Oil-rich Guyana to supply CORSIA-eligible credits in boost to global carbon trade

Guyana will supply millions of carbon credits eligible under phase one of the Carbon Offsetting and Reduction Scheme for International Aviation scheme, the government said late Feb. 28.

This key development in international emissions trading paves the way for increasing the supply of CORSIA-eligible credits in the market, and market participants hope this will encourage other host countries to take a similar route.

The Architecture for REDD+ Transactions (ART) body, which runs the TREES standard, also confirmed Feb. 28 that it issued 7.14 million of jurisdictional REDD+ carbon credits with 2021 vintage to Guyana Feb. 27.

Subsequently, the Guyanese government authorized these credits to be used for a range of compliance and voluntary purposes as per Article 6 of the Paris Agreement, which sets out the rules for global trade in greenhouse gas emission reductions.

Corresponding adjustments aim to avoid double counting of carbon credits that are traded between countries. These must be made when a country buys carbon credits from another country to meet its climate targets, known as Nationally Determined Contributions.

"Guyana's CORSIA-eligible issuance marks the latest milestone in a journey that we began in 2009, when we set out a vision for forging a low carbon economy in Guyana, while also building a model for the world on how tropical forests can be maintained," said Bharrat Jagdeo, vice president of Guyana.

Credit supply

The international aviation industry has committed to reducing its carbon footprint by retiring carbon credits as part of CORSIA, which is overseen by the International Civil Aviation Organization.

The first phase of CORSIA, which began on Jan. 1, 2024, will run through until 2026. It includes voluntary participation of 126 countries, covering roughly 80% of annual emissions from the aviation sector.

The lack of readiness by host countries to provide the corresponding adjustment has been one of the reasons for a lack of supply under the first phase of CORSIA.

National frameworks that allow host countries to grant a CA are under construction, with only a handful of countries, including Rwanda and Ghana, offering clear procedures.

Platts CEC, which reflects credits eligible under the first phase of CORSIA, was assessed at $11.5/mtCO2e Feb. 29, according to S&P Global Commodity Insights.

"Guyana's ICAO-eligible credits mark a significant milestone given the projections that airline operators could need access to 100-200 million credits for CORSIA's first phase from 2024 to 2026," ART said in a statement.

Currently, only credits issued by ART and the American Carbon Registry can be eligible for phase 1 of CORSIA. Two major carbon registries, Gold Standard and Verra, are still awaiting ICAO's full approval for their participation in the first phase of CORSIA.

Oil and forests

The oil-and forest-rich nation has become very active in the carbon markets in recent years.

In 2022, the government signed a historic deal with US upstream company Hess Corporation to sell REDD+ carbon credits worth $750 million to support efforts in protecting its Amazonian rainforests.

Guyana has seen its oil production rise significantly in recent years after giant oil discoveries by ExxonMobil and Hess.

The country's oil production averaged 387,580 b/d in recent months, with output likely to reach 1 million b/d by 2028, according to estimates by S&P Global.

This newfound oil wealth comes at a pivotal time for the country, which is also home to almost 20 million hectares of rainforests, with the potential to store around 20 billion mt of CO2, according to government estimates.