What is CORSIA and Why is it Significant With Regard to the Carbon Credit Market?
According to most recent figures from the Intergovernmental Panel on Climate Change (IPCC), aviation (domestic and international) accounts for approximately 2 per cent of global CO2 emissions produced by human activity; international aviation is responsible for approximately 1.3 per cent of global CO2 emissions.
The International Civil Aviations Organization (ICAO) adopted 2 sectoral aspirational goals: 2% annual fuel-efficiency improvement and carbon neutral growth from 2020 onwards.
Though significant technological progress has been made in the aviation sector, with aircraft produced today being about 80 per cent more fuel efficient per passenger kilometer than in the 1960s, aviation emissions are forecasted to grow in the coming decades, as the projected annual improvements in aircraft fuel efficiency of around 1 to 2 percent are largely surpassed by forecasted traffic growth of around 5 percent per year. Based on the environmental trend assessment by the ICAO Council’s Committee on Aviation Environmental Protection (CAEP), international aviation fuel consumption is estimated to grow somewhere between 2.8 to 3.9 times by 2040 compared to the 2010 levels.
Because other measures in the basket are still in development or require further maturation of technological advances, the aggregate environmental benefit achieved by non-market-based measures will be insufficient for the international aviation sector to reach its aspirational goal of carbon-neutral growth from 2020. The 39th general assembly agreed on a market-based measure to help fill the emissions gap. This is the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), the first-ever sector-wide carbon offsetting scheme, which includes market-based measures.
CORSIA’s intent is to address any annual increase in total CO2 emissions from international civil aviation (i.e. civil aviation flights that depart in one country and arrive in a different country) above the 2020 levels, taking into account special circumstances and respective capabilities. This is a preferred approach rather than having a patchwork of regional and local measures that are not harmonized and could create inefficiencies in the system without any certainty of delivering environmental benefits.
Sixty-six countries, representing 86.5% of global aviation activities have announced their voluntary participation in the program from its outset in 2021. After 2027, the program is mandatory globally, with some exemptions. Organizations are already purchasing credits ahead of the 2021 program start, in anticipation of future market price increases.
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