Canada Gazette, Part I, Volume 154, Number 35: Regulations Amending the Canadian Aviation Regulations (Parts I and X – Offsetting of CO2 Emissions – CORSIA)

August 29, 2020

Statutory authority
Aeronautics Act

Sponsoring department
Department of Transport

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues: Aviation is responsible for approximately 2% of global carbon dioxide (CO2) emissions, with international aviation representing roughly two thirds of the total emissions from aviation. The International Civil Aviation Organization (ICAO) estimates that without corrective action, emissions from international aviation could grow by 60% to 80% between 2020 and 2035.footnote 1 Advances in aircraft technology, operational improvements, and a greater use of sustainable aviation fuels will not be enough to ensure carbon neutral growth of international aviation from 2020. In order to respond to the projected growth in greenhouse gas (GHG) emissions, Member States of ICAO have agreed to implement the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which requires amendments to the Canadian Aviation Regulations (CARs).

Description: The proposed amendments to the CARs add the specific requirements for air operators (operators) who fly internationally to offset their assigned share of the increase in global GHG emissions from the international aviation sector beyond 2020 levels by using CORSIA Eligible Fuels (CEF)footnote 2 or acquiring and cancelling emissions units on the international carbon market. These proposed amendments would come into force in Canada on January 1, 2021.

Rationale: Incorporating the requirements related to the offsetting obligations of CORSIA into Canadian domestic law would (1) fulfill Canada’s international climate change obligations for this ICAO initiative, and (2) contribute to efforts to reduce the global concentration of CO2 in the atmosphere. The proposed amendments would require affected Canadian air operators to acquire a total of between 54.4 million and 71.9 million tonnes (Mt) of CO2 emissions offset units between 2021 and 2035, resulting in a global benefit from avoided damage due to climate change that has a monetized present value range of $1.6 billion to $2.1 billion.footnote 3 The range for the present value total cost of acquiring offsetting emissions units and the associated monitoring, verification and reporting requirements would be between $1.2 billion and $1.6 billion. The net present value of these proposed amendments would be between $362.9 million and $472.7 million from 2021 to 2035.

Issues

According to ICAO, aviation is responsible for approximately 2% of global CO2 emissions, with international aviation representing roughly two thirds of the total emissions from aviation. ICAO estimates that without corrective action, emissions from international aviation could grow by 60% to 80% between 2020 and 2035. Despite ongoing efforts to respond to growing emissions through advances in aircraft technology, operational improvements, and a greater use of sustainable aviation fuels, these efforts will not be enough to ensure carbon neutral growth of international aviation from 2020. For these reasons, Member States of ICAO adopted a resolution to implement an internationally harmonized, market-based measure on climate change, which set aspirational reduction goals for international aviation emissions, including a global annual average fuel efficiency improvement of 2% until 2020, and a medium-term goal of keeping the annual global net carbon emissions from international aviation at 2020 levels.

Background

Global context

GHG emissions are contributing to a global warming trend that is associated with climate change, which will lead to changes in average climate conditions and extreme weather events. Science confirms that the impacts of climate change will worsen as the global average surface temperature becomes increasingly warmer. Canada’s climate is warming at twice the global rate and, in the North, at three times that rate. If no action is taken on climate change, the severity of impacts already being felt in Canada (e.g. floods, fires, heat waves and droughts) will increase.

The Paris Agreement aims to address climate change by limiting global warming to well below 2 °C above pre-industrial era levels, and strives to hold the increase to 1.5 °C, by undertaking rapid emission reductions and reaching global carbon neutrality in the second half of this century. To that end, it requires each country to communicate national GHG targets every five years, representing an ambitious progression over time to meet the commitments in the Paris Agreement. Emissions from international transportation fuels are not addressed in the Agreement because it is difficult to attribute responsibility for these emissions to a single country’s national target. A consistent approach is necessary to ensure a fair playing field and avoid a patchwork of approaches. Targets and measures for the international aviation and marine sectors are negotiated at ICAO and the International Maritime Organization, respectively, which are better equipped to address their transboundary nature.

At the 37th ICAO Assembly in October 2010, Member States adopted a new resolution on climate change, which set aspirational reduction goals for international aviation emissions, including a global annual average fuel efficiency improvement of 2% until 2020, and a medium-term goal of keeping the annual global net carbon emissions from international aviation at 2020 levels. At the 39th Assembly in October 2016, Member States, including Canada, agreed to implement CORSIA to help achieve the aspirational goal of carbon-neutral growth from international aviation from 2020 onward, and ultimately developed it into a standard made pursuant to the Convention on International Civil Aviation and set out in Annex 16, Volume IV.

Carbon Offsetting and Reduction Scheme for International Aviation

CORSIA is a global market-based measure that requires operators to acquire and cancel emissions units to offset a portion of their CO2 emissions from 2021 to 2035, based on the growth of the sector from the baseline. Generally speaking, an emissions unit is a tradable certificate representing a GHG reduction, or removal by carbon sink in another sector (e.g. energy, waste, forestry), which can be acquired and cancelled by an airline operator to offset its own emissions. Cancelling an emission unit renders it unusable for any other purpose, such as application toward a domestic compliance obligation or a national GHG target under the Paris Agreement.

A number of offsetting programs have been established to issue and track emissions units for sale in domestic and international carbon markets. ICAO has agreed to eligibility criteria for emissions units and has set up a Technical Advisory Body (TAB) to assess offsetting programs against these criteria. Any existing program around the world can apply to provide the opportunity for their clients to sell units to operators to meet their CORSIA obligations. However, the transfer of units must be authorized by the relevant Member State under the Paris Agreement and accounted for against its national target, to ensure that no emission reduction or removal is double-counted. After a program applies, the TAB then conducts an assessment of program applications against emissions unit criteria, and makes recommendations to the ICAO Council. Six offsetting programs have been approved to date, and more are under review. Transport Canada will monitor the ongoing CORSIA processes and availability of emissions units; any issues are expected to be addressed at ICAO.

The amount of offsetting obligations is determined annually; however, units only have to be cancelled 13 months after the end of the compliance cycle. For example, after each of 2021, 2022 and 2023, operators will be advised of the offsetting obligations they have accrued for each of those years. In 2024, they will be advised of their final obligation for 2021–2023, after reductions from CEF have been taken into account. Subsequently, they must cancel the necessary amount of emissions units for 2021–2023 by January 31, 2025, and report on those cancellations by April 2025.

For the first nine years (2021 to 2029), each operator’s offsetting obligation is based on the emissions of the operator on routes subject to offsetting and the growth of the sector on these routes. For the last six years (2030 to 2035), the operators’ obligations would include a portion based on their individual growth since 2020 on routes subject to offsetting. Although the exact offsetting proportions between individual growth and global growth have not yet been agreed to at ICAO, operators will be responsible for at least 20% individual growth in emissions for 2030–2032 (no more than 80%, sectoral) and at least 70% for 2033–2035 (no more than 30%, sectoral). The ICAO assembly will decide on the exact proportions ahead of those compliance periods. Operators can reduce these obligations through the use of CEF that have a life cycle emissions factor of at least 10% less than conventional fossil fuels, as the reduction in life cycle value will be credited against their offsetting obligation.

The offsetting provisions will apply for all operators on a route where both ends are included in the offsetting,footnote 4 regardless of their State of registration.

The COVID-19 pandemic has resulted in a sharp decline in aviation activity. Measures put in place to limit the spread of COVID-19 have resulted in a significant reduction in the number of flights being operated and fewer passengers allowed on flights to ensure that passengers and crew are safe. Reduced operations are expected to substantially lower CO2 emissions for 2020 and following years.

The baseline for CORSIA was originally set to be the average of 2019 and 2020. However, due to the significant impact of COVID-19 on the activity and emissions of the sector in 2020, the use of the two-year average baseline would have resulted in significantly higher offsetting requirements than intended. As a result, the ICAO Council decided to use emissions from 2019 as a proxy for 2020 emissions during the pilot phase (2021 to 2023). Over the full Scheme, using 2019 instead of the average of 2019 and 2020 would result in offsetting obligations of a similar order of magnitude compared to those based on the expected pre-COVID baseline. A discussion will be held at the next ICAO Assembly in the fall of 2022 to determine if any other changes are needed, including to the baseline for years beyond the pilot.

Legislative underpinning

The Aeronautics Act provides that the Governor in Council may make regulations respecting aeronautics and regulations respecting the application of the Convention on International Civil Aviation. These proposed amendments would require operators to offset their assigned share of the increase in global CO2 emissions beyond 2020 levels, by using CEF and acquiring and cancelling emissions units on the international carbon market.

Canada is implementing CORSIA through two sets of amendments to the CARs, made under section 4.9 and paragraphs 7.6(1)(a) and (b) of the Aeronautics Act.

(1) The first set of amendments was published in the Canada Gazette, Part II, in November 2018 and came into force on January 1, 2019. These amendments required operators to monitor and verify their annual CO2 emissions, and to report them to Transport Canada. As a result, all operators that reach the CORSIA applicability threshold are required to (1) submit a detailed emissions monitoring plan (EMP); (2) undertake annual monitoring of emissions and complete an annual emissions report; (3) have that report verified by an eligible third-party verification body; and (4) submit the emissions report and associated verification report to Transport Canada.

(2) The second set of proposed amendments, which is addressed in this Regulatory Impact Analysis Statement (RIAS), would implement carbon offsetting requirements for operators. In addition to continuing to require them to monitor, report and verify their annual CO2 emissions, the amendments would

  • a. require operators to acquire and cancel a sufficient number of emissions units to meet their offsetting requirements;
  • b. include provisions to reduce offsetting obligations from the use of sustainable CEF; and
  • c. require operators whose existing EMPs do not already cover the new requirements (such as how they will identify which flights are subject to offsetting) to update them.

Objective

The objective of these proposed amendments is to incorporate the requirements related to the offsetting obligations of CORSIA into Canadian domestic law. Doing so would fulfill Canada’s international climate change obligations for this ICAO initiative, and require Canada’s operators to do their part to maintain the annual global net carbon emissions from international aviation at 2020 levels.

Description

These proposed amendments, and the CORSIA Standard, would apply to operators that offer international flightsfootnote 5 and produce annually a total of more than 10 000 tonnes of CO2 emissions from those flights, through the use of one or more large aeroplanes.footnote 6 CORSIA does not apply to the following types of flights:

  • Flights for humanitarian, medical evacuation, or firefighting purposes;
  • Non-fixed wing aircraft (i.e. helicopters); and
  • Military, state, or police flights.

Operators that become subject to the Scheme after 2020 will be exempted from offsetting obligations for the first three years, or until their emissions reach 0.1% of the sector’s emissions in 2020.footnote 7

In addition to meeting the monitoring, reporting, and verification (MRV) requirements that came into force in January 2019, operators with international flights covered under CORSIA would be required to do the following under the proposed amendments:

1. Update their emissions monitoring plan

Operators, whose existing plans do not already voluntarily incorporate the new requirements in these proposed amendments, would be required to update their existing EMP to establish monitoring methods to measure their use of CEF, to reflect changes to their eligibility to use the simplified reporting method, and to calculate emissions on their routes subject to offsetting. To stay in line with ICAO requirements, under the proposed regulatory amendments, the threshold for access to the simplified procedures tool provided by ICAO (CO2 Estimation and Reporting Tool [CERT]) changes from 500 000 tonnes CO2 annually on all covered routes to 50 000 tonnes CO2 annually on routes subject to offsetting. Any operator that used the CERT tool, but is no longer under the eligibility threshold, would have to update its monitoring method to one of the five methods of direct monitoring as described in the CORSIA Standard.

As a large proportion of Canadian operators did voluntarily include the necessary information, it is expected that only a small number will be affected.

2. Report their use of CORSIA Eligible Fuels

Operators using CEF would be able to reduce their offsetting requirements based on the life cycle value of the CEF.footnote 8 The proposed amendments update reporting requirements for annual emissions reports and associated verification reports, to include the reporting of CEF. The information reported would include the following:

  • Information on the type, quantity and certified life cycle value of the fuel;
  • Information on the production and feedstock of the fuel;
  • Information on the producer, blender, intermediaries, and shippers;
  • Evidence that the fuel satisfies the CORSIA eligibility criteria; and
  • Evidence that the producer of the fuel has been certified by an approved sustainability certification scheme.

3. Cancel, report and verify emissions units cancellation

Operators would be required to acquire and cancel CORSIA eligible emissions unitsfootnote 9 to meet their offsetting requirements after the end of each three-year compliance period, and report these cancellations to Transport Canada. The emissions unit cancellation report (EUCR)footnote 10 would contain detailed information about each batch of cancelled emissions units. The list of eligible programs and project types is available on the ICAO CORSIA website and would be incorporated by reference into the CARs. Operators would be required to engage an accredited third-party verification body to confirm the completeness and accuracy of information in the report. Operators would be required to submit a copy of the EUCR and the corresponding verification report to Transport Canada, and to authorize the verification body also to submit copies of the EUCR and verification report to Transport Canada.

The proposed amendments would come into force in Canada on January 1, 2021.

Regulatory development

Consultation

Throughout the development of CORSIA, Transport Canada consulted with affected Canadian operators directly and through their associations — namely the National Airlines Council of Canada, the Air Transport Association of Canada and the Canadian Business Aviation Association. Stakeholders have also been well briefed on CORSIA through their international organizations, namely the International Aviation Transport Association (IATA) and the International Business Aircraft Council (IBAC). IATA in particular has put forth significant effort to hold several series of international seminars to help operators understand CORSIA and their obligations. Furthermore, two of Canada’s airlines have participated in a CORSIA implementation pilot project sponsored by ICAO and the German Government. The results of this project have further informed Transport Canada about the real-life functionality of CORSIA and identified areas where stakeholders would require further clarification of the requirements, or additional guidance. This information was considered by ICAO for suggested improvements to CORSIA. In particular, the templates were updated and new guidance material was developed to add clarity to the requirements.

Early consultations covering the implementation of ICAO’s CORSIA in Canada were undertaken ahead of publication of the first amendments to the CARs, in November 2018. The consultations formed, in part, Canada’s negotiation positions.

Since November 2018, Transport Canada has continued to consult industry stakeholders through workshops, with a particular focus on helping operators understand CORSIA, the offsetting requirements and the respective obligations of operators.

Through the publication of a Notice of Proposed Amendment (NPA; NPA 2019-011) by the Canadian Aviation Regulatory Advisory Council (CARAC), Transport Canada shared information and sought input from stakeholders for 45 days (from June 24 to August 7, 2019) in preparation for the second stage of CORSIA implementation. Transport Canada has responded to the feedback gathered from this consultation, relating to what follows.

  • 1. The expected impact of the grounding the Boeing 737 Max on the calculation of baseline emissions that underpin the calculation of the offsetting obligations starting in 2030.
    • While CORSIA does not allow Transport Canada to modify baselines, Transport Canada will monitor the issue and determine whether to raise the issue of the impact of the grounding of the Boeing 737 Max during the triennial review process of CORSIA by ICAO.
  • 2. The process for determining the offsetting obligations.
    • This process was covered at a high level in the NPA and is clearly set out in the proposed Regulations.
  • 3. The process for determining sustainable aviation fuels requirements for domestic policies, such as carbon pricing and clean fuels standards.
    • These issues are being considered by the relevant lead departments in the development of relevant policies.

In the spring and summer of 2020, due to the impact of COVID-19 on the sector, Transport Canada undertook further consultations with industry stakeholders, to better understand the impact of the pandemic on their operators and their expected offsetting obligations under CORSIA. These consultations informed Canada’s negotiation positions for the summer 2020 ICAO consultations on whether the design of CORSIA had to be amended in the short term, due to COVID-19.

Since the first emissions unit cancellation reports would be due in 2025, subsequent training sessions focusing on those reports will be scheduled for 2024. An additional Let’s Talk Transportation consultation process with stakeholders will also be made available concurrent with the publication of this RIAS in the Canada Gazette, Part I.

Transport Canada also consulted other government departments throughout the development of CORSIA. These departments include Natural Resources Canada, Environment and Climate Change Canada and Agriculture and Agri-Food Canada. The consultations focused primarily on two areas of work:

  • CORSIA Eligible Emissions units — the departments provided information on linkages to requirements of the Paris Agreement and best practices for offsets.
  • Sustainable aviation fuels — the departments provided information on alternative fuel potential and development in Canada, sustainability schemes and best practices for sustainable fuels generally.

Modern treaty obligations and Indigenous engagement and consultation

In accordance with the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, Transport Canada’s Regulatory Stewardship and Aboriginal Affairs group completed an Assessment of Modern Treaty Implications that examined the geographical scope and subject matter of the proposed amendments in relation to modern treaties in effect. As a result of this examination, no implications or impacts on modern treaties have been identified.

Instrument choice

CORSIA is outlined in the ICAO Standards and Recommended Practices (SARPs) [in Annex 16, Volume IV] made under the authority of Article 37 of the Convention on International Civil Aviation (Chicago Convention). It is therefore binding on the high-seas pursuant to Article 12 of the Convention. Member states are required to keep domestic regulations uniform “to the greatest extent possible”footnote 11 with the SARPs, to ensure consistency in the regulation of international aviation.

As a result, regulatory amendments to the CARs are the only appropriate instrument choice to implement the CORSIA SARPs (Annex 16, Volume IV) domestically in Canada, and to fulfill Canada’s obligations under the Chicago Convention. Other ICAO Member States are also required to incorporate the ICAO SARPs domestically within their regulatory structure.

Regulatory analysis

The proposed amendments would require affected Canadian air operators to acquire a total of between 54.4 million and 71.9 million tonnes (Mt) of CO2 emissions offset units from 2021 to 2035, resulting in a global benefit from avoided damage due to climate change that has a monetized present value range of $1.6 billion to $2.1 billion. The range for the present value total cost of acquiring offsetting emissions units and the associated monitoring, verification and reporting requirements would be between $1.2 billion and $1.6 billion. The net present value of the proposed amendments would be between $362.9 million and $472.7 million from 2021 to 2035.

Impacts of COVID-19 pandemic

The COVID-19 pandemic has resulted in a sharp decline in aviation activity. Measures put in place to limit the spread of COVID-19 have resulted in a significant reduction in the number of flights being operated and fewer passengers allowed on flights to ensure that passengers and crew are safe. Reduced operations are expected to substantially lower CO2 emissions for 2020 and following years.

The full impact of COVID-19 on the sector remains unknown, and a future recovery path is speculative. Before the COVID-19 crisis, the assumption was that CO2 emissions from international aviation would continue to increase through 2020, however, this is no longer the case. The current circumstances were not anticipated when CORSIA was agreed upon in 2016.

Lower levels of CO2 emissions in 2020 will influence the magnitude of offsetting requirements (i.e. demand for emissions units) during the pilot phase (2021 to 2023) and perhaps through to 2035. As a result, the costs and benefits presented below are based on the best information available to date. Given that the costs and benefits rely heavily on the CO2 emissions forecast, and there is uncertainty regarding the recovery of the air sector, the forecast used to determine the costs and benefits remains uncertain. Transport Canada continues to work with stakeholders to collect and assess relevant information to refine its analysis of costs and benefits if necessary prior to the scheduled implementation of the proposed amendments.

As stated in the “Background” section, the emissions baseline for CORSIA, to determine the emissions offsetting requirements, was originally set to be the average of 2019 and 2020. This baseline was projected before the COVID-19 pandemic. Emissions from 2019 will instead be used as a proxy for 2020 during the pilot phase (2021 to 2023). For the purposes of this analysis, the calculation of offsets and the subsequent offset requirement costs were based on growth compared to 2019 for all compliance years to ensure that the cost of CORSIA over the life of the Scheme remains within the same order of magnitude as originally intended. Further, to assess the costs and benefits of the proposed amendments at a time of significant uncertainty for the future emissions trajectory for the aviation sector, three potential recovery paths have been identified.

1. V-shaped recovery: On this recovery path, there is a sharp decline in air passenger demand in 2020, and demand returns to pre-crisis levels on an annual basis in 2022. Beyond 2022, passenger demand continues to grow at faster trend rates and returns to the pre-crisis forecast trend line by 2024.

2. U-shaped recovery: On this recovery path, there is a sharp decline in demand in air passenger demand in 2020, and passenger demand returns to pre-crisis levels in 2025. Beyond 2025, passenger demand continues to grow at faster trend rates and returns to the pre-crisis forecast trend line by 2030.

3. U-shaped recovery + permanent loss: On this recovery path, air passenger demand is assumed to be the same as in the U-shaped recovery until 2025. After 2025, the forecast growth rates in this scenario are assumed to be lower than in the U-shaped recovery. The scenario assumes that a permanent change in travel behaviour of consumers and business takes place. By the end of the forecast, air passenger demand is lower than in the V-shaped or U-shaped recovery scenarios.

At this time, sources, such as the International Air Transport Association (IATA),footnote 12 Air Canadafootnote 13 and industry analysts,footnote 14 have supported the hypothesis that a U-shaped recovery path will be followed, with the air sector recovering to pre-COVID-19 levels by 2025. As a result, the emissions forecasts used to calculate the offset requirements in the central scenario of this analysis are based on the U-shaped recovery path that assumes passenger demand returns to pre-crisis levels in 2025, a return to a pre-crisis forecast trend line by 2030, and 50% lower emissions in 2020 compared to 2019 emission levels. The other two recovery paths are presented in the sensitivity analysis.

Benefits and costs

Analysis conducted prior to the COVID-19 pandemic forecasted emissions from the international flights of Canadian operators by adopting two growth scenarios that were developed by ICAO. These scenarios were used to provide a range of forecasted emissions as upper and lower bounds, respectively. The lower-bound scenario was based on an optimistic case in which there are advanced technological and operational improvements, resulting in less growth in operator emissions. The upper-bound scenario was based on a case that incorporated business-as-usual technological improvements, resulting in higher growth in operator emissions. Given the impacts of the COVID-19 pandemic on aviation emissions in 2020 and the uncertain recovery paths identified above, the lower and upper bound growth scenarios are used in the analysis when emissions are assumed to return to the pre-COVID-19 trend lines (V-shaped and U-shaped recovery paths).

Unless otherwise noted, benefits and costs are present values using 2019 Canadian dollars and a 7% discount rate, the analytical time frame is from 2021 to 2035, and dollars are discounted to 2020.

The net present value of the proposed amendments would be between $362.9 million and $472.7 million, from 2021 to 2035. The proposed amendments would require affected Canadian operators to acquire a total of between 54.4 million and 71.9 million tonnes (Mt) of CO2 emissions offset units. Offsetting these emissions would provide a global benefit from avoided damage due to climate change, and this avoided damage has a monetized present value range of $1.6 billion to $2.1 billion. The range for the present value total cost of acquiring offsetting emissions units and the associated monitoring, verification and reporting requirements would be between $1.2 billion and $1.6 billion. A detailed cost-benefit analysis report is available upon request.

Analytical framework

This cost-benefit analysis considers the benefits and costs of the regulatory changes (the policy scenario) compared to a world in which these changes did not occur (the baseline scenario).

The incremental impacts considered in the analysis relate to the acquisition of CO2 emissions units and to the requirements to monitor, verify, and report emissions and emissions units. The costs of the proposed amendments would be carried by operators that acquire and cancel emissions units. The benefits of the proposed amendments would relate to the positive environmental impacts of the proposed amendments and would benefit the Canadian public, as well as individuals globally, who would experience reduced damage from climate change.

In this analysis, there are no expected reductions in total CO2 emissions to come directly from affected aeroplane operators between the policy scenario and baseline scenario. The cost of the proposed amendments may therefore be overstated, since operators may have the ability to reduce emissions using a method with a lower marginal cost than purchasing offset units, such as using CEF or investing in technologies that would reduce emissions. Any decrease in global CO2 emissions between the policy and baseline scenarios would be a result of the offset credits purchased by aeroplane operators in the policy scenario that would reduce CO2 emissions in other sectors and countries.

As currently constituted, CORSIA would be in force internationally until 2035. For the Scheme to be extended beyond that year, Member States would have to reach a new agreement. Therefore, the analytical time frame only covers the period from 2021 to 2035.

Regulated community

The proposed amendments would affect 16 Canadian operators, and would impact their flights between approximately 65 partner countries as of July 2020. These operators operated a total of approximately 327 159 CORSIA eligible flights in 2018, and are forecasted to operate approximately 253 439 flights when the offsetting portion of CORSIA comes into effect in 2021. The number of flights by Canadian operators is forecasted to increase to 630 142 by 2035. These numbers are based on the U-shaped recovery path.

Baseline scenario

In the baseline scenario, the proposed amendments are not implemented in Canada. As a result, air operators would not participate in emission-reducing procedures and would bear no additional costs.

In the absence of CORSIA, air operators would still be expected to comply with all existing GHG emission mitigation schemes to which they may be subject. However, while emissions from domestic aviation are considered toward Canada’s national GHG target under the Paris Agreement, emissions from international aviation are not. At this time, the fuel used in inter-jurisdictional flights in Canada (i.e. flights crossing provincial and territorial borders) is not covered by the federal fuel charge under the Greenhouse Gas Pollution Pricing Act or provincial carbon pricing systems, and the Act and systems are not measures that are expected to affect emissions from international air travel.

When CORSIA was first developed, it was expected that international CO2 emissions from affected air operators would continue to increase between 2021 and 2035. However, due to the COVID-19 pandemic, this is no longer the case. As a result, in the baseline scenario, international CO2 emissions from affected air operators are expected to follow a U-shaped path, where there are 50% lower emissions in 2020 compared to the 2019 level, recovery to 2019 levels in 2025, and recovery to the pre-COVID trend line in 2030. It is estimated that CO2 emissions from international air travel from affected stakeholders would be 7.3 Mt in 2020 and increase to between 22.6 Mt and 25.7 Mt by 2035.

Policy scenario

In the policy scenario, air operators are assumed to be fully compliant with the requirement to purchase offsets beginning in the compliance year (2021), and are assumed to be taking steps to offset or reduce CO2 emissions so that total global emissions attributable to international aviation from affected air operators remain at 2019 levels. This goal would be accomplished through the acquisition and cancellation of offset units. Actual CO2 emissions from international aviation is expected to be the same as in the baseline scenario.

In addition, air operators would have to comply with additional administrative requirements, including updating their EMPs, reporting the use of CORSIA Eligible Fuels, and providing the emissions unit cancellation report.footnote 15

Although including routes to and from a State in the carbon offsetting portion of CORSIA is voluntary for Member States until 2027, Canada is participating in CORSIA from the start; therefore, the calculation of offsetting obligations for Canadian operators would include routes between Canada and other participating States beginning in 2021.footnote 16 This analysis takes into account flights between two Member States that are also known to be participating based on information available as of July 2020.

Given the COVID-19 pandemic and the adverse impact it has had on the air sector, it is projected that emissions from Canadian operators would return to the 2019 level by 2025, and stay above the 2019 level from 2026 as a result of the sector’s growth. Therefore, even though the air operators must comply with CORSIA from 2021, they are not expected to assume costs associated with offsetting obligations before 2026.footnote 17 However, if the actual emissions from the sector go above the 2019 level before 2026, then Canadian operators will have to comply with the offsetting requirements and assume costs that are not currently modelled in the cost-benefit analysis.

Benefits

Between 2021 and 2035, Canadian operators would be required to offset from 54.4 million to 71.9 million tonnes of CO2 emissions (Figure 1 and Figure 2). The buying and selling of eligible emissions units happens through the carbon market. The price of the emissions units in a given carbon market is determined by the law of supply (availability of emission credits) and demand (level of emission credits needed by participants). This offsetting would result in lower concentrations of CO2 in the atmosphere and would help mitigate climate change and its adverse global impacts on the environment and the economy. These values are monetized using Environment and Climate Change Canada’s (ECCC) social cost of greenhouse gases (GHGs) estimates.footnote 18

Figure 1: Aggregate offset emissions requirements summary (lower bound)

Emissions and Off-Set Summary – Lower Bound - Text version below

Figure 1 - Text version

Figure 1 illustrates a graph with a vertical line at 12.6 that represents the 2020 emission limit. The numbers for the CO2 emissions range from 0.0 to 25.0, in 5.0 increments. There is another line that starts at the 2020 emission limit with a positive increasing slope that illustrates how CO2 emissions will deviate from the 2020 levels. The space between the two lines represents the offset requirements in the lower bound scenario from 2021 to 2035. The numerical values presented on the image follow:

Year 2019 Emissions Limit (Mt) CO2 emissions (LB Scenario) (Mt) Offsets (Mt)
2019 14.7 14.7 0.0
2020 14.7 7.3 0.0
2021 14.7 11.0 0.0
2022 14.7 12.5 0.0
2023 14.7 13.2 0.0
2024 14.7 13.9 0.0
2025 14.7 14.7 0.0
2026 14.7 15.6 1.3
2027 14.7 16.6 2.5
2028 14.7 17.6 3.7
2029 14.7 18.6 4.9
2030 14.7 19.5 5.8
2031 14.7 20.1 6.4
2032 14.7 20.7 7.0
2033 14.7 21.3 7.0
2034 14.7 21.9 7.6
2035 14.7 22.6 8.2

Figure 2: Aggregate offsets missions requirements summary (upper bound)

Emissions and Off-Set Summary – Upper Bound - Text version below

Figure 2 - Text version

Figure 2 illustrates a graph with a vertical line at 12.6 that represents the 2020 emission limit. The numbers for the CO2 emissions range from 0.0 to 25.0, in 5.0 increments. There is another line that starts at the 2020 emission limit with a positive increasing slope that illustrates how CO2 emissions will deviate from the 2020 levels. The space between the two lines represents the offset requirements in the upper bound scenario from 2021 to 2035. The numerical values presented on the image follow:

Year 2019 Emissions Limit (Mt) CO2 emissions (UB Scenario) (Mt) Offsets (Mt)
2019 14.7 14.7 0.0
2020 14.7 7.3 0.0
2021 14.7 11.0 0.0
2022 14.7 12.5 0.0
2023 14.7 13.2 0.0
2024 14.7 13.9 0.0
2025 14.7 14.7 0.0
2026 14.7 16.0 1.6
2027 14.7 17.4 3.2
2028 14.7 18.7 4.7
2029 14.7 20.0 6.2
2030 14.7 21.4 7.5

The total benefit from offsetting CO2 emissions is between $1.6 billion and $2.1 billion (using ECCC’s central social cost of greenhouse gases value in $CAN 2019).

Costs

Affected operators would assume costs to purchase emissions units and to fulfill monitoring, verification and reporting requirements. The estimated total cost of the proposed amendments over the 15-year analytical time frame (i.e. 2021 to 2035) is between $1.2 billion and $1.6 billion.

Administrative cost

Many of the monitoring, verification and reporting requirements associated with the proposed amendments were defined in Phase 1 of the CORSIA Regulations. Those costs were accounted for in the cost-benefit analysis that accompanied those Regulations. These proposed amendments would alter those requirements and impose some minor administration costs on operators. These costs would arise from operators’ updating their emissions monitoring plan, reporting their use of CEF, and cancelling emissions units, as well as reporting and verifying emissions units cancellation. The total costs for monitoring, verification and reporting are around $0.64 million, over 15 years, in both the upper and lower bound scenarios.

Cost of purchasing emission units

As stated above, Canadian operators would be required to purchase between 54.4 million and 71.9 million tonnes of CO2 offset units over the 2021 to 2035 time frame. This amount was multiplied by the prices of carbon offsets to determine the total cost of the proposed Regulations. In the central analysis, the price of emissions units is $24 per unit in 2021 and increases to $61 per unit by 2035. This unit price is the average of four separate estimates: International Energy Agency’s World Energy Outlook for 2013 and for 2015, Synapse Energy Economics, and ICF Consulting. Each of these sources estimated the price of permits in the international market; no estimates were calculated specifically for CORSIA. Further, these price estimates were determined before the COVID-19 pandemic and do not take into account the impact of the pandemic on the demand for carbon offsets. At this time, updated price estimates that take into account the pandemic are not available.

Offsetting is done through the acquisition and cancellation of emissions units that arise from programs or projects approved by ICAO. The price of the emissions units in a given carbon market is determined by the law of supply (availability of emission credits) and demand (level of emission credits needed by participants).

The impact of higher or lower offset costs is discussed in the “Sensitivity analysis” section. The total cost of purchasing offsets is estimated at between $1.2 billion and $1.6 billion. However, operators could be motivated to reduce emissions through clean technology and other means, such as using CEF or investing in technologies that would reduce emissions, to reduce emissions using a method with a lower marginal cost than purchasing offset units.

Cost to Government

The costs to the Government of Canada to implement CORSIA were introduced through the MRV phase, which was the subject of publication in the Canada Gazette in 2018.footnote 19 These costs were already assessed and identified in the supporting Regulatory Impact Assessment Statement. Costs to Government included Transport Canada officials reviewing EMPs, the annual CEF report, and the Emissions Units Cancellation Report. There are no incremental costs to Government for the implementation of the offsetting phase of CORSIA.

Cost-benefit statement

Number of years: 15 (2021 to 2035)
Base year for costing: $CAN 2019
Present value base year: 2020
Discount rate: 7%

Table 1: Monetized costs

Impacted stakeholder

Description of cost

2021

2022–2034
(annual average)

2035

Total
(present value)

Annualized value

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Industry

Purchase of offset credits

$0.00

$0.00

$81.52M

$106.86M

$181.47M

$249.20M

$1.24B

$1.64B

$136.28M

$179.890M

Monitoring, verification and reporting

$0.03M

$0.03M

$0.04M

$0.04M

$0.07M

$0.07M

$0.64M

$0.64M

$0.07M

$0.07M

All stakeholders

Total costs

$0.03M

$0.03M

$81.56M

$106.91M

$181.55M

$249.27M

$1.24B

$1.64B

M$136.35M

M$179.96M

Table 2: Monetized benefits

Impacted stakeholder

Description of benefit

2021

2022–2034
(annual average)

2035

Total
(present value)

Annualized value

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Canadians

Avoided climate change damage

$0.00

$0.00

M$107.78M

$140.94M

$203.63M

$279.62M

$1.60B

$2.11B

$176.19M

$231.87M

All stakeholders

Total benefits

$0.00

$0.00

$107.78M

$140.94M

$203.63M

$279.62M

$1.60B

$2.11B

$176.19M

$231.87M

Table 3: Summary of monetized costs and benefits

Impacts

2021

2022–2034
(annual average)

2035

Total
(present value)

Annualized value

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Lower Bound

Upper Bound

Total costs

$0.03M

$0.03M

$81.56M

$106.91M

$181.55M

$249.27M

$1.24B

$1.64B

$136.35M

$179.96M

Total benefits

$0.00

$0.00

$107.78M

$140.94M

$203.63M

$279.62M

$1.60B

$2.11B

$176.19M

$231.87M

NET IMPACT

-$0.03M

-$0.03M

$26.22M

$30.35M

$22.08M

$30.35M

$362.88M

$472.73M

$39.84M

$51.90M

Sensitivity analysis

A sensitivity analysis is used to test the effect on the output of selected independent variables used in the analysis. Uncertainty about these independent variables can be better contextualized through the use of sensitivity analysis. The following independent variables were analyzed: ECCC’s social cost of greenhouse gases, carbon offset costs, discount rate, ICAO recovery scenarios, and emissions baseline.

Social cost of greenhouse gases

Environment and Climate Change Canada developed two estimates for the social cost of greenhouse gases: a central value, and the 95th percentile value. In the main analysis, the central value is used, while the sensitivity analysis presents the results with the 95th percentile value. The social cost of greenhouse gases is a measure of the incremental additional damages that are expected from a small increase in CO2 emissions (or conversely, the avoided damages from a decrease in CO2 emissions).

Carbon offset costs

Several sources were used to estimate carbon offset prices: International Energy Agency’s World Energy Outlook for 2013 and for 2015, Synapse Energy Economics, and ICF Consulting. The central analysis uses an average of these four estimates, while the sensitivity analysis presents the results if the values from these singular sources were used. While the International Energy Agency’s World Energy Outlook for 2013 and for 2015 and Synapse Energy Economics generate a positive net benefit, ICF Consulting has a higher carbon offset price than the other three and, therefore, results in a negative net benefit.

Discount rate

The central analysis used a 7% discount rate as recommended by the Treasury Board Secretariat. The sensitivity analysis presents the results should a 3% discount rate have been used, as well as if there were no discounting.

ICAO recovery scenarios

As previously discussed, three potential pandemic recovery paths have been identified: V-shaped recovery, U-shaped recovery and U-shaped recovery + permanent loss. The central analysis uses the U-shaped recovery scenario, while the sensitivity analysis presents the results for the V-shaped recovery (with a 50% and 60% reduction in international travel in 2020) and U-shaped recovery + permanent loss scenarios.

Emissions baseline for determining offsetting requirements

In the central analysis, the calculation of offsets, and the subsequent offset requirement costs, are based on emission growth compared to 2019 levels. In the sensitivity analysis, another baseline option is developed: the average of 2019 emissions levels and 2019 emission levels + 2.6%.footnote 20

Table 4: Sensitivity analysis results — Social cost of greenhouse gases

Parameter change

Lower bound NPV

Lower bound B/C ratio

Upper bound NPV

Upper bound B/C ratio

Central table b4 note *

$362.9M

1.29

$472.7M

1.29

95th percentile

$5,704.3M

5.59

$7,502.7M

5.58

Table b4 note(s)

Table b4 note *

Central scenario used in main analysis

Return to table b4 note * referrer

Table 5: Sensitivity analysis results — Carbon offset costs

Parameter change

Lower bound NPV

Lower bound B/C ratio

Upper bound NPV

Upper bound B/C ratio

Average of 4 sources table b5 note *

$362.9M

1.29

$472.7M

1.29

CORSIA (IEA WEO 2013)

$1,055M

2.92

$1,388M

2.92

IEA WEO 2015

$214.4M

1.15

$279.9M

1.15

Synapse Energy Economics

$484.4M

1.43

$631.8M

1.43

ICF Consulting

$-304.1M

0.84

$-409.4M

0.84

Table b5 note(s)

Table b5 note *

Central scenario used in main analysis

Return to table b5 note * referrer

Table 6: Sensitivity analysis results — Recovery paths

Parameter change

Lower bound NPV

Lower bound B/C Ratio

Upper bound NPV

Upper bound B/C ratio

U-shaped table b6 note *

$362.9M

1.29

$472.7M

1.29

V-shaped (50% lower emissions in 2020)

$607.7M

1.38

$758.2M

1.37

V-shaped (60% lower emissions in 2020)

$607.7M

1.38

$758.2M

1.37

U-shaped + permanent loss

$134.2M

1.27

$183.4M

1.27

Table b6 note(s)

Table b6 note *

Central scenario used in main analysis

Return to table b6 note * referrer

Table 7: Sensitivity analysis results — Emissions baseline for determining offset requirements

Parameter change

Lower bound NPV

Lower bound B/C Ratio

Upper bound NPV

Upper bound B/C Ratio

2019 Baseline table b7 note *

$362.9M

1.29

$472.7M

1.29

Average of 2019 and 2019 + 2.6%

$348.0M

1.26

$457.8M

1.29

Table b7 note(s)

Table b7 note *

Central scenario used in main analysis

Return to table b7 note * referrer

Table 8: Sensitivity analysis results — Discount rate

Parameter change

Lower bound NPV

Lower bound B/C Ratio

Upper bound NPV

Upper bound B/C Ratio

7% table b8 note *

$362.9M

1.29

$472.7M

1.29

3%

$541.7M

1.28

$707.6M

1.28

Undiscounted

$743.9M

1.27

$973.6M

1.27

Table b8 note(s)

Table b8 note *

Central scenario used in main analysis

Return to table b8 note * referrer

Distributional impact analysis

Costs would not be distributed evenly among Canadian air operators. The three largest commercial air operators and their subsidiaries would assume between 90.8% ($1.13 billion) of the total cost to air operators in the lower bound scenario and 90.7% ($1.49 billion) in the upper bound scenario. Based on publicly available financial information for these three companies, in 2018, the combined annualized cost of the proposed Regulations would represent approximately between 0.47% and 0.60% of the annual revenues of the three companies combined.

The other 13 air operators would assume the remaining 9.2% to 9.3% of the total cost to air operators, which is approximately between $113.7 million in the lower bound scenario and $149.04 million in the upper bound scenario. The individual cost over the 15year analytical time frame per company for these companies ranges between $470,726 and $34.7 million for the lower bound scenario and between $482,375 and $45.22 million for the upper bound scenario.

While it is acknowledged that these air operators are heavily affected by the pandemic, given that their projected emissions would stay below the 2019 level until 2025 and that they are not expected to assume costs associated with offsetting obligations before 2026, these costs should not be imposed while they are recovering from the effects of the pandemic.

Small business lens

The small business lens does not apply as there are no associated impacts on small businesses. Since CORSIA only applies to operators above the threshold of 10 000 tonnes of annual CO2 emissions that operate international flights, it is unlikely that any small aeroplane operator based in Canada would be subject to the Scheme.

One-for-one rule

The One-for-one rule applies since there is an incremental increase in administrative burden on business, and the proposal is considered an “IN” under the rule. The implementation of CORSIA in Canada would impose an incremental administrative burden of $242,203, for an average annualized cost of $1,554 per aeroplane operator (present value, using a 7% discount rate, expressed in $CAN 2012, as required by the Treasury Board’s “One-for-One” Rule guidefootnote 21.

All operators are expected to be required to submit an updated emissions monitoring plan. This would result in a one-time cost of approximately $398.4 per operator in 2021 ($CAN 2012).

Operators would be required to calculate emission reductions from the use of CEF. The incremental time spent to include CEF information in annual reports would represent a cost of approximately $2,049, per aeroplane operator ($CAN 2012).

Operators would also be required to submit an Emissions Units Cancellation Report at the end of every three-year compliance period between 2021 and 2035. The estimated average administrative cost associated with performing the necessary calculations, checking the calculated figures, and submitting the report, is approximately $7,735 ($CAN 2012) per operator.

Operators would be required to engage an accredited third-party verification body to confirm the completeness and accuracy of the information in the EUCR. The costs associated with hiring the third party and reviewing and submitting their report is estimated to be an additional $4,770 ($CAN 2012) per aeroplane operator.

Regulatory cooperation and alignment

This regulatory proposal is not related to a work plan or commitment within a formal regulatory cooperation forum; however, it would align Canada’s domestic regulations with the ICAO CORSIA standards and recommended practices (SARPs) set out in Annex 16, Volume IV, allowing Canada to meet its international obligations of the Chicago Convention. CORSIA was created through an international negotiation and passed by consensus by ICAO’s 191 Member States in 2016. Under Article 37 of the Chicago Convention, each Member State has agreed to collaborate in securing the highest degree of uniformity in regulation through the adoption of the SARPs. By conforming to the SARPs, Canada is aligning its regulations with those of ICAO and of the jurisdictions of the other Member States.

This regulatory proposal also demonstrates Canada’s commitment to addressing climate change, in line with Canada’s goals under the Paris Agreement to the United Nations Framework Convention on Climate Change (UNFCCC), and other action to address climate change at the international level through multilateral agreements. CORSIA is the culmination of various Canadian and international efforts to reduce the impact of GHG emissions from international aviation in an effort to combat climate change. Including Canada, a total of 88 Member States have declared their intention to fully participate in the offsetting component of CORSIA from the start. Canada’s participation is consistent with Canada’s Action Plan to Reduce Greenhouse Gas Emissions from Aviation, which states that “Transport Canada would continue to actively participate, through ICAO, on the implementation of global approaches and standards to address climate change, including system efficiencies and market-based measures.”

In addition, the implementation of CORSIA is in line with the Government of Canada’s Federal Sustainable Development Strategy. One of the goals of this strategy is to undertake effective action on climate change, with a goal of reducing Canada’s total GHG emissions by 30% by 2030, relative to 2005 emission levels. The strategy states that Canada should also play a leading role in international efforts to address climate change through free trade agreements; interactions with key partners, including the United States, Mexico, China and the European Union; multilateral environmental agreements; and participation in international fora such as the United Nations. Efforts also include negotiations on GHG emissions in the maritime and aviation sectors and implementing Canada’s climate finance pledge.

Implementing Phase 2 of CORSIA represents the culmination of these efforts and builds on Canada’s implementation of Phase 1 of the CORSIA Regulations (monitoring, reporting, and verification) in Canada that came into force in January 2019.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a strategic environmental assessment was completed. The assessment concluded that the proposed amendments would have a positive effect on the natural environment and human health, by leading to fewer global GHG emissions. The assessment also determined that the amendments would support achievement of the Federal Sustainable Development Strategy goal, “Effective Action on Climate Change,” by improving air quality and encouraging the offset of GHG emissions while maintaining competitiveness.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this proposal.

Implementation, compliance and enforcement, and service standards

Implementation

Consistent with this global approach, offsetting requirements under CORSIA are determined through a systemic approach, where the growth of the international aviation sector as a whole affects each operator’s obligation. Therefore, each operator is required to monitor and report its emissions on an annual basis. The emissions data that operators submit annually to Transport Canada would be used to establish each operator’s offsetting obligation under CORSIA. Canada would also submit data to ICAO, as specified by ICAO, to support the calculation of the sectoral growth factor (compared to the baseline emissions) that would form the basis for the calculation of annual offsetting requirements for operators internationally.

At the outset of CORSIA, the allocation of offsetting obligations for operators would be based entirely on an operator’s share of total international aviation emissions on routes subject to offsetting and the sector’s growth, post-2020 (sectoral approach). Over time, the allocation of offsetting requirements for each operator would also be based partially on the operator’s individual growth in CO2 emissions (individual approach), post-2020. Every three years, starting in 2025, operators would be required to “true up” their emissions units — that is, to acquire and cancel sufficient emissions units on the international carbon market to match their offsetting obligation under CORSIA.

CORSIA’s monitoring, reporting and verification requirements apply to all international routes, regardless of whether the Member States on either or both ends of the route are participating in the offsetting component. The CORSIA offsetting requirements, however, apply only on a route basis to routes between Member States that are both participating in the offsetting component.

From 2021 to 2026, Member States have the option to participate in the offsetting component. The CORSIA offsetting requirements for operators would only apply to routes between Member States that have both volunteered to participate in the offsetting component. Conversely, a route would not be covered by the offsetting requirements of CORSIA if one or both Member States connecting the route have not opted into the early phases. As of June 30, 2020, 88 States, representing 76.82% of international aviation activity, have indicated that they would join the offsetting component of CORSIA from the outset.

Beginning in 2027, participation in the offsetting component of CORSIA would be mandatory for all Member States, with some predetermined exemptions. The routes exempted from the Scheme after 2027 are those to and from Member States with low aviation activity, and those classified as Least Developed Countries, Small Island Developing States, or Landlocked Developing Countries. However, these countries do have the option to choose to participate in the offsetting component of CORSIA.

The routes subject to offsetting under CORSIA must be monitored annually, as Member States may voluntarily join the offsetting component of CORSIA from the beginning of any given year, provided that they notify ICAO of their decision to join by June 30 of the preceding year.

Compliance and enforcement

These Regulations could be enforced through the assessment of administrative monetary penalties imposed by designated provisions under sections 7.6 to 8.2 of the Aeronautics Act, which carry a maximum fine of $5,000 for individuals and $25,000 for corporations per infraction.

Operators shall not operate flights between two states subject to the offsetting obligations unless that operator has met their offsetting obligations for the previous compliance cycle. Each flight that is operated in violation of that requirement would constitute a separate infraction.

Monitoring of compliance with these Regulations, related to the offsetting component and CEF reporting, includes the ongoing monitoring of the carbon and aviation fuels markets using public and internal data sources to ensure that emissions units cancelled and CEF claimed are accurate; and the ongoing monitoring of the submission timelines relating to plans and reports included in the Regulations.

Members of the aviation community have a shared interest in, commitment to, and responsibility for the sustainability of aviation, and are expected to operate on the basis of common sense, personal responsibility and respect for others. Prior to assessing administrative monetary penalties, Transport Canada will be encouraging open communication with industry for violations where there is no risk to Canada meeting its obligations within the global implementation of CORSIA, especially in cases where there are mitigating circumstances. As per Transport Canada enforcement policy, administrative monetary penalties are generally assessed gradually.

Starting in 2020, Transport Canada will be required to undertake order of magnitude checks of emissions reports, and submit aggregated information on Canadian operators to ICAO by August 31 of each year, including information on CEF use. Every three years, starting in 2025, the order of magnitude check and information submission must also cover emissions unit cancellation reports.

Contact

Wendy Bailey
Chief
Environmental Protection and Standards
Civil Aviation
Transport Canada
330 Sparks Street, Place de Ville Tower C, 6th Floor
Ottawa, Ontario
K1A 0N5
Telephone: 613‑993‑7284 or 1‑800‑305‑2059
Email: tc.corsia.tc@tc.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to section 4.9footnote a and paragraphs 7.6(1)(a)footnote b and (b)‍footnote c of the Aeronautics Actfootnote d, proposes to make the annexed Regulations Amending the Canadian Aviation Regulations (Parts I and X — Offsetting of CO2 Emissions — CORSIA).

Interested persons may make written representations with respect to the proposed Regulations to the Minister of Transport within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Wendy Bailey, Chief, Environmental Protection and Standards (AARTG), Civil Aviation, Safety and Security Group, Department of Transport, Place de Ville, Tower C, 330 Sparks Street, Ottawa, Ontario K1A 0N5 or sent by email to tc.corsia.tc@tc.gc.ca (general inquiries — tel.: 613‑993‑7284 or 1‑800‑305‑2059; website: www.tc.gc.ca).

Ottawa, August 21, 2020

Julie Adair
Assistant Clerk of the Privy Council

Regulations Amending the Canadian Aviation Regulations (Parts I and X — Offsetting of CO2 Emissions — CORSIA)

Amendments

1 Part X of Schedule II to Subpart 3 of Part I of the Canadian Aviation Regulationsfootnote 22 is replaced by the following:

Column I

Designated Provision

Column II

Maximum Amount of Penalty ($)

Individual

Corporation

PART X — GREENHOUSE GAS EMISSIONS FROM INTERNATIONAL AVIATION — CORSIA

Subsection 1000.10(1)

5,000

25,000

Subsection 1000.10(2)

5,000

25,000

Subsection 1000.10(3)

5,000

25,000

Subsection 1000.10(4)

5,000

25,000

Subsection 1000.12(1)

5,000

25,000

Subsection 1000.12(2)

5,000

25,000

Subsection 1000.12(4)

5,000

25,000

Subsection 1000.12(5)

5,000

25,000

Subsection 1000.13(1)

5,000

25,000

Subsection 1000.13(2)

5,000

25,000

Subsection 1000.13(3)

5,000

25,000

Subsection 1000.13(4)

5,000

25,000

Subsection 1000.13(5)

5,000

25,000

Section 1000.14

5,000

25,000

Subsection 1000.15(1)

5,000

25,000

Subsection 1000.15(2)

5,000

25,000

Subsection 1000.20(1)

5,000

25,000

Subsection 1000.20(3)

5,000

25,000

Section 1000.21

5,000

25,000

Paragraph 1000.30(1)(a)

5,000

25,000

Paragraph 1000.30(1)(b)

5,000

25,000

Subsection 1000.30(2)

5,000

25,000

Subsection 1000.30(3)

5,000

25,000

Paragraph 1000.31(1)(a)

5,000

25,000

Paragraph 1000.31(1)(b)

5,000

25,000

Subsection 1000.31(2)

5,000

25,000

Subsection 1000.31(3)

5,000

25,000

Subsection 1000.32(1)

5,000

25,000

Subsection 1000.35(1)

5,000

25,000

Subsection 1000.35(2)

5,000

25,000

2 Part X of the Regulations is replaced by the following:

Part X — Greenhouse Gas Emissions from International Aviation — CORSIA

Division I — General

Interpretation

1000.01 The following definitions apply in this Part.

  • CO2 means carbon dioxide. (CO2)
  • compliance period means one of the three-year periods set out in subsection 1020.01(2) of the CORSIA Standard. (période de conformité)
  • CORSIA means the International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation set out in Volume IV of Annex 16 to the Convention. (CORSIA)
  • CORSIA eligible emissions unit has the same meaning as in subsection 1020.01(1) of the CORSIA Standard. (unité d’émissions admissible du CORSIA)
  • CORSIA eligible fuel has the same meaning as in subsection 1020.01(1) of the CORSIA Standard. (carburant admissible CORSIA)
  • CORSIA Standard means Standard 1020 — CORSIA, published by the Department of Transport. (Norme du CORSIA)
  • new entrant has the same meaning as in CORSIA and, for the purposes of interpreting this definition, “aeroplane operator” is to be read as “private operator” or “air operator”. (nouveau venu)

Application

1000.02 (1) This Part applies to Canadian private operators and Canadian air operators that produce — from the use of one or more large aeroplanes — more than 10 000 t of CO2 emissions from flights between contracting states during a calendar year.

(2) For the purposes of subsection (1), the emissions are calculated in accordance with section 1000.03.

(3) For the purposes of this Part, flights are attributed to a private operator or air operator in accordance with section 1020.02 of the CORSIA Standard and the flight departure time (UTC) determines the calendar year to which a flight belongs.

(4) The following flights are exempt from the application of subsection (1):

  • (a) humanitarian flights;
  • (b) medical evacuation flights;
  • (c) fire-fighting flights; and
  • (d) positioning flights required in relation to the flights referred to in paragraphs (a) to (c).

Calculation Method

1000.03 (1) CO2 emissions are to be determined using the following formula and expressed in tonnes:

Formula to calculate CO2 emissions

Figure - Text version

The sum of the mass of fuel used multiplied by the fuel conversion factor of the given fuel.

where

  • Mf is the mass of fuel f used, expressed in tonnes and calculated according to
    • (a) a method described in subsection 1020.03(1) of the CORSIA Standard, subject to subsection (2); or
    • (b) a method described in subsection 1020.03(2) of the CORSIA Standard; and
  • FCFf is the fuel conversion factor of given fuel f, expressed in kg CO2/kg fuel, and is equal to
    • (a) 3.16 for Jet-A and Jet-A1 fuels; or
    • (b) 3.10 for aviation gasoline (AvGas) and Jet-B fuel.

(2) For the purposes of the methods described in paragraphs 1020.03(1)(a) and (b) of the CORSIA Standard, if a flight is operated on behalf of a private operator or air operator, that operator must ensure that the fuel measurement values calculated according to the method described in paragraph 1020.03(1)(c) of the CORSIA Standard are provided to it and taken into account in its calculations.

[1000.04 to 1000.09 reserved]

Division II — Monitoring

Emissions Monitoring Plan

1000.10 (1) Within 90 days after the day on which a private operator or air operator becomes subject to this Part, the operator must submit to the Minister for approval an emissions monitoring plan for its flights between contracting states — other than those flights referred to in subsection 1000.02(4) — that are conducted using one or more large aeroplanes.

(2) The plan must contain the information referred to in subsections 1020.10(1) to (3) of the CORSIA Standard.

(3) The private operator or air operator must choose one of the following monitoring methods:

  • (a) in the case of flights between states referred to in subsection 1020.10(4) of the CORSIA Standard,
    • (i) a method described in subsection 1020.03(1) or (2) of the CORSIA Standard, if the annual CO2 emissions from those flights are less than 50 000 t, or
    • (ii) a method described in subsection 1020.03(1) of the CORSIA Standard, if the annual CO2 emissions from those flights are equal to or greater than 50 000 t; or
  • (b) in any other case, a method described in subsection 1020.03(1) or (2) of the CORSIA Standard.

(4) A private operator or air operator whose emissions monitoring plan was approved by the Minister before January 1, 2021 must submit to the Minister, no later than February 28, 2021,

  • (a) only the information referred to in paragraphs 1020.10(2)(g), (i), (j) and (k) of the CORSIA Standard if the monitoring method identified in that plan meets the requirements of subsection (3); or
  • (b) an amended plan for approval that identifies a method chosen in accordance with subsection (3) and contains the information referred to in subsection (2) if the monitoring method identified in its previously approved plan does not meet the requirements of subsection (3).

Approval

1000.11 The Minister must approve the emissions monitoring plan if

  • (a) the information referred to in subsection 1000.10(2) is provided;
  • (b) a monitoring method is chosen in accordance with subsection 1000.10(3); and
  • (c) the information referred to in subsections 1020.10(2) and (3) of the CORSIA Standard and submitted in accordance with section 1000.10 is consistent with the chosen monitoring method and the activities of the private operator or air operator, as applicable.

Amendment

1000.12 (1) Subject to subsection (2), if any of the information referred to in subsection 1020.10(2) of the CORSIA Standard is amended, the private operator or air operator must submit an amended emissions monitoring plan to the Minister for approval before it is implemented.

(2) If the information referred to in paragraph 1020.10(2)(i), (j) or (k) of the CORSIA Standard is amended, the private operator or air operator must submit an amended emissions monitoring plan to the Minister for approval no later than September 30 of the year preceding the beginning of the next compliance period.

(3) If there is a change to the information referred to in subsection 1020.10(1) of the CORSIA Standard, the private operator or air operator must submit the updated information to the Minister without delay.

(4) If the annual CO2 emissions from a private operator’s or air operator’s flights between states referred to in subsection 1020.10(4) of the CORSIA Standard increase to an amount equal to or greater than 50 000 t for two consecutive years, the operator must choose a monitoring method in accordance with subparagraph 1000.10(3)(a)(ii) and submit an amended emissions monitoring plan to the Minister for approval before it is implemented and no later than September 30 of the year following the two consecutive years of increased emissions.

(5) If the annual CO2 emissions from a private operator’s or air operator’s flights between states referred to in subsection 1020.10(4) of the CORSIA Standard decrease to an amount less than 50 000 t for two consecutive years, the operator may choose a different monitoring method in accordance with subparagraph 1000.10(3)(a)(i) and, if a different monitoring method is chosen, must submit an amended emissions monitoring plan to the Minister for approval before it is implemented and no later than September 30 of the year following the two consecutive years of decreased emissions.

Implementation of Monitoring Plan

1000.13 (1) Subject to subsection (5), a private operator or air operator must implement its emissions monitoring plan as soon as it is approved.

(2) Subject to subsections (3) to (5), the private operator or air operator must use the monitoring method identified in its approved emissions monitoring plan for at least an entire compliance period.

(3) If a private operator or air operator changes its monitoring method in accordance with subsection 1000.12(4) or (5), the operator must use the new method beginning on January 1 of the year after the year in which the amended emissions monitoring plan is approved.

(4) If a private operator or air operator changes its monitoring method as a corrective measure taken under subparagraph 1000.15(1)(a)(ii), the operator must use the new method as soon as its amended emissions monitoring plan is approved.

(5) A new entrant must implement its approved emissions monitoring plan on January 1 of the year after the year during which the new entrant becomes subject to this Part.

Data Gaps

1000.14 A private operator or air operator that uses a monitoring method described in subsection 1020.03(1) of the CORSIA Standard must not have data gaps related to fuel quantities in respect of more than 5% of its flights between states referred to in subsection 1020.10(4) of the CORSIA Standard.

1000.15 (1) If there are data gaps in respect of a private operator’s or air operator’s flights between states referred to in subsection 1020.10(4) of the CORSIA Standard, the operator must,

  • (a) if the gaps exceed 5%,
    • (i) notify the Minister of the reasons for the gaps within three months after the day on which it becomes aware of those gaps,
    • (ii) take corrective measures before submitting the verified emissions report referred to in section 1000.30, which may include changing the monitoring method if an amended emissions monitoring plan is submitted to, and approved by, the Minister in accordance with section 1000.12, and
    • (iii) fill in the gaps before submitting the verified emissions report referred to in section 1000.30 using one of the monitoring methods described in subsection 1020.03(1) of the CORSIA Standard that is to be pre-approved by the Minister if the requirements related to that method are met; and
  • (b) if the gaps do not exceed 5%,
    • (i) take corrective measures, and
    • (ii) fill in the gaps using one of the monitoring methods described in section 1020.15 of the CORSIA Standard before submitting the verified emissions report referred to in section 1000.30.

(2) If there are data gaps in respect of a private operator’s or air operator’s flights between contracting states other than those flights referred to in subsection (1), the operator must

  • (a) take corrective measures; and
  • (b) fill in the gaps using one of the monitoring methods described in section 1020.15 of the CORSIA Standard before submitting the verified emissions report referred to in section 1000.30.

[1000.16 to 1000.19 reserved]

Division III — Offsetting

Obligation to Offset

1000.20 (1) For each compliance period, a private operator or air operator must offset the final amount of CO2 emissions calculated in accordance with subsection 1000.24(1) and indicated in a notice provided by the Minister by cancelling, within a registry referred to in section 1020.20 of the CORSIA Standard, an amount of CORSIA eligible emissions units equal to the amount indicated in the notice, by the later of

  • (a) the last day of the 13th month after the end of the compliance period to which the notice relates; and
  • (b) the 60th day after the day on which the operator receives the notice.

(2) For the purposes of the calculation of offsetting obligations, the CO2 emissions to be taken into account are those from flights between states referred to in subsection 1020.10(4) of the CORSIA Standard — other than those flights referred to in subsection 1000.02(4) — that are conducted using one or more large aeroplanes.

(3) A private operator or air operator must ensure that the information referred to in subsection 1020.30(4) of the CORSIA Standard in respect of each of its cancelled CORSIA eligible emissions units for a given compliance period is published on the website of the registry referred to in subsection (1).

Prohibition

1000.21 A private operator or air operator must not operate an aircraft for a flight between states referred to in subsection 1020.10(4) of the CORSIA Standard unless that operator has offset its CO2 emissions in accordance with subsection 1000.20(1) of these Regulations.

Calculation of Annual Offsetting Obligations

1000.22 (1) The Minister must calculate the amount of CO2 emissions, expressed in tonnes, required to be offset by a private operator or air operator for a given calendar year, without consideration of any reduction resulting from the use of CORSIA eligible fuels, using the following formula:

Formula to calculate annual offsetting obligations

Figure - Text version

The percent sectoral is multiplied by the product of the CO2 emissions from the operator’s flights in the given calendar year and the sector’s growth factor for that year. This is added to the percent individual for the given calendar year multiplied by the product of the CO2 emissions from the operator’s flights that year and the operator’s growth factor for that year.

where

  • %Sy is the per cent sectoral for the given calendar year y, as indicated in subsection 1020.22(2) of the CORSIA Standard;
  • OEy is the CO2 emissions from the operator’s flights referred to in subsection 1000.20(2) for the given calendar year y;
  • SGFy is the sector’s growth factor for the given calendar year y referred to in subsection 1020.22(3) of the CORSIA Standard;
  • %Oy is the per cent individual for the given calendar year y, as indicated in subsection 1020.22(2) of the CORSIA Standard; and
  • OGFy is the operator’s growth factor for the given calendar year y, calculated in accordance with the formula set out in subsection (2).

(2) The Minister must, taking into account the CO2 emissions set out in the verified emissions report submitted by the private operator or air operator, calculate the operator’s growth factor for a given calendar year using the following formula:

Formula to calculate an operator’s growth factor

Figure - Text version

The value set out in subsection 1020.22(4) of the CORSIA Standard is subtracted from the CO2 emissions from the operator’s flights in the given calendar year. The difference is divided by the CO2 emissions from the operator’s flights in that year.

where

  • OEy is the CO2 emissions from the operator’s flights referred to in subsection 1000.20(2) for the given calendar year y; and
  • OEB,y is the value set out in subsection 1020.22(4) of the CORSIA Standard.

(3) In the case of a new entrant, the Minister must not take into account the CO2 emissions produced by the new entrant during the shorter of the following periods:

  • (a) the period beginning on the day on which the new entrant becomes subject to this Part and ending on January 1 of the third year after that day; and
  • (b) the period beginning on the day on which the new entrant becomes subject to this Part and ending on December 31 of the year preceding the year during which the CO2 emissions from its flights referred to in subsection 1000.20(2) exceed the threshold set out in subsection 1020.22(1) of the CORSIA Standard.

Calculation of Reductions from Use of CORSIA Eligible Fuels

1000.23 (1) A private operator or air operator may claim an emissions reduction resulting from the use of CORSIA eligible fuels in a given calendar year and, if a claim is made, the reduction is to be calculated for each CORSIA eligible fuel using the following formula and be expressed in tonnes:

Formula to calculate reductions resulting from the use of CORSIA eligible fuels

Figure - Text version

The life-cycle emissions value for a given CORSIA eligible fuel is calculated in accordance with subsection (2) and divided by 89 for jet fuels and 95 for aviation gasoline. The quotient is subtracted from 1. The result is multiplied by the total mass of the given CORSIA eligible fuel for the given calendar year. The product is multiplied by the fuel conversion factor of 3.16 for Jet-A and Jet-A1 fuels or 3.10 for aviation gasoline and Jet-B fuel.

where

  • FCF is the fuel conversion factor, expressed in kg CO2/kg fuel, and is equal to
    • (a) 3.16 for Jet-A and Jet-A1 fuels; or
    • (b) 3.10 for aviation gasoline (AvGas) and Jet-B fuel;
  • MSf,y is the total mass, expressed in tonnes, of a given CORSIA eligible fuel f claimed for the given calendar year y, as calculated in accordance with subsection 1020.23(3) of the CORSIA Standard and as reported in accordance with section 1000.30 of these Regulations;
  • LSf is the life-cycle emissions value for a given CORSIA eligible fuel f, calculated in accordance with subsection (2) and expressed in gCO2e/MJ; and
  • LC is the life-cycle emissions value for fuel, expressed in gCO2e/MJ and equal to
    • (a) 89 for jet fuels; and
    • (b) 95 for aviation gasoline (AvGas).

(2) For the purposes of calculating the life-cycle emissions value for a CORSIA eligible fuel,

  • (a) if a default life-cycle emissions value is used, the private operator or air operator must use the value referred to in subsection 1020.23(1) of the CORSIA Standard; or
  • (b) if an actual life-cycle emissions value is used, the private operator or air operator must
    • (i) use the calculation methodology referred to in paragraph 1020.23(2)(a) of the CORSIA Standard, and
    • (ii) ensure that the application of the calculation methodology is verified in accordance with paragraph 1020.23(2)(b) of the CORSIA Standard.

(3) In order to claim an emissions reduction resulting from the use of CORSIA eligible fuels during a given compliance period, a private operator or air operator must submit the information required by subparagraph 1000.30(1)(a)(ii) no later than in its verified emissions report in respect of the final year of that compliance period.

Calculation of Final Offsetting Obligations

1000.24 (1) The Minister must calculate, for each private operator and air operator, the final amount of CO2 emissions that that operator is required to offset for a given compliance period, rounded up to the nearest tonne, using the following formula:

Formula to calculate final offsetting obligations

Figure - Text version

The sum of emissions reductions claimed resulting from the use of CORSIA eligible fuels in years 1 to 3 of the given compliance period is subtracted from the sum of CO2 emissions that the operator is required to offset for years 1 to 3 of that compliance period.

where

  • ORy,c is the amount of CO2 emissions that the operator is required to offset for the given calendar year y (where y = 1, 2 or 3) of the compliance period c, calculated in accordance with section 1000.22; and
  • ERy,c is the emissions reduction claimed resulting from the use of CORSIA eligible fuels in the given calendar year y (where y = 1, 2 or 3) of the compliance period c, calculated in accordance with section 1000.23.

(2) If the amount of CO2 emissions calculated in accordance with subsection (1) is a negative amount for a given compliance period, that amount cannot be used to reduce the private operator’s or air operator’s emissions-offsetting obligations for a subsequent compliance period.

[1000.25 to 1000.29 reserved]

Division IV — Reporting, Verification and Record Keeping

Verified Emissions Report

1000.30 (1) A private operator or air operator must submit to the Minister, no later than April 30 of the calendar year following the calendar year during which the monitoring of emissions was carried out,

  • (a) a verified emissions report containing the information referred to in
    • (i) subsection 1020.30(1) of the CORSIA Standard, and
    • (ii) subsection 1020.30(2) of the CORSIA Standard, if an emissions reduction resulting from the use of CORSIA eligible fuel is being claimed; and
  • (b) the verification report associated with the report referred to in paragraph (a) containing the information referred to in paragraph 1020.32(3)(j) of the CORSIA Standard.

(2) The private operator or air operator must ensure that the verification body submits to the Minister, with the operator’s prior authorization, the reports referred to in subsection (1) no later than April 30 of the calendar year following the calendar year during which the monitoring of emissions was carried out.

(3) Despite subsections (1) and (2), the verified emissions report and associated verification report for the year 2020 must contain the information referred to in, and be submitted in accordance with, section 1000.20, as it read before January 1, 2021.

Verified Emissions Unit Cancellation Report

1000.31 (1) A private operator or air operator must submit to the Minister, for a given compliance period,

  • (a) a verified emissions unit cancellation report containing the information referred to in subsections 1020.30(3) to (5) of the CORSIA Standard; and
  • (b) the verification report associated with the report referred to in paragraph (a) containing the information referred to in paragraph 1020.32(3)(j) of the CORSIA Standard.

(2) The private operator or air operator must submit to the Minister the reports referred to in subsection (1) by the later of

  • (a) the last day of the 16th month after the end of a given compliance period; and
  • (b) the last day of the 5th months after the day on which the operator receives the notice referred to in subsection 1000.20(1).

(3) The private operator or air operator must ensure that the verification body submits to the Minister, with the operator’s prior authorization, the reports referred to in subsection (1) by the later of the dates set out in subsection (2).

Verification Body

1000.32 (1) A private operator or air operator must select a verification body that is accredited as meeting the requirements set out in subsection 1020.32(2) of the CORSIA Standard by a national accreditation body that is a member of the International Accreditation Forum and that meets the requirements referred to in subsection 1020.32(1) of the CORSIA Standard.

(2) The private operator or air operator must ensure that the verification of the emissions report and the emissions unit cancellation report is conducted in accordance with the requirements set out in subsection 1020.32(3) of the CORSIA Standard.

Parent Company and Subsidiaries

1000.33 A private operator or air operator and one or more other private operators or air operators may consolidate their emissions monitoring plans, verified emissions reports, verified emissions unit cancellation reports and associated verification reports if

  • (a) they are in a parent-subsidiary relationship in which the subsidiary is wholly owned by the parent company or they are wholly owned subsidiaries of the same parent company; and
  • (b) the consolidated emissions monitoring plan establishes that the subsidiary is wholly owned.

Publication

1000.34 (1) A private operator or air operator that uses a monitoring method described in subsection 1020.03(1) of the CORSIA Standard may make a request to the Minister that certain information be considered confidential, in the cases set out in section 1020.34 of the CORSIA Standard, and must indicate the reasons for the request.

(2) The Minister must determine that information is confidential if it is established that publication would harm the commercial interests of the private operator or air operator and such information must be designated as confidential when provided to ICAO.

Records

1000.35 (1) A private operator or air operator must retain a copy of the emissions monitoring plans, the verified emissions reports, the verified emissions unit cancellation reports, the authorizations referred to in subsections 1000.30(2) and 1000.31(3) and the associated verification reports, together with the supporting documents, for at least 10 years after the day on which they are made.

(2) The private operator or air operator must provide the Minister with a copy of the records referred to in subsection (1) on request.

Coming into Force

3 These Regulations come into force on January 1, 2021.