(iii) Carbon Offsetting The aviation industry marked CORSIA’s fifth anniversary in 2021 with the coming into force of the carbon neutral growth commitment of participating countries. CORSIA is the first industry-wide initiative to self-regulate carbon emissions, and as of 31 December 2021, a total 104 states have voluntarily signed on to participate including Malaysia, Thailand, Indonesia and the Philippines. Participation imposes a mandatory requirement on all airlines registered within the state to comply with CORSIA and its progressively ambitious targets to tackle CO2 emissions from international aviation. AirAsia has met two key CORSIA requirements to date. In May 2021, all our airlines submitted independently verified carbon emission reports for the year 2020 to their respective civil aviation authorities. To improve the reporting process, we enhanced our carbon dashboards to reduce data gaps. This has enabled the airlines to cut down the number of man-hours needed to track missing or incorrect data. It is also expected to increase the efficiency of the data verification process and enable AirAsia to meet the new CORSIA deadline for reporting by 30 April of each year from 2022 onwards. At the time of preparing this report, AirAsia is verifying our 2021 emissions from international flights with ICAO-accredited third-party verification body, Verifavia. Airlines in CORSIA participating countries are also required to cap carbon emissions from international flights so that global CO2 emissions from international aviation do not exceed 2019 levels. According to 2021 data, carbon emissions from AirAsia’s international flights fell by 98.8% in comparison with 2019 emissions, thereby requiring no offsetting measures. Based on current recovery projections, our airlines are not expected to have to undertake mandatory emissions offsetting before 2024. However, in line with industry best practice, we are in the process of putting in place a scheme to enable voluntary offsetting by travellers by the second half of 2022. This early implementation will enable us to build internal capacity to navigate carbon markets to procure CORSIA eligible credits. As part of our alignment with TCFD reporting requirements, we developed a model to analyse the financial impact of adding tiered offset fees to airfares. We met with representatives of emissions unit programmes, carbon trading platforms and carbon offset providers to gain a better understanding of the pricing and availability of CORSIA eligible carbon offsets. This exercise enabled us to compare multiple scenarios, from CORSIA compliant offsetting (carbon neutral growth for international flights from a 2019 baseline) to full offsetting of all carbon emissions from international and domestic flights. AirAsia will be closely following developments at the 41st ICAO General Assembly, scheduled to take place in September 2022, for CORSIA updates that may impact compliance obligations. Among key issues that are expected to be discussed are the setting of the industry’s CO2 baseline for the period between 2024-2027, new aspects to CORSIA, as well as policies to address other pollutants such as NOx emissions and noise. (iv) SAF Strategy A fourth approach to addressing our carbon emissions is through the utilisation of SAF which can cut lifecycle emissions by up to 80%. SAF is identified as the most effective medium- to long-term solution for the industry’s in-sector emissions reduction ambitions. Although the fuel is currently not available in Asean, this is expected to change in 2022 as two major fuel producers have announced the expansion of refinery capacities in Singapore to supply up to three million tonnes of SAF. To pave the way for SAF introduction, we formed an SAF Committee comprising representatives from our Flight Operations, Engineering, Sustainability and Finance departments to assess the operational and financial feasibility of SAF implementation. The committee confirmed the absence of any technological barrier to SAF utilisation as we operate a full Airbus A320 family of aircraft which has been certified by the aircraft and engine manufacturer as being able to fly with a blend of up to 50% SAF. Furthermore, as the commercially available SAF at present is a drop-in fuel, or fuel that can be blended with jet fuel, we are not required to invest in any new infrastructure or equipment for supply of the new fuel blend. At present, the main obstacles to SAF utilisation is the low volume of fuel available globally and its high price. In assessing our position, the committee has engaged with fuel producers to obtain a clearer timeline on SAF availability at key Asean airports. It has also carried out a volume and cost projection for SAF utilisation in accordance with a broad industry target of 10% of total fuel consumption by 2030. The findings of this exercise will inform the development of Capital A’s Sustainability Blueprint which is scheduled for completion by Q3 2022. In 2022, the SAF Committee will be expanded to include representatives from our Government Relations department to initiate discussions with legislators on SAF policies that can help advance the use of the renewable fuel in the region. These discussions will be guided by developments in the EU and US which present a mix of fuel mandates and tax credits for SAF utilisation. S U S T A I N A B I L I T Y S T A T E M E N T A N N U A L R E P O R T 2 0 2 1 1 2 5
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