As highlighted in our previous client alert, the General Assembly of the International Civil Aviation Organisation (ICAO) passed a resolution in October 2016, paving the way for the implementation of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA is a global market-based measure intended to cap CO2 emissions from international civil aviation at their 2020 levels, enabling carbon-neutral growth for the aviation sector from 2020.
The ICAO Council, during the 214th Session held in June 2018, adopted the First Edition of the International Standards and Recommended Practices, Environmental Protection – CORSIA (Annex 16, Volume IV), which came into effect from 1 January 2019. The Council also approved the ICAO CORSIA CO2 Estimation and Reporting Tool (CERT) for small aircraft operators to monitor and report their CO2 emissions.
In March 2019, the Council approved the Emissions Unit Criteria (EUC), and also established the CORSIA Technical Advisory Body (TAB). The TAB will use the EUC to evaluate carbon-offset programmes and make recommendations to the Council on the types of offset credits that will be eligible for CORSIA. While there remains uncertainty as to the TAB’s methodology and eligible programmes, these will likely be clarified over the next few years.
Offset credits generated from mechanisms established under the United Nations Framework Convention on Climate Change (UNFCCC) will be eligible, subject to clarification by the Council on, among other things, eligible vintages and timeframes. At present, these references to UNFCCC mechanisms should apply to the Clean Development Mechanism (CDM) and Joint Implementation under the Kyoto Protocol, and when operational, the Sustainable Development Mechanism under Article 6.4 of the Paris Agreement and, potentially, offsets arising under cooperative approaches established under Article 6.2 of the Paris Agreement.
Implementation of CORSIA is split into phases spanning until 2035. The respective phases are:
2019–2020: Baseline Period
2021–2023: Pilot Voluntary Phase
2024–2026: First Voluntary Phase
2027–2035: Second Mandatory Phase (divided into three compliance periods of three years)
A table summarising key dates that aircraft operators should note in relation to the Pilot Voluntary Phase is at the end of this client alert.
Monitoring, reporting and verification (MRV) obligations
Since 1 January 2019, nearly all civil aviation aircraft operators are required to monitor, report and verify CO2 emissions from international flights up until 31 December 2035. However, operators producing annual CO2 emissions less than or equal to 10,000 tonnes from international flights, aircrafts with a maximum certificated take-off mass less than or equal to 5,700 kg, and humanitarian, medical and firefighting-related flights are exempted from the MRV requirements. This MRV obligation is independent of participation in CORSIA offsetting, which will be implemented in phases from 2021 to 2035. Data reported will be subsequently used for the calculation of CORSIA’s baselines
Aircraft operators should have submitted their Emissions Monitoring Plan to their respective country’s regulator, and obtained approval prior to 1 January 2019. The monitoring method, being either fuel use monitoring or the ICAO CORSIA CERT, should be consistent with their expected methodology during the Pilot Voluntary Phase. If an operator requires or is required to change its methodology, the revised Emissions Monitoring Plan should be submitted by 30 September 2020 for implementation from 1 January 2021. The aircraft operator must also resubmit the Emissions Monitoring Plan if there is a material change to the information in it, as well as inform its country’s regulator of changes that may affect the regulator’s oversight.
Aircraft operators should note that by 31 May 2020 their 2019 CO2 emissions data should be compiled and verified by an accredited verification body and submitted to their country’s regulator. Similarly, 2020 CO2 emissions data should be verified and submitted by 31 May 2021. At present, countries are in the process of accrediting verification bodies. In April 2019, Verifavia, a French-headquartered emissions verifier, became the first company to announce its worldwide accreditation under CORSIA by the Singapore Accreditation Council, allowing it to offer CORSIA verification services to airlines.
CORSIA-related records must be kept for a period of 10 years, and it is also recommended that aircraft operators maintain records of relevant CO2 emissions during the 2019–2020 period to cross-check their offsetting requirements subsequently calculated by its attributed country.
Pilot Voluntary Phase
Countries will have until 30 June 2020 to notify ICAO whether they will voluntarily participate in the Pilot Voluntary Phase running from 2021 to 2023. As of 8 March 2019, 79 countries, representing 76.63 per cent of international aviation activity, expressed an intention to participate. These include the United States, the United Kingdom and Singapore. ICAO will publish the list aircraft operators attributed to a country, as well as accredited verification bodies, by 31 December 2020. Note, however, that a country may change its decision on participation in the Pilot Voluntary Phase in any year, by informing ICAO by 30 June in the prior year.
Aircraft operators attributed to participating countries will have to comply during the Pilot Voluntary Phase. They will be informed of their average CO2 emissions during the Baseline Period by 30 September 2021, and of their offsetting requirements by 30 November of the following year (that is, an aircraft operator would be informed of its offsetting requirements for 2021 by 30 November 2022).
While MRV obligations continue throughout this period, aircraft operators should note the shorter timeline for verification of their emissions reports as compared to the Baseline Period (that is 2019–2020). This is to be submitted by 30 April, as opposed to 31 May previously.
Offsets for 2025
The final offsetting requirements for the Pilot Voluntary Phase (that is 2021–2023) will be made known to aircraft operators by 30 November 2024 or earlier. For the Pilot Voluntary Phase, a country has the option to determine the basis of an aircraft operator’s offset requirements either on emissions covered by CORSIA in a given year (that is 2021, 2022 and 2023) or on emissions for the year 2020. By 31 January 2025, or within 60 days of such notification, aircraft operators will be required to cancel the requisite emissions units and publish the cancelled emissions units by 7 February 2025. A verified emissions units cancellation report for the Pilot Voluntary Phase must then be submitted to the country’s regulator by 30 April 2025.
Therefore, aircraft operators are only required to finally cancel their emissions for the Pilot Voluntary Phase around the end of 2024 or early 2025, depending on when their country’s regulator informs them of their offset requirements. This provides at least a five-year period for aircraft operators to acquire eligible emissions units, which can be purchased and cancelled at anytime prior to the deadline for compliance.
However, several uncertainties remain regarding eligible emissions units. Even if an existing carbon emissions programme, such as the CDM developed under the Kyoto Protocol, is approved as eligible, only emissions units of a certain vintage may be accepted (for example, those representing emission reductions achieved, and therefore issued, after 2020, or if earlier, after 31 December 2016 when the ICAO CORSIA Resolution A39-3 was passed).
Aircraft operators should closely monitor the developments relating to the assessment of eligible emissions units. The TAB must first evaluate carbon-offset programmes and units, and then recommend them for the Council to approve. This provides about three periods annually, when the Council meets, for eligible programmes and emissions units to be approved for CORSIA. The operationalisation of the TAB and appointment of 19 country representatives for a minimum term of three years is the latest development, with the TAB Terms of Reference expected to be made available soon.
Client Alert 2019-114