Offset credit supply potential for CORSIA
NewClimate Institute has recently published an analysis of the offset credit supply potential for CORSIA which seeks to inform the ongoing policy design for the scheme at ICAO.
In this discussion paper we estimate the marginal cost of supplying certified emissions reduction units (CERs) from projects that are currently registered under the Clean Development Mechanism (CDM). We develop a supply curve using data on the individual ability of projects to potentially supply CERs over the period up to 2020. We analyse changes to the supply curve based on a number of scenarios which restrict the eligibility of CERs based on the timing of emission reductions, the timing of project investment decisions and registration under the CDM, as well as an assessment of the extent to which projects are vulnerable to the risk of discontinuing abatement activities without CER revenues.
Abstract:
The International Civil Aviation Organisation is in the process of finalising the design of a scheme – the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) – to address carbon dioxide emissions from international aviation. In this discussion paper we estimate the potential supply of carbon offset credits to meet demand from international aviation under CORSIA under a number of different scenarios which include different types of restrictions imposed on the eligibility of offset credits. Our analysis considers supply from the four largest offsetting programmes: the Clean Development Mechanism, the Verified Carbon Standard, the Gold Standard and the Climate Action Reserve for emission reductions over the period from 2013 – 2035.
We find that existing projects under the four programmes could supply approximately 18 billion offset credits or more than six times the total demand anticipated for CORSIA over its intended duration. In the absence of robust eligibility restrictions, CORSIA will not result in significant emissions reductions beyond those that would occur without the scheme. This is because over 80 percent of the supply comes from projects that are likely to continue abatement regardless of whether they can sell offset credits. Allowing the use of all of these credits would therefore undermine the objective of the scheme to achieve carbon neutral growth. To address these risks, we recommend that policy-makers apply eligibility restrictions that either promote new emission reduction projects or support existing vulnerable projects that require offset credit revenues to continue GHG abatement.
The analysis covers a number of different eligibility scenarios for the four largest offset programmes: the Clean Development Mechanism, Verified Carbon Standard (Verra), Gold Standard and Climate Action Reserve.
Key findings from the work include the following:
- Existing projects under the four programmes could supply up to 18 billion offset credits for emission reductions achieved from 2013 to 2035, or more than six times the total demand anticipated for CORSIA from 2021 to 2035.
- In the absence of robust eligibility restrictions, CORSIA will not result in significant emissions reductions beyond those that would occur without the scheme.
- To address these risks, we recommend that eligibility restrictions either promote new emission reduction projects or support existing vulnerable projects that require offset credit revenues to continue GHG abatement.
- To be effective in stimulating emission reductions beyond those that would happen in the absence of CORSIA, it is critical that any vintage restrictions are based on either the date of investment decision or the physical start of the activity (e.g. start of operation).
- Restrictions based on when the emission reductions occurred or based on the date of project registration would not be at all effective in promoting new projects.
The report was authored by Harry Fearnehough, Carsten Warnecke, Lambert Schneider, Derik Broekhoff and Stephanie La Hoz Theuer and funded by the German Federal Environment Agency.
If you have any questions about the work, please don't hesitate to get in touch: h.fearnehough@newclimate.org
Contacts for further information: Harry Fearnehough or Carsten Warnecke
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