Market-based measures complement other measures in addressing the climate change impact of the aviation sector. This chapter provides an overview of two such measures, namely the EU’s Emissions Trading System (ETS) and ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), as well as some insights on emerging carbon pricing instruments and international cooperation activities.
Market-based measures address aviation’s climate impact beyond what is achieved by technology, operational measures and sustainable aviation fuels while also incentivising such measures.
During 2013-2020, the EU Emissions Trading System (ETS) led to a total reduction in aviation net CO2 emissions of 159 Mt (approximately equivalent to the annual emissions of the Netherlands in 2018) through funding of emissions reductions in other sectors.
Monitoring, reporting and verification of CO2 emissions under the ICAO Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) began in 2019. 88 States volunteered to participate in the CORSIA offsetting pilot phase from 2021, including all EU and EFTA States. This has increased to 107 States in 2022 and represents a majority of ICAO Member States.
Emissions trading systems (e.g. EU ETS) have a greenhouse gas emissions cap covering sectors of the economy, while offsetting schemes (e.g. CORSIA) compensate for emissions through reductions in other sectors but without an associated emissions cap.
The environmental integrity of offsets depends on their ability to demonstrate that the emissions reductions would not have occurred in the absence of the market mechanism that funds the offset.
At COP26 in 2021, accounting rules under the Paris Agreement were agreed for international transfers of carbon market units, including the avoidance of double-counting of emission reductions in respect of CORSIA and nationally determined contributions by countries under the Climate Change Convention.
International cooperation is key in building capacity to address the global environmental and sustainability challenges facing the aviation sector. EU funded action has enhanced the relationship with partner States on implementing CORSIA and other areas of environmental protection.
Other measures linked to carbon pricing initiatives that are relevant for the aviation sector are being discussed in Europe.