In late 2016, the International Civil Aviation Organisation (ICAO) made headlines, reaching a long-awaited multilateral agreement on a global market-based measure (GMBM) to regulate carbon emissions from civil aviation. This was hailed as a ‘historic achievement’, with 65 countries responsible for 85% of emissions working together to protect the global climate. Importantly, the speed of negotiations was greatly catalysed by the European Union, which was set to reinstate its own unilateral aviation emissions trading scheme on 1 January 2017 should the ICAO fail to reach an agreement by the end of the previous year (Regulation 421/2014). In the nick of time, at its 39th meeting, ICAO reached an agreement on a global MBM, known as the ‘Carbon Offsetting and Reduction Scheme for International Aviation – ‘CORSIA’. It was clearly hoped that this would prevent the Union from proceeding with its unilateral approach. However, in its recent Proposal for a regulation amending the EU ETS, the Commission appears reluctant to immediately relinquish its leverage, raising political tensions and important legal questions regarding the compatibility of the two schemes.
CORSIA – a truly ‘historic’ achievement?
The ICAO’s carbon offsetting scheme will require aircraft operators to surrender so-called ‘offset-units’ for carbon emitted during flights on routes between participating states. These units are generated by other (recognised) climate protection programs which achieve emission reductions, and must be bought by aircraft operators to compensate for their aviation emissions. Importantly then, the offsetting scheme does not set an absolute limit on the permissible growth of aviation emissions in the coming years. This differs fundamentally from a ‘cap-and-trade’ scheme like that of the EU ETS, which does set a maximum amount of emissions (the ‘cap’) through issuing a set amount of carbon credits which are allotted to aircraft operators. Operators must surrender carbon credits for each respective unit of emissions generated, and those who exceed their initial allotment must purchase additional credits from more energy-efficient competitors (the ‘trade’).
In 2012, the EU had extended its ETS (Directive 2003/87/EC) to include civil aviation through its own Aviation Directive. However the controversial move gave rise to substantial push-back from both third states and industry groups, eventually leading the EU to ‘stop-the-clock’ on the Aviation Directive, restricting its scope to intra-EEA flights in wait ‘of the implementation by 2020 of an international agreement applying a single global market based measure’. In 2013 the ICAO did respond to EU pressure, agreeing to a global MBM for aviation emissions (Resolution A38-18), however, sensitive to the interests of the aviation industry, it opted for offsets rather than a cap-and-trade scheme. This effectively outsources the actual reduction efforts to other climate projects, and has been criticised by environmental groups as failing to address the core issue, one representative of the International Council on Clean Transportation noting that ‘[i]n the long run airlines need to decarbonize, not to pay others to do it for them’.
The scheme is to be implemented in different phases, where both the ‘pilot’ (2021-2023) and ‘first’ phase (2024-2026) are voluntary. It will be ten years before participation is obligatory on routes between more developed states whose emissions meet the minimum threshold set by the scheme. Even then, substantial reservations have been made by large emitters including China, India, Russia and Saudi Arabia.
Leaving the ICAO hanging – Commission ‘review’ of the EU ETS for the post 2020 period
Given its timing, it was clearly hoped that the conclusion of CORSIA would be sufficient for the EU to indefinitely suspend its unilateral approach in favour of the international agreement. Indeed, shortly after the CORSIA was approved, in early 2017, the EU Commission issued a Communication, proposing a regulation ‘amending Directive 2003/87/EC to continue the current limitations of the scope of the ETS for aviation activities’ and ‘prepare to implement a global market-based measure from 2021’.
However, a closer look at the Commission proposal reveals that the EU is not prepared to entirely release its hold over the ICAO’s policy developments. Rather than committing to definitive amendments, the Commission proposes ‘a further assessment and review the EU ETS for the post-2020 period’, ‘[o]nce there is more clarity about the nature and content of the legal instruments adopted by ICAO for the implementation of the GMBM as well as about the intentions of our international partners regarding the implementation of the GMBM’. This assessment will take into account ‘the necessary consistency with the economy wide commitment taken by the EU under the Paris Agreement and its agreed objective of reducing GHG emissions domestically by 40 % by 2030 compared to 1990 levels’. Implicitly then, if the scheme does not allow the EU to meet its ambitious climate objectives, the Union may not be willing to entirely replace its ETS with the ICAO agreement.
The Communication further notes concern for the ‘environmental integrity from a climate perspective’, which still needs to be developed through the finer workings of the CORSIA scheme. Of particular interest here are the procedural safeguards for the emission offset units to be used by states, which, if not carefully managed, may result in little more than fictional climate protection. In this regard, the Commission has explicitly considered the possibility of extending the EU ETS to its full international scope in spite of multilateral agreement. This pending review thus leaves the ICAO hanging, maintaining the pressure on the level of ambition and environmental integrity of the scheme. It does not appear to be an idle threat, and the Commission has noted that ‘in the absence of a revision’ it will proceed with the current EU ETS, where ‘the number of free allowances would be reduced every year from 2021, in line with the linear reduction factor applicable to all other sectors’.
The remaining uncertainty has caused concerns for industry groups. The International Air Transport Association (IATA), for example, has attempted to persuade governments to voluntarily participate in the early stages of CORSIA, which has been described as a move to ‘rally the EU to the ICAO scheme’. The European Regions Airline Associated (ERA) also immediately began lobbying in early 2017, calling the EU to suspend the entire ETS scheme until the ICAO has been able to implement a global solution.
Legal Implications – Compatibility of CORSIA and the EU ETS
From a legal perspective, important questions arise as to what extent the CORSIA may preclude the EU ETS, in either its fullest or intra-EEA form. The preamble of ICAO Resolution A39-3, setting out the core of CORSIA, seems to counsel against unilateral action, emphasizing the ‘strong support of Member States for a global solution for the international aviation industry, as opposed to a possible patchwork of State and regional MBMs’. One could further question whether it is possible for EU and EEA states to ‘ensure the national policies and regulatory framework for compliance’ for CORSIA if they are also subject to the EU ETS. As flights between EU member states constitute ‘international’ and not ‘domestic’ civil aviation, this may mean that intra-EEA flights would be subject to double counting under both the EU ETS and CORSIA. Doubts are also raised regarding the compatibility of simultaneous ‘cap-and-trade’ and ‘emission-offset’ schemes, which operate on fundamentally different premises.
Notably, it has been suggested that applying the EU ETS to flights between EU member states and third states that have not voluntarily signed up to CORSIA in the pilot and first phases of the scheme may in fact be permissible. This is because the CORSIA will not apply to those routes for at least the next ten years, circumventing the issue of double counting. An important condition would then be that the EU scheme sufficiently respects the principle of common but differentiated responsibility principle which lies at the heart of CORSIA’s phased-approach and exemptions for least developed countries and land-locked and small island developing states. This would, however, reignite the smouldering debate on the territorial limits of the EU’s jurisdiction to prescribe measures which take into account carbon emitted abroad.
 See further, U M Erling, ‘International Aviation Emissions Under International Civil Aviation Organization’s Global Market Based Measure: Ready for Offsetting?’ (2017) Air & Space Law 42(1) 1.
 ibid 12.