EU and US to back CORSIA baseline change proposal despite warnings of unintended consequences
Wed 10 June 2020 – EU Member States have adopted a proposal from the European Commission to back a fundamental change to CORSIA that would remove international aviation CO2 emissions in 2020 from the global aviation carbon offsetting scheme’s baseline. The dramatic fall in air traffic due to the Covid-19 pandemic could otherwise significantly increase the airline sector’s future offsetting costs. A 2019-only baseline would likely lead to no offsetting requirements from airlines during the initial three-year pilot phase starting in 2021. However, the Commission believes the change is necessary not only to support the crisis-hit industry but also to preserve support for CORSIA from other countries. The UK, the US and Latin American countries also favour the change, which is to be discussed by the ICAO Council during its current session. The ICAO Secretariat, meanwhile, cautions of the unintended consequences resulting from a quick decision.
Adopted in a written procedure on behalf of Member States, the decision by the EU Council to change the baseline period technically amends a corresponding Council decision from 2016 and the text will now be published in the EU Official Journal.
“The EU fully supports CORSIA as the multilateral mechanism for offsetting international aviation emissions and tackling global warming,” said Oleg Butković, Croatia’s transport minister, whose country currently holds the Council presidency. “Adapting the baseline is crucial to maintaining a similar level of ambition for the scheme and the commitment of ICAO states to the CORSIA pilot phase while taking into account the extremely difficult circumstances created by the pandemic for international air traffic.”
The Commission proposed another CORSIA rule change in the event of a 2019-only baseline being adopted by the ICAO Council during its current session, which runs until June 26. It called for the removal of an option States participating in the pilot phase can select for calculating aeroplane operators’ offsetting requirement. Although it acknowledged a higher 2019 emissions baseline is likely to lead to no or minimal offsetting requirements during the pilot phase, the Commission said 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.
With countries required to inform ICAO by the end of this month as to whether they intend joining CORSIA from the start, the EU is concerned that the additional financial burden of a lower baseline on aeroplane operators could lead to a lowering of support for the scheme.
The Commission’s proposal also noted 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.
Eight European countries are represented on the current 36-member ICAO Council, including the UK, which has indicated its position on the baseline change is consistent with that of the EU’s.
“Tackling climate change is one of the most urgent and pressing challenges we face, which is why the government has set a bold 2050 net zero target for the UK,” said a Department for Transport spokesperson. “By supporting the proposal for the CORSIA baseline to be calculated using 2019 emissions, we are safeguarding the integrity of the scheme while also appropriately recognising the impacts of Covid-19 on the aviation industry.”
According to a Reuters report, the United States told a virtual ICAO meeting last Friday (June 5) that it too recommended the change and the Latin American Civil Aviation Commission had written to ICAO to add its support.
“The Latin American Civil Aviation Commission supports the change in the CORSIA baseline emissions calculation method,” a LACAC spokesperson told GreenAir. “The letter sent to the President of the ICAO Council specifies the preference for a solution that does not consider the 2020 emissions in the CORSIA baseline calculation method.”
The letter from LACAC, which represents 22 States, also urged the Council to change the deadlines specified in the CORSIA regulations for the submission of 2019 emissions to ICAO. Aeroplane operators were to submit their 2019 verified emissions report to their relevant State body by 31 May 2020 and States are to submit aggregated emissions through the CORSIA Central Registry by 31 August 2020.
In a recent post on the ICAO website, the ICAO Secretariat addresses the deadline issue and says any adjustment to CORSIA’s design features “requires careful consideration by the relevant ICAO bodies”.
The Council session is due to consider an analysis by ICAO’s environment committee, CAEP, of the Covid-19 impact on the design features. A change to the baseline, points out ICAO, also has implications for the ‘sectoral growth factor’ and the threshold for new entrant operators to the scheme.
“In addition to the impact assessment, the Council will also consider the legal and reputational aspects related to the various options, as well as the importance of maintaining the originally-agreed balance between the scheme’s economic impacts and environmental benefits together with its simplicity and practicality, whilst responding to this unprecedented crisis,” says the website.
In a paper presented to the Council, the Secretariat said considerations on the need and timing to change the CORSIA baseline and other design features needed to be based on the proper technical data and assessment.
“It is of paramount importance that any decision that may result in a change in the CORSIA design feature(s) should assure that CORSIA remains faithful to its original objectives as a practical, cost-effective scheme that produces environmental benefits to reach carbon neutral growth for international aviation from 2020, in a clear and transparent manner, without introducing a negative public perception or undermining ICAO’s leadership and reputation on CORSIA as the only global market-based measure applying to CO2 emissions from international aviation,” it said.
“It should also be noted that there may be unintended consequences of taking an early decision based on high uncertain levels of emissions recovery scenarios from 2021 onwards.”
The option of not taking a decision on the baseline change during the current session would provide more time to observe the evolution of Covid-19, collect more data and undertake more analyses “to facilitate a well-informed decision by the Council,” added the Secretariat. However, it acknowledged that by putting off the decision, the industry and carbon markets could lack the necessary certainty to take, respectively, proactive action in purchasing CORSIA emissions units and developing new emissions reduction projects.
US NGO Environmental Defense Fund (EDF) said the effect of changing the baseline would be to postpone the start of CORSIA by eliminating, in practice, its pilot phase, as under most post-Covid growth scenarios offsetting obligations would be removed for three to five years. It also raised doubts in a blog post over whether the Council had the legal authority to change rules adopted by ICAO’s Member States at their Assembly.
“Countries at ICAO’s Council meeting this month should not make a hasty change to CORSIA’s fundamental structure,” argued EDF’s Annie Petsonk. “Instead, they should ensure the integrity of ICAO’s climate programme by leaving the baseline as the average of 2019-2020 emissions. They should emphasise to participating countries the availability of CORSIA’s pilot phase flexibility mechanism, and work with the other ICAO Member States to evaluate whether, at their next Assembly in 2022, changes to CORSIA are needed.”
Speaking during a webinar hosted by the International Emission Trading Association earlier today, Rene Velasquez, Head of Global Carbon at CBL Markets, said changing the baseline was a pragmatic and logical approach to the impact of the Covid-19 crisis on the airline sector.
“It is paramount we support the airlines in the bad times as well as the good,” he said. “Although I understand the position of retaining the baseline as it currently stands, the reality is that initially CORSIA is voluntary and if it becomes too onerous a system we risk countries being lobbied by their airlines to opt out. If we do that we are effectively diluting the scheme’s overall ambition. Let’s support the industry during its recovery phase and look to ratchet up ambition over time.”
CBL Markets, part of XCHG, has begun working with IATA since January to set up the Airline Carbon Exchange, through which airlines can source both voluntary and CORSIA-eligible emissions units. Velasquez said 14 out of 30 of the largest airlines invited to join a pilot phase of the exchange had so far accepted, despite the pandemic’s impact. He noted airlines had already started making significant voluntary offsetting commitments against carbon net zero or neutrality targets.
According to IATA’s latest economic performance report, global passenger traffic will likely fall by 54.7% in 2020 from 8,680 billion RPKs in 2019 to 3,929 billion in 2020. However, IATA is anticipating a 55.2% rebound in RPKs in 2021 over 2020 to 6,099 billion.
In terms of global carbon emissions, IATA is expecting a 37.1% fall this year, from 914 million tonnes in 2019 to 574 million tonnes in 2020 and then a 30.3% increase to 748 million tonnes in 2021. It is forecasting industry fuel efficiency will improve by 1.1% in 2020 as older aircraft will be retired or put into storage.
IATA is forecasting airlines will lose $84.3 billion in 2020 as revenues fall by 50% to $419 billion from $838 billion in 2019. In 2021, losses are expected to be cut to $14.8 billion as revenues rise to $598 billion.
“Financially, 2020 will go down as the worst year in the history of aviation,” commented IATA’s Director General, Alexandre de Juniac.
This article was updated June 11 to include comments from the UK Department for Transport and the Latin American Civil Aviation Commission