CORSIA insights & Latest Policy News and Reports

Authors: Micaela Passetti & Fundi Maphanga

In this edition, we start with a roundup of this week’s key policy updates, ensuring you stay informed on the latest developments. We then provide some exciting information about our latest report launches. Next, we dive into the scenario analysis findings from our newly released “CORSIA: Forecasting Future Demand & Supply Scenarios” report, created in collaboration with IETA.

Policy Updates You May Have Missed This Week

Chile Compliance-Eligible VCM Credits Featured on Carbon Pulse

Our AlliedOffsets VCM/Compliance Tracker data has been highlighted on Carbon Pulse. Domestic buyers have cancelled 258,547 credits from eight Chilean Green Tax Emissions Compensation System (SCE) registered projects, including Verra, Gold Standard, and Clean Development Mechanism projects. Additionally, 1.8 million credits from these projects are available for compliance retirement.

Why This Is Important: Governments leveraging both domestic and international carbon credits in compliance markets can provide a stable demand base for voluntary carbon market credits. This, in turn, supports activities with broader co-benefits, ensuring they receive necessary investments. Chile's law currently restricts pre-2021 credits (CDM credits), and the market faces a low supply under existing requirements. However, there are three additional projects (Gold Standard, Verra) with credits that meet these criteria.

To learn more about these and similar projects, get in touch at? fundi.maphanga@alliedoffsets.com with questions or comments!

Gold Standard Carbon Market Regulations Tracker Launched

The Gold Standard has introduced its Carbon Market Regulations Tracker, along with new policy-related technical document updates:

• Click here to watch the webinar launch of the Regulations Tracker
• New Pilot Policy Requirements and Procedures?
• Updated Article 6 Authorisation Checklist?

Why This Is Important: Governments play a crucial role in reducing transaction costs, incentivizing private sector investments, socialising the risk of carbon finance, and ensuring social and environmental benefits for local communities. This new tool is a significant addition to the climate and carbon policy landscape.

NEWS: Exciting New Reports from AlliedOffsets

We have some updates for you! AlliedOffsets has released three significant reports in the past two weeks:

1. CORSIA: Forecasting Future Demand & Supply Scenarios

This week, we proudly launched our “CORSIA: Forecasting Future Demand & Supply Scenarios'' report, developed in collaboration with @IETA and featuring market commentary from @IATA. This comprehensive report dives into the future landscape of CORSIA, offering valuable predictions and analysis.

2. AlliedOffsets Forecasting Model Report

In another exciting release, AlliedOffsets has developed a brand new forecasting model to help stakeholders predict the impacts of various scenarios on the supply, demand, and prices of credits in the coming years. The report reviews three distinct scenarios:

• Pessimistic Scenario: A cautious outlook on the market.
• Optimistic Scenario: A hopeful perspective on future developments.
• Most Likely Scenario: A balanced view based on current trends.

These scenarios illustrate how the model adapts to different inputs and provide valuable insights for market prognostications.

3. 5 Learnings About the CDR Policy Landscape

Two weeks ago, we released a report titled “5 Learnings About the CDR Policy Landscape.” This report explores the five key themes shaping the development of Carbon Dioxide Removal (CDR) governance frameworks, providing crucial insights for policymakers and industry stakeholders.

For updates on our latest reports, subscribe for our monthly VCM newsletter on our website!

Now, let’s look at some of the key insights from our latest CORSIA report!

CORSIA Scenario Analysis Insights

At the moment, CORSIA EEUs for First phase are undersupplied, and low in availability. Airlines have until January 2028, and the main source of supply constraint is the approval of new programs by ICAO, and the award of LoAs (Letters of Authorisation) by governments to unilaterally authorise credits for use to meet CORSIA demand and not be double-counted towards their NDCs.

Under 3 scenarios where countries are able to issue LoAs, and ICAO (International Civil Aviation Organisation) approves additional programs in the next three years, we calculated cumulative volumes expected to be issued between 2024 and 2027 giving an estimate of credits buyers may have access to. As countries have been prone to grant LoAs with specific project methodologies, we looked at India, Brazil and the United States (three of the largest countries in terms of forecasted credits over the next three years), and made assumptions over which mitigation outcomes they would not intend to use towards their Nationally Determined Contributions (NDCs).?

Current state of available supply:

• 7 million fully authorised First phase credits are available in the market, from the ART project located in Guyana.
• 28 million credits from the ACR registry are eligible under ICAO requirements but have yet to receive an LoA from their host country (‘not correspondingly adjusted’).
• 42 million credits are from conditionally approved programs (eg. Verra, Gold Standard, Cercarbono), which could be considered extra supply if programs get approved by ICAO.

• Present State: Represents presently purchasable (“available”) CORSIA EEUs (Eligible Emissions Units) - 7.14 million tonnes of CO2e. This scenario disregards forecasted issuances.

• No changes in Approval: Represents supply according to estimated, self-reported forecasted issuances from eligible projects currently issuing EEUs (CORSIA phase 1 projects) - up to 34.22 million tonnes of CO2e, if no change occurs in terms of LoAs and ICAO approval of new programs.?

• India LoAs: Under this scenario, both Verra and Gold Standard (currently conditionally approved) will get full approval from ICAO and that India will grant an LoA to specific project methodologies. Projects from renewable energy (solar and wind), biogas, and methane are the most likely to receive an LoA, as they are reported within India’s NDC whitelist.

• Brazil’s LoAs: This scenario assumes that both Verra and Gold Standard will get full approval from ICAO and that no methodologies will be excluded from international trading. According to the Brazilian Business Council for Sustainable Development’s (CEBDS) report, Brazil’s NDC targets will be exceeded, allowing for surplus mitigation outcomes to be traded under Article 6.

• US Forestry: Assuming that the United States awards an LoA to all ACR forestry projects currently eligible for First phase, but have not been given commitments to be correspondingly adjusted. Supply in the next three years would reach up to 171.84 mtCO2e.

The first two scenarios of limited supply still fall short of meeting demand with a low emission increase of +5% SGF (Sectoral Growth Factor). Brazil and India awarding LoAs to credits from Verra and Gold Standard would meet +5% SGF scenario, but will not meet demand under a +10% SGF scenario - however, a combination of the two scenarios would. Finally, a scenario in which there is a surge in supply, equivalent to the United States granting LoAs to its forestry projects. The third scenario positively impacts supply the most, with more than 42 million credits expected every year starting 2025.