The Global Emissions Offset (GEO) is aimed at making it easier for airlines to scale-up buying offsets.
It is a key new development in aviation carbon markets and will be traded on IATA’s Aviation Carbon Exchange (ACE), which was launched recently in partnership with the technology provider, CBL Markets. ACE is an exclusive platform for airlines to trade in carbon offset projects and is the only exchange to be integrated into the IATA Clearing House, which guarantees a secure settlement system for payment and delivery of carbon offsets.
Offsets, or carbon credits, are used by the aviation industry to compensate for CO2 emissions arising from airline operations, whether on domestic routes or on international routes, with the latter coming under the Carbon Reduction and Offsetting Scheme for International Aviation (CORSIA).
The GEO, developed by CBL, breaks new ground by bundling up several different certified carbon offsets into one contract. Most carbon mitigation programs, from forestry to habitat preservation to renewable energy projects can be included in the bundle, provided they have been certified by third party regulators as being CORSIA compliant under ICAO regulations.
It allows airlines to buy bigger tranches of carbon credits under one umbrella scheme that meets all certification standards.
Previously, to acquire the same number of offsets that a GEO offers, airlines had to complete their own due diligence on multiple projects with potentially different certification standards, as well as different pricing.
“The GEO is a game-changer,” said Sebastian Mikosz, Senior Vice President for Member and External Relations at IATA. “It shows that the ACE which we launched just a few months ago continues to provide key support for airlines when it comes to the issue of tackling climate change. The CORSIA agreement is a fundamental part of the industry’s aim to stabilize net CO2 emissions at 2020 levels and the development of GEOs will help underpin that.”
Four pillars of aviation’s climate change strategy
Carbon offsets, together with technology, air traffic management and flight operations, are the four pathways— the ‘big beasts’—to meeting aviation’s climate change commitment.
In 2016, ICAO’s 193 member states inked the CORSIA, which aims for carbon neutral growth in international aviation from the beginning of 2021.
A voluntary three-year pilot phase was launched in 2021, to be followed by another voluntary phase from 2024 to 2026. CORSIA will become mandatory for nearly all ICAO member states by 2027. The only exemptions will be small lesser developed economies with low rates of air travel.
Carbon offsetting is seen as a short to medium-term solution in the industry’s overall commitment to bring down aviation emissions from 915 million tonnes in 2019 to 325 million tonnes in 2050.
As new technology develops, offsetting is expected to play a diminishing role in emissions reduction. With the right government support, emissions targets will be achieved through the widespread use of sustainable aviation fuel, and hydrogen and electric technology.
Carbon markets come of age
But carbon offsets will be important for many years yet. They have become an accepted and widely-used tool to mitigate emissions, not just from aviation but from industries worldwide.
Many projects today combine emissions reduction with the additional benefits of poverty reduction, habitat preservation, and better standards of living—all of which support the UN’s Sustainable Development goals.
In Kenya, for example, villagers are being subsidised to switch to high-efficiency wood burning stoves and easy-to-use water filtration units, which reduces the amount of firewood needed to boil water, and frees up more time for other work.
As the market matures, the diversity of products is likely to keep growing. The GEO is one of the first big new developments to be traded on the ACE, but it won’t be the last.