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Up in the air: the airline industry’s net zero journey

April 20, 2023

Aviation is a significant source of emissions globally, accounting for 3.5% of the anthropogenic climate impact as measured in net effective radiative forcing, and one of the hardest to abate industries. Alongside decarbonizing the value chain, carbon credits have a significant role within the sector. 

The air transport industry has been an early mover in carbon markets. They are consistently the top retiree of carbon credits. In 2021, the industry retired 48.8 million carbon credits, representing 46% of the industry’s scope 1 and scope 2 emissions. Historically, a significant amount of these credits have not met the stringent quality standards the carbon market stakeholders demand today. 

Of course the use of carbon credits is only one lever aviation can pull in the net zero journey. For the industry to align with a 1.5°C pathway, there must be a paradigm shift within the sector, supported by collaboration, investment, and innovation, to deploy available levers that drive ambitious climate action.

Who is in the aviation value chain?

Airlines are typically the first companies that come to mind when thinking about decarbonizing aviation, but there are diverse sectors within the aviation value chain that are also looking to reach net zero targets. For example:

  • Airports: London Heathrow has set a 2050 net zero target. Scope 3 emissions represent the largest share of emissions for airports. Emissions from activities related to aircraft activities (takeoff, landing, cruising) represented 95% of Heathrow’s carbon footprint in 2019. Heathrow invests in nature-based carbon credits from UK projects to compensate for residual emissions.
  • Original equipment manufacturers and lessors: Boeing is a top 100 emitter. Boeing operations claimed to reach net zero in 2020 by reducing emissions, purchasing renewable energy, and utilizing carbon credits. However, Boeing’s net zero journey is not over. In 2022, shareholders approved a proposal requesting a report on the Net Zero Indicator, within the Climate Action 100+ Benchmark Indicator framework. Climate Action 100+’s assessment for Boeing illustrated there is significant work to be done, particularly around decarbonization strategy and capital alignment.
  • Cargo airlines and freight: FedEx has almost 700 airplanes, more than most airlines, and as such is wrestling with the same emissions reductions challenges as airlines. Aviation accounts for around 60% of FedEx’s emissions. FedEx has pledged USD $2 billion to drive carbon neutral operations by 2040 in three strategic areas: electrification, sustainable energy, and carbon sequestration. FedEx is not new to the world of carbon credits, as flights wholly within the European Union have been also covered by ETS requirements since 2009 and FedEx is gearing up to comply with CORSIA requirements.

Who is guiding climate action for aviation?

Aviation is a hard-to-abate sector characterized by technological barriers, low-profit margins (the average is around 2-4% for airlines) and minimal historic regulatory pressure to decarbonize. 

However, as the net zero mandate crystallizes and pressure mounts from regulators, shareholders and broader stakeholders - like eco-conscious consumers - the aviation industry has set course for its 1.5ºC journey. 

What are ICAO and CORSIA?

The UN’s International Civil Aviation Organization (ICAO) supports governance, cooperation, and standard setting for global air transport and comprises 193 national governments. Emissions from domestic aviation are accounted for in nationally determined contributions (NDCs), but emissions from international travel are covered under ICAO. 

The majority of fuel consumption comes from international travel. In 2010, 65% of aviation fuel consumption was from international aviation and consumption is expected to grow to nearly 70% by 2050.

ICAO established the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) as a market-based mechanism to address emissions from international aviation by requiring airlines to not only monitor and report emissions, but also purchase carbon credits to compensate for growth in emissions above the 2019 baseline.

CORSIA has started accepting standards for its voluntary first phase (2024-2026). Credits from American Carbon Registry (ACR) and Architecture for REDD+ Transactions (ART) are the only eligible suppliers that have been announced thus far, but more are expected to be approved. 

The CORSIA positive list of approved carbon standards for the ongoing pilot phase (2021-2023) includes credits from nine registries: ACR, ART, China GHG Voluntary Emission Reduction Program, Clean Development Mechanism (CDM), Forest Carbon Partnership Facility (FCPF), Global Carbon Council (GCC), Gold Standard and Verra.

CORSIA eligibility has been used by market stakeholders as a benchmark or proxy for quality. Recently the IC-VCM announced it would fast-track CORSIA-eligible credits, reaffirming CORSIA’s relevance as a market label. 

The fast-track path means CORSIA-eligible credits will face less scrutiny from the IC-VCM, but it does not mean that all CORSIA suppliers will meet the IC-VCM’s criteria. Further, Sylvera’s carbon credit ratings data demonstrate that deep project level due diligence is still required given the broad range of quality that exists within a registry and project type.

What is IATA?

The airline industry’s trade association, International Air Transport Association (IATA), has set an industry-wide goal of net zero by 2050. The collective target also reaffirmed support for ICAO’s CORSIA measure as a crucial support mechanism for the industry’s climate action. 

IATA defined four pillars and their relative contributions to the net zero strategy: 

  1. 65% will come from the use of Sustainable Aviation Fuel (SAF) 
  2. 17% though the use of approved carbon credits 
  3. 13% through improvements in new aircraft technologies
  4. 3% from improved infrastructure and operational efficiency, with a strong focus on improved air traffic management

What are the SBTi recommendations for airlines?

In February 2023, the Science Based Targets initiative (SBTi) released an updated technical report to align their pathway recommendations and criteria for aviation companies with existing sector-based guidance. SBTi’s interim pathway is based on the Breakthrough Scenario outlined by the International Council on Clean Transportation’s Aviation Vision 2050 report

The update integrates projected demand and technology changes. SBTi’s core guidance focuses on in-value chain emissions reductions and strongly recommends that companies contribute to societal net zero: thinking beyond their own value chains when decarbonizing in what they refer to as beyond value chain mitigation (BVCM)

More on the Mission Possible Partnership 

Mission Possible Partnership (MPP) is an alliance that provides Sector Transition Strategies for seven hard-to-abate sectors, including aviation. MPP’s aviation guidance explores all climate levers across the aviation value chain to provide a harmonized pathway for the sector. 

In addition to modeling two net zeros scenarios designed to minimize total costs of ownership, MPP also highlights five pillars in aviation’s net zero solution portfolio: demand- side measures, efficiency improvements, SAF, novel propulsion aircrafts, and carbon dioxide removal (CDR) technologies.

MPP and SBTi have a partnership to align sector guidance, but a co-developed sector guidance for aviation has not yet been announced.

What are the pillars of decarbonization for aviation?

Aviation is a complex ecosystem influenced by diverse companies, international governance bodies, global governments and ultimately, consumer activities. Guidance for net zero and carbon accounting in aviation can appear fragmented, but there are still fundamental pillars that are a north star for aviation’s net zero path. 

1) Avoid

The COVID-19 pandemic significantly reduced air travel demand, but it is expected to recover to pre-pandemic levels by 2024. 

However, there are still factors that will constrain and reduce demand. Policy incentives have already been put in place to drive modal shifts, for example France has banned short-haul flights where there is a rail alternative.

Shifting consumer choices, driven by either a desire to reduce personal carbon emissions or as a  response to increasing ticket prices due to rising fuel costs associated with the introduction of SAF, will also constrain air traffic growth.

2) Reduce 

Incremental aircraft and flight procedure innovations have reduced carbon intensity of operations. If innovations continue, the global aircraft fleet could be 40% more fuel efficient by 2050 compared to a 2019 baseline. 

The industry is also making investments in more novel aircraft propulsion systems that use hydrogen and electricity as fuel sources. However, there are major barriers that limit their short-term impact on net zero. These technologies have range limitations, low technology development levels, and face barriers to market adoption given long lead times on airworthiness certifications.

Perhaps the most discussed lever in air transport’s net zero solution portfolio is sustainable aviation fuel (SAF). SAF is a broad classification that generally describes non-conventional aviation fuel, primarily biofuels. Announcements like the launch of the USD $100 million investment United Airlines Ventures Sustainable Flight Fund, an investment vehicle for SAF with funding from Air Canada, Boeing, GE Aerospace, Honeywell and JPMorgan Chase, have made a big splash in the market. 

There are multiple categories of SAF that face production pathways characterized by policy, financial, and technological barriers to scale. Altogether, IATA estimates SAF will contribute around 65% of emissions reductions needed to reach net zero in 2050.

3) Compensate

Carbon credits are a crucial tool in air transport’s net zero toolbox. The bulk of decarbonization pathways in the sector are dominated by renewable fuels, for which there are still residual emissions. The industry will also have to neutralize the impact of radiative forcing, which cannot be eliminated through the use of renewable fuels. 

Moreover, the latest IPCC report underscores the immediate need for climate action. For such a significant source of global emissions and warming potential, aviation has no time to delay and wait for SAFs to scale. It is imperative companies in the aviation value chain need to define and activate their high-quality carbon credit strategy. 

Where does net zero for aviation stand today?

Based on the existing sector guidance and net zero pathways, a critical milestone for the industry will be to halve 2019 emission levels by 2040 and several large emitters in the sector have already missed interim emissions reductions targets. Uncertainties around technology development and scalability of SAFs that predicate much of the sector’s net zero modeling means that there is significant risk to delaying action.

Investing in high-quality carbon credits as part of a holistic climate action strategy is non-negotiable and it is one of the few climate action levers we have to pull at scale today. 

Understandably, companies are concerned about greenwashing risks associated with procuring low quality carbon credits. Sylvera is helping companies take no regrets climate action by providing reliable and accurate information to guide the use of carbon credits.

Request a demo to learn more about how Sylvera is helping companies de-risk and kickstart their carbon market strategy to become net zero leaders.
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About the author
Senior Technical Climate Consultant

Annalise Downey is a Senior Technical Climate Consultant at Sylvera, helping market participants define their carbon strategy and navigate the voluntary carbon markets. Annalise was brought in during the early days of Sylvera as a member of the ratings team, analyzing carbon projects and helping to develop project-type frameworks including REDD+ and ARR. Annalise brings experience in commercialization and new product development as co-founder of a subsea remote sensing company. She is passionate about bridging disciplines to develop data-driven and scalable solutions to tackle climate change.