COP25 outcome puts pressure on ICAO to ensure robust rules for aviation carbon market

The failure to agree on robust rules to prevent double-counting at the UN climate change conference puts the UN aviation body in a difficult spot as it defines which programmes will be eligible under the future aviation offsetting scheme. It will be paramount to guarantee that airlines will only be allowed to use good quality credits underlined by emission reductions which are only counted once.

Representatives of the aviation industry were very active at COP25, as governments were expected to agree on key rules necessary to operationalise CORSIA, the sector’s carbon market which will kick off next year.

It seemed, however, that the main priority for aviation lobbyists in Madrid was to mitigate the impacts of the flight shame movement, rather than climate change. IATA, the industry’s main lobby group, has even just announced that they would run a massive (mis?)information campaign to counter the flight shame movement. In this context, the head of IATA, Alexandre de Juniac,  also took the opportunity to question climate science and minimise the threat of climate change; a tactic which hopefully backfires quickly and increases the number of people committing to reduce flying.

Avoiding double-counting

Under CORSIA, airlines will have to purchase internationally recognised carbon offsets in order to compensate for the growth in their CO2 emissions from 2021. These offsets must have been recognised by the International Civil Aviation Organisation (ICAO) as good enough for use by airlines. 

This means among other things that an emission reduction used by an airline to offset one tonne of CO2 cannot also be used by a country to meet its obligations under the Paris Agreements. Simply put, if one tonne of CO2 has been reduced, then only one tonne of CO2 reduced can be counted. In ICAO-speak, the criteria read like this: 

Measures must be in place to avoid: […] Double claiming (which occurs if the same emissions reduction is counted twice by both the buyer and the seller (i.e., counted towards the climate change mitigation effort of both an airline and the host country of the emissions reduction activity)). In order to prevent double claiming, eligible programs should require and demonstrate that host countries of emissions reduction activities agree to account for any offset units issued as a result of those activities such that double claiming does not occur between the airline and the host country of the emissions reduction activity.” 

The key to avoiding this “double-counting” is therefore that countries where the emission reduction takes place, i.e. where the climate project is implemented, commit to not count these emission reductions towards their own targets. 

However, this is precisely what certain countries, in particular, Brazil, are not willing to do. This was a major factor in the collapse of the COP negotiations on carbon markets. 

In the absence of an international agreement whereby countries commit to a system which prevents that emission reductions will be counted twice, it will be very difficult to ensure that the ICAO criteria are met. If the criteria cannot be met, then no offset credit, anywhere in the world, would be eligible for CORSIA. Airlines would end up with offsetting obligations which cannot be complied with.

Three possible ways forward

Several options are now possible. First, ICAO could decide on the eligibility of certain programmes conditional on the adoption of rules at COP26. However, it is far from certain that rules will be adopted next year either, and this would, therefore, be a risky approach, leaving the market with total uncertainty right until the offsetting obligations start. 

Another option would be to only recognise units as eligible if they come from countries which have formally committed to avoiding double-counting, e.g. by joining the declaration of “San Jose Principles”. However, setting this type of geographical restriction is politically sensitive. 

Ultimately, the main objective, and ideal outcome, is for countries to agree on comprehensive accounting rules which will prevent double counting. If this is not possible, an alternative, second-best, option would be to define the eligibility of programs and offset credits based on all other criteria (including other aspects which relate to double-counting), but only grant provisional eligibility to credits. The full eligibility would only be confirmed after the country where the emission reduction took place has demonstrated that it will not count the emission reduction for its own target, i.e. after it has applied a corresponding adjustment. 

This approach would however still be problematic because ICAO has not adopted any rules to deal with the invalidation of credits, i.e. what happens if a credit is used, but it is later found that the reduction was double-counted. In such a situation, a mechanism should be in place to ensure that the credit is invalidated, even if it has already been used by an airline to demonstrate compliance with past CORSIA obligations. The question is therefore who bears the responsibility for replacing the invalidated credit. One possible avenue for this is to establish a “rainy day fund”, whereby every time offsets are purchased, a small fraction is placed in a fund which can then be accessed to replace invalidated credits. This is an effective way of insuring against the risk of invalidation and sharing the risk. 

The fact that COP25 did not deliver rules for article 6 clearly does not help the situation at ICAO that is expected to take the decision on programme eligibility in March. This decision is technically complex and politically sensitive, and the fact that none of the programmes which have applied for the scheme actually meet the criteria certainly does not make matters easier.

With this added uncertainty around CORSIA, airlines should redouble their efforts to cut their carbon pollution. This will reduce their offsetting obligations and is much more effective in addressing the climate crisis.