ICAO Approves Initial Carbon Offset Programs for CORSIA

Participants in the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) now have increased certainty over eligible carbon offsets. At its March 2020 Council meeting, the International Civil Aviation Organization (ICAO) approved six offset programs for use under CORSIA, while also taking steps to standardize CORSIA implementation and establish engine emission standards.

The six approved carbon-offset programs for CORSIA’s 2021-2023 pilot phase are:

ICAO based its decision largely on its Technical Advisory Body (TAB) recommendations that these carbon-offset programs were consistent with CORSIA’s Emissions Unit Eligibility Criteria (EUCs). These criteria include the following: (1) emission reductions, avoidance, or removals that are additional; (2) credits based on a realistic and credible baseline; (3) units that are quantified, monitored, reported and verified; (4) a clear and transparent chain of custody within the offset program; (5) emissions reductions, avoidance, or carbon sequestration that are permanent; (6) a system with measures in place to assess and mitigate incidences of material leakage; (7) a system to prevent double counting towards a mitigation obligation; and (8) emissions reductions, avoidance, or carbon sequestration from projects that do no net harm. ICAO also adopted TAB’s recommended eligibility timeframe for emissions units, generally applying to activities initiated January 1, 2016 with emissions reductions occurring through December 31, 2020 (TAB may recommend extensions to this timeframe).

Each of the approved programs follow well-established methodologies or protocols for issuing carbon-offset credits, both in the U.S. and elsewhere. The American Carbon Registry, Climate Action Reserve, and Verified Carbon Standard are all well-respected registries based in the United States that issue credits for compliance markets (such as California’s cap-and-trade program) and voluntary markets. The Gold Standard is another highly regarded organization based in Switzerland that has issued and verified carbon offsets around the world. China’s program, while newer, has been gaining momentum as China ramps up its climate change efforts in recent years.

The CDM program arose as a result of the Kyoto Protocol, and was originally used for compliance with emissions reduction obligations under the Kyoto Protocol and subsequent related agreements. The adoption of the Paris Agreement placed the future of CDM into question, and some work remains to establish criteria for the use of offset credits (known as Certified Emissions Reductions, or CERs) issued under the CDM program. The CDM program has come under fire in recent years, and the parties to the Paris Agreement currently are working to determine how CDM offsets will be used and accounted for under the Paris Agreement and other carbon accounting schemes. Nonetheless, CORSIA’s inclusion of CDM in the first instance is a boon for certain nations that have long pushed to retain the eligibility of CDM credits. If properly accounted for, CERs could provide a significant source of offsets for CORSIA.

While global air travel is dramatically down in recent weeks due to restrictions and behavioral changes resulting from COVID-19, CORSIA timelines remain in place. ICAO’s adoption of initial carbon offset registries is a big step for CORSIA and will enable participants to begin planning their offset acquisition strategy and transactions. The move may also spur additional carbon offset development activity. As ICAO Deputy Director of Environment, Jane Hupe, stated: “With the Council’s approval of eligible emissions units, ICAO now has all of the pieces in place to implement CORSIA.”

Beveridge & Diamond’s Air and Climate Change practice group helps clients navigate all aspects of carbon markets and climate change programs, including CORSIA. For more information, contact the authors.