Using Aviation Emission Reduction Markets to Reduce Deforestation in Peru

By Peter Graham
Climate & Energy, Forests & Lands

In October 2016, the International Civil Aviation Organization (ICAO) and its 191 member States agreed to implement a Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)to limit future increases in greenhouse gas emissions from the sector. This market-based scheme creates a potential global demand of over two billion tonnes of investment-ready emissions reductions from 2021 to 2035.

Peru could meet some of this demand with its current and projected supply from reducing emissions from deforestation and forest degradation and through forest restoration. By choosing to participate in the early Phases of this scheme, starting in 2021, the Peruvian Government could generate more than $500million in additional investment at an estimated cost of $24 million to its aviation industry, which represents a small fraction –less than 0.4 percent –of global emissions from international aviation.

Key Findings

  1. The International Civil Aviation Organization (ICAO) in October 2016 created a potential global demand of more than 2 billion tonnes of investment-grade emissions reductions from 2021 to 2035 that could be partially met through continuing development of programs and projects in Peru.
  2. The value to Peru of supplying the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is, conservatively, over US$500 million in additional private institutional investment. Higher prices and more ambitious supply projections indicate potential gains of over US$2.5 billion.
  3. Peru has the potential to benefit by linking this market demand to domestic supply through eligible supply-side activities, including Reducing Emissions from Deforestation and Forest Degradation (REDD+), structured via existing World Bank and many other long-term international investment supply contracts for emissions reductions.
  4. To facilitate this investment, the Peruvian national government policy must deliver the necessary institutional and legal conditions for jurisdictional REDD, building on those currently applied to existing programs and projects.
  5. Peru can increase the impact of CORSIA and augment the associated demand for offset credits by opting-in to the scheme starting in 2021, and by encouraging others in the region to do the same. Policy Analysis | March 2017 Linking the ICAO Global Market-Based Mechanism to REDD+ in Peru 2/22 Peru’s airlines would incur an estimated additional cost of $24 to $57 million over the period 2021-2026, which is less the than marginal fuel price variability. The associated increase in demand and credit price could quadruple investment value.

Using Aviation Emission Reduction Markets to Reduce Deforestation in Peru

March 2017
The International Civil Aviation Organization and its 191 member States agreed in October 2016 to implement a Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)to limit future increases in greenhouse gas emissions from the sector. This market-based scheme creates a potential global demand of over two billion tonnes of investment-ready emissions reductions from 2021 to 2035. Peru could meet some of this demand with its current and projected supply from reducing emissions from deforestation and forest degradation and through forest restoration.

(Spanish language version)

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On April 3, 2017

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