We are observing a distinct uptick in press coverage of aviation in the context of climate change discussions of various kinds at the moment. The headline item is, of course, the conversation about the proposed place of aviation within the Green New Deal plans in the United States, and what that might look like in the context of a 100 per cent carbon-neutral society, alongside clean fuels, high-speed electric rail, etc. At the industry level the conversation is centred on the new Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), as the mandatory emissions reporting requirement kicked in on 1 January this year.

Closer to home, we are also seeing incoming lessees, lessors and financiers asking these questions when re-leasing aircraft emerging from the various recent airline insolvencies, as people query the ongoing place of the familiar EU ETS letter and seek to understand where the new CORSIA reporting requirements will need to be accommodated in lease and finance documentation, and how this monitoring will be carried out and reported in practice. The freshly updated Green Loan Principles are also raising questions in asset finance generally, as the latest advice in relation to how these principles can be applied to revolving credit facilities clarifies the options available to operators and financiers in terms of green tranches within working capital revolvers.

What seems clear from all of these discussions is that the finance aspect of the industry will be equal in importance to technological advancement if aviation is to meet the targets and regulatory regimes to which it has signed up, within the necessary time frame.

CORSIA takes a two-pronged approach to ensuring that airlines are able to cap their emissions at 2020 levels, by imposing the reporting requirements mentioned above to encourage emissions reductions in the first instance by way of transparency, but also by establishing an offsetting scheme requiring carriers to buy carbon credits from other industries that have made more progress in their reductions, thereby financing advances in other fields while aviation technology catches up. As a result, it may be the case that we see airlines seeking to use green loans or green revolver tranches to finance the purchasing of these credits, which will encourage the development and meaningful implementation of emissions reductions technologies in various industries as well as in aviation, while simultaneously making investment in aviation more attractive to financiers keen to show participation (and tangible results) in green financing.

Intriguingly, it has been suggested that CORSIA might be a source of hope to industry generally, as an example of the ways in which the ‘profit incentive’ can be mobilised for environmental good. “In short,” it has been observed, “CORSIA could catalyse a global carbon market that drives investment in low-carbon fuels and technologies” (Less Than Zero). Aviation has a real opportunity to show leadership on this issue, despite the distance yet to be covered in terms of more efficient equipment and less harmful fuel sources. And with the next generation of aviation CEOs (now as young as 10 years old and already proving to be both observant and organised: Qantas boss Alan Joyce responds to letter from 10yo CEO of Oceania Express) watching us closely, the example we set and the changes we make now will be beyond price.