# Corpsia--A Feasible Second Best Solution?
## 1 Introduction  
In 2010, the International Civil Aviation Organization (ICAO) decided to achieve Carbon neutral growth [1]. In 2016, ICAO adopted the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), requiring airlines to purchase carbon offset credits for emissions above average 2019 levels on international flights starting in 2021. Carbon offset projects reduce or store carbon dioxide or other greenhouse gas emissions, by investing in renewable energy or the preservation of forests, for example, in order to compensate for emissions elsewhere. In aviation, carbon offsetting is a potential second best solution, because sectoral marginal abatement costs are relatively high and potential best solutions such as carbon taxes or cap and trade systems [2] have not proven politically feasible. CORSIA's success will depend highly upon the offsets used. For example, storing global emissions by planting trees has become widely considered as challenging due to the lack of available land and the fact that the existence of large woodlands would have to be secured forever, or for at least 100 years [3]. As a consequence, forest carbon credits have been kept out of several key carbon markets, such as the European Union's Emission Trading Scheme [4]. Instead of carbon storage, carbon reduction by increasing energy efficiency has become more popular for offsetting, although it is controversial as well. Frequently, carbon reduction projects do not depend on offsets and would have occurred anyway, which can induce adverse effects if policy makers do not implement policies to address emissions [5]. Due to the ambiguous climate benefits of carbon offsetting, offset prices are important to incentivize emission reductions in the buying sector. It is expected that a carbon price of 40-805 per ton of CO\({}_{2}\)e in 2020 would be consistent with achieving the Paris Agreement of keeping temperature rise below 2 degrees [2]. Currently, the carbon offset market is characterized by a structural oversupply. Today, offsetting a ton of CO\({}_{2}\) under CORSIA would cost less than one US Dollar. The drop in air traffic from the COVID-19 pandemic makes it unlikely that the airline sector will be required to offset any emissions in thenext several years [6], resulting in a window of opportunity for improving CORSIA's regulations. This paper is motivated by these drawbacks of carbon offsetting. It tries to answer the question of whether CORSIA is a feasible second best solution for the ICAO's carbon neutral growth goal. Therefore, we systematically identify critical offset characteristics. Based on these findings, we empirically analyze the carbon offset market supply that is currently eligible under CORSIA and discuss how the market will likely interact with airlines. We focus on offsets' carbon reduction potential and adverse effects. Furthermore, given today's high price variation of eligible carbon offsets (for example, a German nonprofit organization called Atmosfair offers voluntary offsets for USD 28 per ton under the CORSIA-eligible Gold Standard certification, whereas other Gold Standard offsets from other providers are available for USD 3), we evaluate whether prices are useful as a signal for climate and regulatory integrity. While the basic economic idea behind carbon offsetting resembles cap and trade systems, differences in their realization are huge. In both cases, differences in marginal abatement cost allow cost-efficient emission reductions by trading CO2 permits. However, cap and trade systems are capped in absolute terms, closed, and balanced. Increases need to be counterbalanced by reductions, often in comparable general regulatory settings within countries, sectors, or economic areas. In most cases, carbon offsetting is uncapped in absolute terms and operates in segregated jurisdictions, potentially requiring extensive bureaucracies to guarantee net emission reductions. Carbon offsetting and cap and trade systems require monitoring, reporting, and verifying of emissions.