Market-based measures, also known as economic measures, play a big role in the decarbonisation of the sector as they complement the other solutions until the sector can rely only on in-sector emission reductions. For the airline industry, there are two types of economic measures available: a cap and trade system, like the EU ETS, and carbon offsetting, like CORSIA.
EU ETS
The EU emissions trading system (EU ETS) is a cornerstone of the EU's policy to combat climate change and its key tool for reducing greenhouse gas emissions cost effectively. The EU ETS works on the 'cap and trade' principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies, including airlines, receive or buy emission allowances which they can trade with one another as needed.
Since 2012, the EU ETS applies to flights to and from airports in the European Economic Area (EEA). While flights to and from airports outside the EEA are exempted from ETS obligations until the International Civil Aviation Organization (ICAO) has developed CORSIA to offset post-2020 emissions growth in international aviation.
CORSIA
In 2016, the ICAO adopted CORSIA, a global carbon offsetting scheme to address and offset CO2 emissions from international aviation, which are not covered by the Paris Agreement. The agreement at ICAO demonstrates that the aviation industry is determined to live up to its climate change commitments and play its part in meeting international goals for greenhouse gas emissions reduction.
Under CORSIA, all airline operators need to monitor, verify and report their emissions on all international flights (from 1 January 2019). Operators will be required to purchase 'emissions units', to offset the growth in CO2 emissions from those routes covered by the scheme.
In order to address the concerns of developing states and to take into account the special circumstances and respective capabilities of states, CORSIA will be implemented in phases, illustrated above. From 2021 until 2026, only flights between 'volunteering' states will be subject to offsetting requirements. From 2027, all flights will be subject to offsetting, with the exception of flights to/from Least Developed Countries (LDCs), Small Island Developing States (SIDS), Landlocked Developing Countries (LLDCs) and small aviation markets, unless they volunteer to participate.
EU ETS and CORSIA
As part of the European Green Deal, the European Commission (EC) is currently reviewing the EU ETS and updating the rules for aviation in order to implement CORSIA in a way that is consistent with the EU’s 2030 climate targets and is reviewing the share of auctioned allowances for aircraft operators.
ERA has responded to the open consultations and you can find the feedback response here.
Source: ERA/European Commission/ICAO