This article is part of illuminem's Carbon Academy, the ultimate free and comprehensive guide on key carbon concepts

1. Introduction

According to the Intergovernmental Panel on Climate Change IPCC, the aviation sector is responsible for approximately 2 percent of global CO2 emissions produced by human activity.
Developed in 2016 by the International Civil Aviation Organization (ICAO), CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) enforces carbon-neutral growth for the international Aviation sector from 2021. CORSIA is the first global market-based initiative offering a harmonized mechanism  to reduce emissions from a specific sector.
Below we offer a brief overview of the main aspects of CORSIA based on information gathered from ICAO’s website.

2. How does it work? The 3 phases

The CORSIA consists of three phases: 

• a pilot phase (2021 – 2023)
• a first phase (2024 – 2026)
• a second phase (2027 – 2035)

The difference between the phases lies in the type of State participation in the scheme: while in the pilot phase and in the first phase it is voluntary, it is mandatory in the second phase.

The table below illustrates the different phases of CORSIA:

source: South Pole

N.B. Countries  such as Least developed countries, small island developing states and landlocked developing countries, are exempt from all phases of CORSIA, unless they volunteer to participate in the scheme.

3. Route-based approach

CORSIA follows a route-based approach:

• A route falls under the CORSIA offsetting if both States connecting the route participate in the scheme
• A route does not fall under the CORSIA offsetting if one or both States connecting the route do not participate in the scheme

The logic behind a route-based approach is to prevent market distortions between participating and non-participating airplane operators sharing the same routes.
From the start of CORSIA's pilot phase, all international flights between two States not participating in CORSIA for offsetting purposes are exempt from offsetting requirements. However, airplane operators not engaging in CORSIA for offsetting, yet surpassing annual CO2 emissions of 10,000 tonnes, are subject to MRV requirements (monitoring, reporting, and verification). The requirement to monitor, report and verify CO2 emissions from international aviation is thus independent from the generation of offsetting requirements.
The figure below illustrates this point clearly: 

Source: ICAO

It may also be the case that an airplane operator can have offsetting requirements, even if its State of registration does not participate in CORSIA offsetting. Due to CORSIA's route-based framework, if non-participating operators conduct flights between participating States, they become subject to CORSIA's offsetting obligations, regardless of whether their State of registration participates in CORSIA or not. In other words, airline operators that are flying routes between states that have joined CORSIA do not have the choice to participate, but must do so.

4. How are offsetting requirements calculated? 

4.1. Baseline 

To understand offsetting requirements, we first need to illustrate where the emissions baseline is set:

• For the pilot phase (2021-2023), the baseline is the total CO2 emissions covered by CORSIA in 2019
• For the first and second phases (2024-2035), the baseline is 85% of the total CO2 emissions covered by CORSIA in 2019

4.2. Who does what

Calculating offsetting requirements is the result of a multi-step process involving airline companies, ICAO, and national entities:

• The airline operator monitors its annual fuel consumption from all its flights
• The operator reports its data to its national authority 
• ICAO collects all CO2 emissions data from States and estimates a sectoral growth factor of emissions, namely the distribution of the total amount of CO2 emissions to be offset in a given year among individual airplane operators.
• Once ICAO shares the sector's growth factor for a given year, the State will calculate an operator's CO2 offsetting requirements for a given year by multiplying the operator's annual emissions by the sectoral growth factor. The State is the primary responsible for ensuring that the airplane operator complies with the CORSIA requirements. 

The infographic below provides details on the formula for the calculation of offsetting requirements:


Source: ICAO 

5. CORSIA credits

In order to comply with its offsetting requirements, the airline operator purchases a number of credits from the carbon market. Typically, this offsetting process involves buying and retiring carbon credits obtained through various projects aimed at reducing or removing emissions. Retiring a carbon credit indicates that it has been used and removed from market circulation, preventing its reuse.

ICAO has tasked the Technological Advisory Board (TAB) with assessing these units for CORSIA eligibility, subject to subsequent approval by the ICAO. In Phase 1, only two standards are recognized in the market as eligible for credits: the American Carbon Registry and the Architecture for REDD+ Transactions. 

6.  Two concluding points

CORSIA serves as a crucial framework, not only for regulating a sector responsible for substantial emissions but also for providing other benefits on a broad scale. Below, we briefly outline two of those advantages:

• Boosting trust in the VCM: The fact that a UN specialized agency expresses a preference for a certain type of credits, sends a signal to the voluntary carbon market as a whole, suggesting that the CORSIA-approved credits may be of higher quality. This could lead to a surge in demand for CORSIA credits from both airline and non-airline buyers, a dynamic that is likely to drive prices for CORSIA credits and enhance confidence in the Voluntary Carbon Market. 
• Convergence between VCM and CCM: CORSIA exhibits characteristics of both compliance and voluntary carbon markets. The voluntary participation and the trading of carbon markets associate it with VCM, while the involvement of national and international entities aligns it with a compliance scheme. The establishment of similar schemes will hopefully pave the way for an increasing convergence between the Voluntary and Compliance Carbon Market. 

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