FEATURE: CORSIA implementation schedule slows eligibility of new vintage credits

Strong points

ICAO to review 2022 assessment requests in November-December

Verra and GS will undergo an evaluation for the eligibility of vintage 2021+ projects

Market players unclear on CORSIA vintage 2021+ eligibility timeline

While the first quarter of 2022 is underway and new vintage credits are actively traded in the market (2021+), the CORSIA segment is stuck in time. The vintage window for CORSIA-eligible credits is still 2016-2020 for most programs, which means that their 2021+ credits cannot yet be considered CORSIA-eligible.

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The International Civil Aviation Organization, or ICAO, moves according to its established schedule. The pilot phase of CORSIA implementation runs from 2021 to 2023, while the deadline for air operators to offset is only January 2025.

However, developers and traders at S&P Global Platts have expressed concerns over the slow timing and lack of clarity regarding the opening of the vintage window for CORSIA credits in a rapidly changing market.

According to its November 2021 document on CORSIA-eligible emissions units, ICAO has approved eight emissions unit programs for the provision of CORSIA-eligible credits — American Carbon Registry (ACR), Architecture for REDD+ Transactions (ART), China GHG Voluntary Emission Reduction Program, Clean Development Mechanism (CDM), Climate Action Reserve (CAR), Global Carbon Council (GCC), The Gold Standard (GS) and Verified Carbon Standard (VCS).

Of these, only two programs – ACR and ART – can issue CORSIA credits with emission reductions that have occurred until 2023, while two of the largest standards – VCS and GS – cannot yet issue CORSIA credits. CORSIA credits only up to the 2020 vintage. All programs will also have to undergo the reassessment process by ICAO this year.

According to ICAO’s Technical Advisory Board, or TAB, reassessment of applications for the 2022 cycle began after the February 26, 2022, application submission deadline. The evaluation process will continue until mid-September 2022. Finally, from November to December 2022, ICAO will review the recommendations of the TAB, including the eligibility of programs providing CORSIA-eligible units of newer vintages.

Standards speak

The vintage eligibility window was earlier limited to 2016-2020 because most programs did not meet the criteria established by ICAO which required that they have measures in place to avoid double counting of credits between programs. mitigation effort of an airline and the host country of the emission reduction activity.

The Gold Standard says that following the Article 6 decision adopted at COP26, which provides a framework to avoid double claims through a corresponding adjustment, they will soon introduce new measures to avoid double claims with host country NDCs.

“This will be part of the evidence considered by ICAO when deciding whether to make GS credits with a vintage of 2021 or later eligible for CORSIA. We expect that only post-2020 vintage credits that have been authorized by the project host country for use towards CORSIA, and adjusted accordingly in accordance with the Article 6 guidelines, will be considered eligible for CORSIA,” Hugh Salway, head of environmental markets at The Gold Standard, told Platts.

Verra says the timeline for market availability of 2021+ vintages is unclear and they are working internally on how best to meet CORSIA emissions unit criteria.

“We hope to have CORSIA approval for the 2021+ draft vintages by the end of 2022,” a Verra spokesperson told Platts via email.

As developers create 2021+ vintage credits, they’re battling the uncertainty of when they’ll be eligible for CORSIA.

“Many projects have been planned for the next phase of CORSIA,” said Jatin Kapoor, head of climate transactions at EVI, an India-based developer. He added that the reassessment process to which the programs were subject added to the uncertainty. “We don’t know which standards will be allowed to issue CORSIA-eligible units from 2021.”

CORSIA swap contracts

CORSIA credits are also the underlying credits of swaps such as Xpansiv CBL’s GEO and ACX’s CET. Unlike its other contracts like the N-GEO (based on underlying credits based on nature) and the C-GEO (based on underlying credits based on energy, renewable energy and other technologies ) that include vintage rolling plans, new vintages cannot yet be included in the GEO due to CORSIA restrictions.

The more recent the vintage of a loan, the higher the price. Last week GEO closed at $6.10/t while N-GEO closed at $12.80/t.

ACX insists that there is no indication that the CORSIA vintage window restriction has an impact on the trading of its CET contract. A spokesperson said: “We are seeing a general decline in the carbon market, which is also impacting the TEC.”

A new vintage credits developer earlier told Platts that his credits were not eligible for CORSIA because they were from the 2021+ vintage, which also impacted his ability to participate in Xpansiv’s GEO contract negotiation.

Last year, Xpansiv referred to “certification arbitrage” when saying that participants were buying VCS 2021 credits that otherwise meet GEO eligibility criteria in the hope that they will become CORSIA eligible and deliverable in the under the GEO contract. However, the 2021 credits are still not deliverable to the GEO.

The Platts CEC price (which reflects eligible CORSIA credits) was valued at $6.40/mtCO2e on February 28, down 17% on the month.

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