Airlines Carbon Emissions Tools May Protect Forests: Indonesia and Ethiopia Case Studies

Airlines Carbon Emissions Tools May Protect Forests: Indonesia and Ethiopia Case Studies
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Climate Advisers and Anthony Mansell highlight that the Carbon Offsetting Reduction Scheme for International Aviation (CORSIA) is a mechanism for airlines to achieve international aviation’s target of carbon neutral growth post-2020 by purchasing emission reductions achieved outside the sector. This is an opportunity for countries to finance programs that reduce emissions from airlines investing in those reductions.

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Throughout 2017 Climate Advisers has compiled a series of case studies across different forest nations to make available Reduced Emissions from Deforestation and Degradation (REDD+) programs to CORSIA. we examined Peru and Colombia. Last week, we released two new case studies focused on Indonesia and Ethiopia.

We use both a top-down supply model of national emission reductions in the forestry sector, and a bottom up aggregation of promising jurisdictions to estimate potential gross revenue from marketing these emission reductions across different scenarios. What we consistently find is that those revenues outweigh the costs to the country’s airlines sector from participating in CORSIA. In some cases, the government has not announced its participation in CORSIA’s voluntary phases (from 2021 to 2026). If these countries can market their REDD+ programs under CORSIA, they may be more amenable to early participation in CORSIA that further drives climate ambition. Airlines benefit from purchasing affordable emission reductions that also generate positive co-benefits, from assisting communities to move beyond reliance on destructive land activities to boosting biodiversity.

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Each country must take into consideration additional factors. The marketing of REDD+ programs should cover the financial costs of achieving the required emission reductions, including sufficient capacity building in the preparatory phases of REDD+. A transfer of emission reductions to airlines must not be also counted towards the host country’s nationally determined contribution (NDC) – double counting these reductions would undermine the program’s environmental integrity. Countries and airlines should discuss how best to structure a transaction of REDD+ emission reductions, potentially including voluntary pilot deals.

Most critically, forest countries should be vocal participants in CORSIA discussions, making the case for REDD+ as an environmentally robust and economically sensible approach that should be included. Reaching the long-term goals of the Paris Agreement necessitates the world to tackle deforestation, and CORSIA opens the door to investment useful to countries willing to achieve results.

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Gabriel Thoumi, CFA, FRM works as Director Capital Markets at Climate Advisers where he manages global financial analytics focusing on mitigating systemic climate risk while advising on “greening” capital markets. He has 18 years of experience managing and deploying frameworks to improve global capital markets sustainability through risk mitigation and return enhancement. Previously, for Calvert Investment Management, he valued global equity, index, and fixed income portfolios and their component positions in the utilities, energy, materials, chemicals, and financial sectors. He worked on quantitative index construction and asset allocation strategies. He engaged Fortune 500 CEOs on approaches to mitigating climate risk using financial risk management tools. He led initiatives to improve financial accounting of exchange-listed products and incorporated natural capital into financial tools. He has also worked at Morgan Stanley's carbon offset company, Wells Fargo Capital Management, and American Express. He is an adjunct at John Hopkins University.
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