Feature: CORSIA implementation schedule slows down eligibility of new vintage credits

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

The International Civil Aviation Organization, or ICAO, is moving as per its set schedule. The pilot phase for CORSIA implementation is from 2021 to 2023, while the deadline for airline operators to offset is only in January 2025.

However, developers and traders S&P Global Platts spoke to expressed concerns about the slow timeline and lack of clarity on the opening up of the vintage window for CORSIA credits in a market that is fast evolving.

According to its November 2021 document on CORSIA eligible emissions units, the ICAO approved eight Emissions Unit Programs for the supply 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).

Out of these, only two programs -- ACR and ART -- can issue CORSIA credits with emissions reductions that occurred through 2023, while two of the largest standards –- VCS and GS -– can still only issue CORSIA credits till vintage 2020. All programs will also have to undergo the re-assessment process by ICAO this year.

According to the ICAO's Technical Advisory Body, or TAB, re-assessment for 2022 cycle applications commenced after Feb. 26, 2022, the last date for applications. The assessment process will continue until mid-September 2022. Finally, from November to December 2022, the ICAO will consider the TAB recommendations including the admissibility of programs supplying CORSIA eligible units of newer vintages.

Standards' speak

The vintage eligibility window was restricted earlier to 2016-2020 because most programs did not fulfil the criteria set out by ICAO that mandated they must have measures in place to avoid double counting of credits between the 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 for avoiding double claiming through corresponding adjustment, they will soon introduce new measures to avoid double claiming with host countries' NDCs.

"This will be part of the evidence considered by ICAO when it decides whether to make GS credits with a vintage of 2021 or later eligible for CORSIA. Our expectation is that only post-2020 vintage credits that have been authorized by the project's host country for use towards CORSIA, and correspondingly adjusted in line with Article 6 guidance, will be deemed eligible for CORSIA," Hugh Salway, head of environmental markets at The Gold Standard, told Platts.

Verra says the timeline for when 2021+ vintages will be available in the market is somewhat unclear and they are working internally on how best to meet the CORSIA emissions unit criteria.

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

While developers are creating 2021+ vintage credits, they are battling uncertainty about when they will be CORSIA eligible.

"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 re-assessment process that the programs were subject to added to the uncertainty. "We don't know which standards will be allowed to issue CORSIA-eligible units for 2021 onwards."

CORSIA exchange contracts

CORSIA credits are also the underlying credits for exchange contracts like Xpansiv CBL's GEO and ACX's CET. Unlike its other contracts like the N-GEO (based on underlying nature-based credits) and the C-GEO (based on underlying energy, renewables, and other technology-based credits) that include plans for rolling vintages, new vintages can't be included yet in the GEO because of CORSIA restrictions.

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

ACX noted there is no indication that the CORSIA vintage window restriction is impacting trading on its CET contract. A spokesperson said, "We are seeing a general pull back in the carbon market, which is impacting the CET as well."

A developer of new vintage credits earlier told Platts that his credits were not eligible for CORSIA because they were of 2021+ vintage which was also impacting his ability to participate in trading on Xpansiv's GEO contract.

Last year, Xpansiv had referred to "certification arbitrage" saying that participants were purchasing 2021 VCS credits that otherwise meet GEO eligibility criteria with the expectation they will become CORSIA eligible and deliverable into the GEO contract. 2021 credits, however, are still not deliverable to the GEO.

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