Last week's Carbon Fast Forward Online conference sparked a fascinating discussion on the implications of CORSIA for the voluntary carbon markets, particularly during the pilot phase (2021-2023).
A noteworthy study titled "Lifting off," conducted by Nature Conservancy and Anthropocene, shed light on the scarcity of qualifying carbon credits from projects based on various voluntary market standards. However, the International Civil Aviation Organisation (ICAO) includes supply from the Clean Development Mechanism (CDM) in its criteria. The study revealed that the significant supply of carbon credits, both actual and potential, would primarily come from an abundance of CDM projects. Despite the CDM's higher standards, it is often overlooked by traditional offsetting companies due to an oversupply that has led to depressed prices of Certified Emission Reductions (CERs).
During the conference, I presented three reasons why CORSIA is not expected to impact voluntary carbon market prices in Phase I:
There is a strong possibility that ICAO will revise the baseline rules to include only 2019 data, considering the industry's slow recovery. Consequently, the demand for carbon credits under CORSIA is anticipated to be low or even negligible.
Even if ICAO maintains the agreed-upon baseline, airlines have the option to utilise "low carbon" aviation fuel as an alternative to offsetting emissions with carbon credits.
The inclusion of the CDM in the criteria presents a massive potential supply of offsets that meet ICAO's requirements. Despite efforts by traditional offsetting companies to steer the voluntary offset market away from the CDM, compliance markets like CORSIA often prioritise the selection of the most cost-effective carbon credits rather than the most "charismatic" ones.
The discussion at the conference highlighted the intricate dynamics between CORSIA and voluntary carbon markets, emphasising the potential influence of baseline revisions, alternative fuel options, and the role of the CDM in shaping the future of carbon credit supply.
