New Viridios Report Signals Impending Supply Crunch With CORSIA Launch

New Viridios Report Signals Impending Supply Crunch With CORSIA Launch - Carbon Herald

Viridios Capital has just published a new white paper, which looks into the kick-off of the first phase of CORSIA and the very likely supply constraints that will follow.

CORSIA, the Carbon Offsetting and Reduction Scheme for International Aviation, which was developed by the International Civil Aviation Organization (ICAO) and adopted by governments in 2016, is the first global market-based scheme designed to mitigate CO2 emissions from the international aviation industry. 

Namely, the scheme exists to deal with such emissions that cannot be addressed through technological or operational solutions, as well as via the use of sustainable aviation fuel (SAF) – through carbon offsets. 

Relevant: CORSIA Prices Jump After ICAO’s Conditional Approval Of Leading Registries

Under CORSIA, these offsets are known as Eligible Emissions Units (EEUs), for which, the report says, there is a steep increase in demand, now that the scheme has entered its first Phase, following the two-year pilot period from 2021 to 2023. 

CORSIA requires airlines with a total annual emissions count of more than 10,000 metric tons of carbon dioxide to monitor, report and verify (MRV) their emissions every year from 2019. 

Why Is Demand For CORSIA EEUs Skyrocketing?

Phase 1 will run from 2024 to 2026 and will still remain voluntary for international airlines.

Nevertheless, the white paper by Viridios examines the five major factors that are so fiercely driving demand for CORSIA EEUs in both the short and medium term, and these are:

  1. Rising emissions from aviation. Despite the noticeable decrease in flying over the past few years due to the pandemic, the sector has restored its activities to pre-pandemic levels, and its emissions are even expected to exceed 2019 levels this year. 
  2. EEU supply shortage. As it stands, the exact carbon programs deemed eligible for EEUs are yet to be determined by the International Civil Aviation Organization (ICAO). Only a single carbon registry has received formal approval, while several others have received conditional approval. This, along with the lack of national carbon accounting standards, brings us to a place where EEUs that qualify for Phase 1 are currently non-existent. 
  3. High competition for Corresponding Adjustment credits. Corresponding Adjustments (CAs), which will most likely be required for EEUs in Phase 1 to avoid double counting, will be in high demand not only among airlines. There is a strong probability there will be competition from other corporate buyers, as well as from governments. 
  4. Mandatory participation in CORSIA Phase 2. The CORSIA Phase 2 is expected to become mandatory, which will most certainly lead to a demand spike. 
  5. Airline retirement cycles. Many airlines are already beginning to prepare for the anticipated price hikes in the carbon markets and the inevitable supply constraints by making large carbon credit purchases. These carbon credits have a 3-year retirement cycle.

    Read the full report here

    Read more: New Report From Viridios AI Shows True Size Of The Voluntary Carbon Market

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