European Commission recommends EU states back industry proposal for CORSIA baseline change

European Commission recommends EU states back industry proposal for CORSIA baseline change | Covid-19

Tue 26 May 2020 – The European Commission has recommended EU states should support a proposal by the airline industry to change the CORSIA baseline to take account of the expected sharp decline in carbon emissions this year. Under the scheme, airlines must offset the carbon emissions above a 2019/2020 baseline, but a lower baseline would likely mean a higher than expected carbon offsetting obligation. IATA estimates the 2019/2020 baseline would be about 30% more stringent than originally anticipated before the Covid-19 crisis and is calling for a 2019-only baseline. ICAO’s environment committee CAEP has carried out its own analysis on the impact of changing the baseline to 2019 and found offsetting requirements in the three-year pilot phase starting in 2021 would be close to zero and be reduced by between 9 and 32 per cent in all phases up to 2035. Meanwhile, backed by an Oeko-Institut analysis, a group of NGOs and carbon market stakeholders has urged ICAO Council members not to make the change at next month’s 220th Council session and instead wait until the scheme’s first review in 2022.


However, in its proposal to the EU Council, the Commission says that in order to ensure support for CORSIA under the circumstances created by the pandemic and to avoid “unravelling” key CORSIA design elements, a prudent initial approach would be to accept an adjustment to set CORSIA’s baseline to 2019 only.


“A decision by the Council to adjust the CORSIA baseline during this session would send the signal that ICAO is actively taking steps to adapt to the crisis and preserve States’ support for and participation in CORSIA,” it says.


The Commission suggests that such a decision by the Council during its June 8-26 session could be followed by a consultation with ICAO member states and a formal adoption at the following 221st session starting in late October. Eight European countries are represented on the current 36-member ICAO Council.


The proposal notes that some countries have indicated they might try to use the opportunity of a possible baseline change to call for having different baselines for different countries, depending on their level of development, year of joining CORSIA or other criteria.


“Such a change would go against the principles of Resolution A40-19 and the Chicago Convention and its principle of non-discrimination, and would lead to major risks of unravelling CORSIA,” argues the Commission.


It acknowledges a higher 2019 emissions baseline is likely to lead to no or minimal offsetting requirements during the pilot phase but says the issue of the baseline, the extent to which international air traffic rebounds and the level of CORSIA’s ambition could be re-examined at the scheme’s first review in 2022.


Alongside the baseline, another change to the scheme proposed by the Commission is to remove the option states can select for calculating aeroplane operators’ offsetting requirements during the 2021-2023 pilot phase. The Commission recommends the option of 2021, 2022 and 2023 emissions respectively, for each year of the pilot phase, is selected, rather than 2020 emissions for each respective year.


“This approach takes into account the expected environmental and international transport benefits, the need to provide incentives to operators to reduce their environmental impacts and the importance of early action, while also taking into consideration the size of potential offsetting costs for European operators and any impact on their international competitiveness,” it says. Removing the option of selecting 2020, when emissions are expected to be lower than the following years, should lead to greater environmental effectiveness, argues the Commission.


Subject to differences filed in 2018 to the CORSIA SARPS, the Commission also proposes EU member states should notify ICAO by June 30 of their voluntary participation from the start of the pilot phase on 1 January 2021, as required by the scheme’s rules.


The number of ICAO member states that have indicated they will participate in CORSIA from the start stands at 83 and so far excludes key aviation states such as Brazil, Russia, India and China. Of the 83, over half are members of the European Civil Aviation Conference (ECAC), which signed the Bratislava Declaration in September 2016 that committed the 44 states to implementing the global scheme.


Last month, ECAC consulted with its member states on a preferred option for an adjustment of the CORSIA baseline and provided an analysis of four possible choices, including maintaining the 2019-2020 status quo. In addition to the 2019-only baseline, ECAC’s environment group (EAEG) looked at an option using 2019 emissions and extrapolated 2020 emissions, and another option using 2019 and 2021 emissions.


The 2019-only baseline has the advantage of having early certainty on the baseline and the 2019 level of emissions alone is lower than the one anticipated at the time of CORSIA’s adoption, so providing a stronger environmental ambition, reasons the group. It would, it says, avoid an “inappropriate economic burden” on operators as a result of the crisis and the initial signs of support for such an option at ICAO would allow for a quick decision.


The disadvantages seen by the EAEG include the risk of a lack of momentum for reporting and verifying 2020 emissions by operators and an undermining of support for CORSIA, especially in Europe, if the crisis is prolonged and offsetting requirements do not kick-in for several years.


In an open letter to ICAO Council members sent yesterday (May 25), environmental NGOs Environmental Defense Fund (EDF), WWF and Carbon Market Watch, plus 10 other carbon market stakeholders, including Gold Standard, Climate Action Reserve and atmosfair, urged the Council not to modify the baseline.


Under most post-crisis recovery scenarios, a 2019-only baseline change would eliminate all offsetting requirements for the duration of the pilot phase and potentially several years after, resulting in a de facto postponement of the start of CORSIA by three to five years, they wrote.


“Changing the rules and thereby eliminating three to five years of offset obligations would damage the credibility and long-term stability of CORSIA,” argues the letter. “While we fully acknowledge the difficult times that the aviation industry is experiencing at the moment, CORSIA’s built-in tools – special flexibility during the pilot phase and triennial reviews – can be used to address the current situation.


“CORSIA is an important mechanism for carbon markets around the world. Changes to elements as fundamental to its design as the baseline should be treated very cautiously.”


According to the Commission’s baseline proposal to the EU Council, ICAO CAEP estimates CO2 emissions in 2020 could be around 40% lower than levels anticipated in 2016, when CORSIA was adopted by ICAO, and a lower 2019/2020 baseline than anticipated would have a substantial impact on total offsetting requirements.


In the pilot phase, this could be +280% in a V-shaped recovery scenario to +150% in a U-shaped recovery with permanent loss scenario. In all phases up to 2035, offsetting requirements could change from +45% (V-shaped) to -24% (U-shaped with permanent loss).


Changing the baseline to 2019 could result in total offsetting requirements in the pilot phase becoming zero or close to zero until 2023 and in all phases up to 2035 ranging from -9% in a V-shaped recovery scenario to -32% in a U-shaped recovery with permanent loss.


IATA currently estimates international aviation emissions levels in 2020 could fall by half to around 250 million tonnes of CO2, which would lower the 2019-2020 average baseline calculation to levels equivalent to the sector’s emissions in 2010. A 2019-2020 baseline would therefore be around 30% lower than originally anticipated.


“An adjusted methodology will still produce a more stringent baseline than would have been the case without the Covid-19 crisis, although emissions levels may not reach the baseline in the early stages of what is expected to be a slow recovery for aviation,” it says. “A 2019 baseline limits the impact of the pandemic on financially struggling airlines and, critically, ensures continued political support from all states for CORSIA and the global approach.”


IATA argues using 2019 emissions would still maintain a level of ambition that underpins CORSIA, namely the goal to stabilise net emissions from international aviation close to the pre-crisis forecast of around 600 million tonnes of CO2. It notes that changing the baseline also does not impact CORSIA’s role as complementing a broader package of measures to achieve the global aspirational goal, “thereby underlining the subsidiary nature of offsetting to the primary objective of in-sector emissions reductions.”


A paper dated May 19 by IATA states: “It should be emphasised that CORSIA was never envisaged as a mechanism for financing the carbon markets beyond what is necessary to offset the sector’s emissions above the baseline. Maintaining the current baseline methodology on the justification that offsetting requirements would otherwise not be “sufficient” would go well beyond ICAO’s aspirational target and likely raise widespread concerns as to the intent of CORSIA.”


A recent report and analysis by EDF said the 2019/2020 baseline should be retained until the 2022 ICAO review and states should make use of the pilot phase offsetting requirement flexibility mechanism to mitigate the impact on their operators of a lower baseline.


“However,” counters IATA, “the reality is that it would only provide some marginal relief for airlines in the first three years of the scheme and would not address the increased impact on airlines in any of the subsequent compliance periods.”


Support for retaining the 2019-2020 baseline for the initial phase of CORSIA and revisiting the issue in 2022 when the implications of the crisis may be clearer has come from Germany’s Oeko-Institut. In a paper published yesterday (May 25), it says fears that a lower baseline resulting from the pandemic would lead to much higher offsetting obligations is unfounded as emissions from international aviation will be affected for many years to come. It expects the effect of a lower baseline and lower carbon emissions in the future largely cancel each other out, so resulting in little change to offsetting obligations.


Oeko says a 2019-only baseline proposal delays climate action by the industry for several years and could reduce the overall mitigation achieved through CORSIA by between 25 and 75 per cent. It analysed three scenarios of a recovery of aviation demand: V-shaped (a brief period of sharp decline followed by a quick recovery), U-shaped (a prolonged contraction and muted recovery) and L-shaped (a long downturn with slow recovery).


An important consideration, it says, is whether emissions will ultimately return to the trend level expected before the crisis, or whether the crisis will lead to a sustained lower emissions trend. Learning from past recessions, Oeko says it took two to six years for aviation emissions to reach pre-crisis levels and notes IATA’s expectation that international air travel may not recover to 2019 levels until 2023-24. Past recessions have also resulted in a sustained lower trend line, with IATA assuming passenger kilometres being 10% below pre-Covid expected levels in 2025 and other industry experts predicting sustained lower growth rates even after recovery.


“Overall, the implications of the Covid-19 crisis are relatively limited in our scenarios. This is because the effects of a lower baseline and a lower trend of future aviation emissions partially net out,” says the paper’s author, Dr Lambert Schneider, Research Coordinator for International Climate Policy at Oeko-Institut. 


“A significant increase in offsetting requirements would only occur if aviation emissions were to quickly bounce back to pre-crisis levels. This is, however, neither supported by historical data from previous crises nor expected by the aviation industry. Conversely, a significant decrease in offsetting requirements might occur if the Covid-19 crisis were to have longer and more far-reaching consequences, leading to an even slower recovery than assumed in our scenarios.”


A 2019-only baseline would cut airlines’ offsetting requirements considerably, finds Oeko. In a scenario where there is a smaller drop in aviation demand and a faster recovery, offsetting requirements would be entirely waived in the pilot phase, halved in the first phase (2024-2026) and be reduced by more than a quarter over the operational lifetime of CORSIA (2021-2035). In a scenario where there is a stronger drop in aviation demand and a slower recovery, offsetting requirements under a 2019-only baseline would be waived both in the pilot phase and the first phase and be reduced by about three-quarters over the CORSIA lifetime.


“We recommend maintaining the current rules until the review scheduled for 2022, which should be used to revisit the overall ambition and impacts of the scheme,” said the paper’s co-author, Jakob Graichen.


However, IATA’s paper says there is an urgent need for a decision by the Council next month to allow the necessary amendments to the CORSIA SARPs be adopted in time for the start of the pilot phase. Deferring a decision until after the pilot phase has already begun would result in airlines being subject to a compliance mechanism whose scope is unclear and without knowing the level of stringency they will have to comply with, it argues.


“Regardless of the near-term outlook for the aviation industry, what is important from an environmental perspective is that net emissions are stabilised from 2021 at pre-crisis levels to ensure ICAO’s aspirational target can be met,” says the industry body. “Using 2019 emissions only will achieve this and the verified emissions for 2019 will be available in the coming months. In contrast, deferring a decision until verified emissions for 2020 (or later years) are available would unnecessarily delay a decision on the baseline.”





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