Compliance with the CORSIA

The ICAO estimated the costs from CORSIA offsetting, assuming carbon prices range from a low of $6 to $12, to a high of $20 to $40, per metric ton of CO₂. The analysis shows that the cost of carbon offsetting for operators could range from approximately 0.4 percent to 1.4 percent of total ICAO forecast revenues from international aviation in 2035.

The low estimate is based on the CAEP’s “optimistic” CO2 scenario and IEA’s low carbon price forecast. The high estimate is based on CAEP’s “less optimistic” CO2 scenario and IEA’s high carbon price forecast. Source

According to a cost analysis conducted by IATA, the costs from CORSIA offsetting are expected to have less impact on aviation than fuel price volatility. The estimated offsetting cost in 2030 is equivalent to a $2.60 rise in jet fuel price per barrel. This in turn means that an extra $10 per barrel on the price of jet fuel would cost the industry about four times the estimated cost of offsets in 2030. Over the past 10 years, the standard deviation of jet fuel price annually has been up to $40 per barrel, meaning that airlines have coped with oil price volatility of more than 15 times the size of the projected offsetting cost in 2030.

Many airlines already offer some form of point-of-sale carbon offsetting option for customers, but that practice is not consistent and is much less prevalent in the air freight sector. The reality is that the air freight offsetting cost will need to be pushed onto customers, and however small the additional cost in percentage terms, it will create additional price pressures in the industry.

Will SAFs negate the need for the CORSIA post-2035?

The CORSIA’s projected end date is 2035. However, a special review will be conducted by the end of 2032 to consider terminating, extending or improving the scheme. UK authorities have expressed concern that the “medium-term” nature of the CORSIA is not enough to ensure that aviation contributes to the global temperature goals of the Paris Agreement. As such, the UK government is negotiating with ICAO to agree a long-term emissions reduction goal for aviation, and to align the CORSIA to this goal, by its 2022 Assembly. Furthermore, various UK, EU and global climate change targets and policies tend to extend further than the CORSIA’s projected end date. This may suggest that 2035 is not a realistic end date and, as such, ICAO should take a longer-term approach.

ICAO recognizes SAFs as an important long-term tool for reducing emissions. It has imposed a number of obligations on member states to accelerate the development and deployment of SAFs, with a significant proportion of conventional aviation fuels to be substituted with SAFs by 2050.

The use of SAFs in achieving climate goals is supported by both the EU and UK. In 2020, the European Commission published the Sustainable and Smart Mobility Strategy, with the objective of increasing the uptake of SAFs. As with the 2050 ICAO Vision for Sustainable Aviation Fuels, the strategy is based on a number of key milestones which continue up until 2050. The UK government recently proposed a Sustainable Aviation Fuels Mandate as part of the UK’s wider de-carbonization strategy. Under the proposed mandate, jet fuel suppliers will be required to blend an increasing proportion of SAFs into aviation fuel from 2025. In addition, the consultation paper describes SAFs as key to the de-carbonization of the aviation sector beyond 2050.

While it is clear that SAFs will go some way to helping the sector reduce emissions, longer-term climate targets imply that they will not be sufficiently developed or deployed to negate the need for the CORSIA past 2035.

About the authors

Adam Hedley has 10+ years of experience advising on a broad spectrum of UK, EU and international environmental, health & safety, product compliance and climate change law matters. He is a UK-recognised lawyer for his expertise handling environmental matters and has regularly been ranked as a 'Rising Star' by Legal 500 and as 'up and coming' by Chambers UK. In the latest Legal 500 UK edition, Adam has been ranked as a 'Next Generation Partner' and described as "an exceptional professional. We appreciate the quality of his insight and his approachability and availability."

Amber Davies is a trainee solicitor in the Energy and Natural Resources Industry Group at Reed Smith’s London office. Amber has assisted the Environment, Health and Safety team in UK, EU and international environmental, health & safety, product compliance and product liability matters.