger kilometer traffic forecast based on 2015-2035 compound annual growth rate.

Two key developments, which occurred since these forecasts were prepared, could significantly change the industry outlook. The most immediate development has been the onset of coronavirus disease (COVID-19), which has created a major shock to the aviation sector and the global economy. The airline industry is experiencing an extreme drop in passenger traffic. Current expectations point to a significant contraction that could impact the industry growth profile up to 2035. The second development relates to a major shift in consumer sentiment as a result of concerns about climate change.

1.2   Climate Policy for International Aviation

Multilateral climate cooperation between governments is negotiated under the United Nations Framework Convention on Climate Change (UNFCCC). However, emissions associated with international transportation (aviation and maritime) have been negotiated at respective specialized agencies of the UN, specifically ICAO and the International Maritime Organization.³ These agencies periodically report on their progress in addressing climate change to the UNFCCC through the Subsidiary Body on Scientific and Technological Advice.⁴

Governments signed the Convention on International Civil Aviation (also known as the Chicago Convention) in 1944 to help international civil aviation develop in a safe and orderly manner. A key overarching principle was to establish international air services on the basis of equality of opportunity and operate them soundly and economically. ICAO is an international governmental organization that was established to govern and administer the Chicago Convention. The International Air Transport Association (IATA) is a business association that was established nearly the same time as the signing of the Chicago Convention. IATA is the prime vehicle for inter-airline cooperation in promoting safe, reliable, secure, and economical air services.

Aviation industry practice is such that standard setting and policy development concerning airline operations are usually first developed by IATA and subsequently adopted by governments through ICAO. Although IATA does not have a decision-making role within ICAO processes, there is a close working relationship and IATA expertise is actively sought out when developing ICAO policies and standards. The airline industry played a key role in framing and designing the current climate change policies adopted by ICAO.⁵

Resolutions adopted by ICAO related to climate change detail a series of measures and activities that aim to achieve two global aspirational goals:

•   a 2% annual fuel efficiency improvement until 2050⁶ and

•   net carbon-neutral growth from 2020 (in practice 2019) onward.⁷

The above goals are envisioned to be achieved through a set of measures, including aircraft technology improvements, sustainable aviation fuels, operational improvements, and market-based measures.

In addition to the two existing goals, and in light of the temperature goals enshrined in the Paris Agreement, ICAO is assessing the feasibility of adopting a new long-term global aspirational goal for international aviation. The next ICAO Assembly, scheduled for 2022, is expected to consider options and an implementation road map. ICAO has already noted the collective commitments announced by aviation industry associations to reduce net CO₂ emissions by 50% by 2050 compared to 2005 levels.⁸ ICAO may choose to move from simply noting a 2050 net CO₂ emission reduction target to adopting a similar, or perhaps an even more stringent, target in the future.

2 Carbon Offsetting and Reduction Scheme for International Aviation

2.1 Rationale for the Offsetting Scheme

ICAO member states have agreed to achieve the aviation sector’s climate goals through a set of measures, including aircraft technology improvements, sustainable aviation fuels, operational improvements, and market-based measures. Within market-based measures, a carbon offsetting scheme was deemed to be the most appropriate because of its potential to contribute to achieving defined goals cost-effectively (by tapping into abatement potential in other sectors), while being relatively simple to administer. Beyond fleet renewal and improvements in load factors, aviation has high CO₂ abatement costs. There is some scope to achieve negative cost abatement through improvements in air-navigation services and airline operations (Figure 2). However, there are non-price barriers to realizing these opportunities. Over the next decade, cost-effective measures within the aviation sector can deliver about 20% of the CO₂ emission reductions needed to achieve the target of carbon-neutral growth from 2019.⁹ The cheapest positive cost abatement measures within the aviation sector (engine retrofits or upgrades and early retirement of planes) cost about $200 per metric ton of CO₂.

Figure 2: Abatement Cost Curve for Commercial Air Transport in 2030

ATM = air traffic management, PRC = People’s Republic of China, RVSM = Reduced Vertical Separation Minima, tCO₂ = metric ton of carbon dioxide.

Notes: Jet fuel price assumption $90 per barrel.

Source: G. Anjaparidze. 2019. The Extraordinary Climate Agreement on International Aviation: An Airline Industry Perspective. Policy Brief. Harvard Project on Climate Agreements. October.

2.2 Design of the Scheme

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a carbon offsetting scheme that addresses the growth in total CO₂ emissions from international aviation. When the scheme was adopted in 2016, the average CO₂ emissions in 2019 and 2020 was set as the baseline above which zero-net-growth in CO₂ emissions was to be achieved. However, in June 2020 the ICAO Council decided that only 2019 emissions would be used as the baseline for the pilot phase (2021 to 2023) considering that the inclusion of 2020 emissions would create an inappropriate economic burden on aeroplane operators.¹⁰ Excluding 2020 CO₂ emissions from the baseline will lead to a higher baseline as the industry experienced a sharp downturn in 2020 due to the onset of the coronavirus disease. Prior to the ICAO Council decision, the airline industry was reported to be concerned that in the absence of the baseline revision, countries may reconsider or avoid joining CORSIA given the higher than expected cost burden.¹¹ The communication from the ICAO secretariat announcing the Council decision also stressed that the upcoming periodic review of CORSIA, beginning in 2022, would consider other possible adjustments. Given this uncertainty and the extraordinary circumstances observed in 2020, this report extends the use of 2019 CO₂ emissions as the basis for estimating the baseline over the lifetime of the scheme.

There are three key design elements of CORSIA (Figure 3): (i) a formula for allocating offset responsibility, (ii) a phased approach to implementation, and (iii) provisions related to scheme application. The scheme is subject to periodic review and is also underpinned by a process for monitoring, reporting, and verification of CO₂ emissions from international aviation, covering all ICAO member states.

Figure 3: Three Design Elements of the Carbon Offsetting and Reduction Scheme for International Aviation

Min = minimum, Max = maximum.

Source: G. Anjaparidze. 2019. The Extraordinary Climate Agreement on International Aviation: An Airline Industry Perspective. Policy Brief: Harvard Project on Climate Agreements. October.

Each airline needs to offset a proportion of its total CO₂ emissions covered by CORSIA on the basis of an industry growth factor above the 2019 industry baseline. Offset responsibilities are allocated to airlines based on this approach. In later years of the scheme (2030–2035), offset responsibilities for individual airlines will be determined through a combination of the sector CO₂ growth rate above the...