CORSIA, managed by the International Civil Aviation Organization (ICAO), has implemented new updates to its carbon credit standards. These updates require airlines to monitor and report their emissions, and if they exceed a set baseline, they can purchase emission reduction units, also known as carbon credits. The approved carbon credit standards for the first phase of CORSIA include Winrock International’s American Carbon Registry and Architecture for REDD+ Transactions, the Climate Action Reserve (CAR), the Global Carbon Council (GCC), the Gold Standard, and Verra’s VCS program. However, the Clean Development Mechanism (CDM) did not qualify for Phase I. These updates aim to ensure that the allocation of credits represents real carbon reduction activity and sales, boosting the integrity of the carbon market. The recommendations from the CORSIA’s Technical Advisory Body (TAB) influence the market by increasing demand for approved credits. This will not only affect airlines but also signal other buyers to consider these credits as “best-in-class”. Some high-quality credits endorsed by the International Carbon Reduction and Offset Alliance (ICROA) are not accepted under CORSIA, impacting their eligibility. The TAB will reassess any new applications for standards that haven’t already been approved. The ICAO Council will officially consider the TAB’s recommendations this fall after assessing new credit standard applications.
For airlines preparing for CORSIA’s upcoming phases, it is important to align their credit strategy with the TAB recommendations for compliance. They need to ensure they make CORSIA-compliant purchases before the true-up deadlines. The deadline for the pilot phase (2021-2023) is January 31, 2025, and for Phase I (2024-2026), it is January 31, 2028. Airlines should plan credit purchases well ahead to avoid any risks and consider multi-year purchasing agreements to secure their credits. While some standards are conditionally approved for Phase I, like VCS and Gold Standard, they are likely to receive full approval. It is important to note that credits meeting post-2021 criteria are not yet available. Clear communication and internal education within airlines are crucial for effectively implementing a credit purchasing strategy. Airlines should anticipate delays in the availability of Phase I credits, likely not until 2024 at the earliest. Budgeting accordingly is necessary as CORSIA eligibility rules may increase demand and prices for these credits. The ICAO has estimated the costs for airline operators from CORSIA offsetting, assuming carbon prices range from $6 to $12 per tonne of CO2 to $20 to $40 per tonne of CO2.
CORSIA not only affects airlines but also impacts non-airline buyers of carbon credits. As airlines rush to buy these credits, the limited market will see growing demand, leading to higher prices. Non-airline buyers might also view TAB recommendations as a sign of credit quality, increasing demand for CORSIA-eligible credits and their prices. Adjusting budgets, keeping stakeholders informed, and buying credits well ahead of deadlines can help prepare for these shifts. While some high-quality credits are not eligible under CORSIA, they might meet other standards like the ICVCM’s Core Carbon Principles. Balancing CORSIA-eligible credits with quality non-CORSIA ones, such as Plan Vivo or Puro.earth credits, can help manage budget and availability issues caused by CORSIA. Stakeholders who value CORSIA credits might face increased demand and prices. To manage this, they might buy CORSIA credits being assessed by the ICVCM early to avoid potential demand impacts caused by meeting the Core Carbon Principles’ criteria. Credit buyers should discuss CORSIA’s impact on credit quality with stakeholders and consider their preferences. CORSIA’s latest review of carbon credit standards is a significant moment for both airlines and non-airline buyers. Adapting credit strategies to account for increased demand, pricing shifts, and a balanced mix of CORSIA-eligible and other high-quality credits will demonstrate a commitment to real carbon reduction.