Carbon offsetting from aviation: another victim of Coronavirus?
Corsia, the Carbon Offsetting and Reduction Scheme for International Aviation, is a voluntary carbon offsetting scheme developed International Civil Aviation Organization (ICAO), coming into force in 2021. The scheme was expected to cause a significant growth in demand for carbon credits. Instead, in the context of the Covid-19 crisis, airlines are asking for a change in the scheme which would result in the sector not having to buy any carbon offsets for several years.
The essential point is the question of baseline against which the amount of future emissions to offset will be calculated. Corsia is not meant to offset all emissions related to aviation. It is a voluntary programme implemented only for commercial flights between participating countries (83 States, representing 76.64% of international aviation activity) does not cover emissions from domestic aviation, which can be subject to country-specific policy actions such as environmental taxes. As such, Corsia will be used to offset only the increase in total CO2 emissions from international aviation above the baseline of 2019 and 2020 levels. The scheme has been designed under the assumption that air traffic will enjoy a reliable growth of several percent per year, which would result in 2020 air traffic and emissions being the highest so far. The higher the emission baseline, the lower the “increase in total CO2 emissions” calculated relative to this baseline. The very aim of Corsia is to pay carbon offsets only for this increase relative to baseline, which means the financial flows to voluntary carbon markets from Corsia are highly dependent on the choice of this baseline.
Nevertheless, 2020 has been an unexpected year by all accounts, including for the future of voluntary carbon markets. The spread of the Covid-19 and the combination of measures to fight the pandemic (border closures, lockdowns) caused a global collapse of aviation activity and emissions as entire aircraft fleets remain grounded. The economic consequences of lockdowns and lingering uncertainty about the timeline for Covid-19 vaccine mean that return to “normal” may take a long time. This means that 2020 aviation traffic and emissions will be far below 2019 levels and the recovery to pre-Covid-19 levels could take several years.
Under the current design of Corsia, such situation would result in a much stronger demand for carbon offsets and hence in higher costs for airlines due to the shrinking emission baseline against which future emissions to offset will be calculated. The industry is aware of this unexpected additional cost of Corsia and lobbies for its rewriting. The International Air Transport Association (IATA), an airline trade group, has requested the International Civil Aviation Organization (ICAO) to revise the emission baseline to 2019 only to ensure that airlines are not exposed to additional costs as they struggle for their very survival. If approved, this change would mean that no carbon offsets would have to be bought via Corsia for several years, until the emissions from international flights reach and exceed their 2019 levels.
All in all, this would mean a blow for voluntary carbon markets, which were looking forward to the boost of demand expected from Corsia. Moreover, such development would also question the commitment of the aviation industry to wider environmental objectives at a time when an increasing number of actors in the sector hopes for public support, be it in the form of tax refunds, loans and loan guarantees, equity injections or even bailouts. Given the increasing electoral sensibility of sustainability-related issuers, such situation could lead some politicians to argue for “attaching strings” to governmental support for the aviation sector in terms of environmental commitments and objectives in exchange for help.