Last week’s Carbon Fast Forward Online conference threw up a great discussion on the impact of CORSIA on the voluntary carbon markets in the phase 1 pilot phase (2021-23).
An excellent study by Nature Conservancy and Anthropocene ‘Lifting off’, highlighted a shortage (based on 2019 and 2020 baseline data, amendment expected imminently due to COVID19) of suitably qualifying carbon credits from projects based on the various voluntary market standards. However, the International Civil Aviation Organisation’s (ICAO) criteria include supply from the Clean Development Mechanism (CDM). The report showed that the actual and potential supply would be dominated by copious supply from CDM projects. Despite its higher standards, the CDM is not widely touted by traditional offsetting companies that operate their own projects, due to the huge supply overhang that has depressed CER prices.
At the conference I presented three reasons why CORSIA will NOT impact voluntary carbon market prices during phase I:
1. There is a strong likelihood that ICAO will change the baseline rules to just 2019 and with pessimism over the recovery of the industry over the next few years, demand under CORSIA is expected to be low or even zero.
2. Even if ICAO stick to the agreed baseline, there is the option for airlines to use ‘low carbon’ aviation fuel as an alternative to offsetting emissions with carbon credits.
3. Thanks to the inclusion of the CDM in the criteria there is a massive potential supply of offsets that meet ICAO’s requirements and, despite the traditional offsetting companies’ efforts to steer the voluntary offset market away from the CDM, when it comes to compliance markets (such as CORSIA) it is typical for companies to select the cheapest, and not the most ‘charismatic’, carbon credits
Find out more from
Bill Goldie
Head of Carbon Offsetting
Tel. : 02036371055
Email: bill.goldie@redshawadvisors.com
