CORSIA prices steady amid market confusion around Zimbabwe credits

Participants in the carbon credits market have reported some confusion around eligible supply for Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) Phase 1, after credits issued by Gold Standard were transferred to the Zimbabwe national registry and tagged as eligible by the Zimbabwe Carbon Markets Authority (ZiCMA).

A total of 10,000 tCO2e vintage 2022 credits from the TASC Clean Cooking project (GS 11551) were cancelled on the Gold Standard registry, and transferred and issued on the Zimbabwe national registry on May 25, making it the first transfer between a private voluntary carbon registry and a national registry.

A total of 5,000 tCO2e of these credits were then correspondingly adjusted on May 26 on the Zimbabwe registry and tagged as “CORSIA eligible”.

If the credits are CORSIA eligible, this would be just the second project eligible under Phase 1 of the scheme, after Guyana ART TREES (ART 102).

But market participants have raised doubts whether, despite being tagged as such, the credits would technically be fully eligible given that the credits were cancelled on the Gold Standard registry and then issued under the Zimbabwe national registry.

Zimbabwean registry is not approved by ICAO

This was because the Zimbabwean registry has not been approved by the International Civil Aviation Organisation (ICAO), which administers CORSIA.

This approach differs slightly to that taken by countries such as Indonesia, which has signed a mutual recognition agreement with Gold Standard, allowing projects in the country to be certified under Gold Standard and recognised by the Indonesian government.

Other country’s national schemes have previously applied to ICAO’s CORSIA. Under the pilot phase of the program, China’s voluntary carbon market (CCER) was approved by ICAO, while Thailand’s Voluntary Emission Reduction Program (T-VER) has been conditionally approved under Phase 1.

Fully Phase 1 approved registries have taken their time to tag credits as “CORSIA eligible” while they look to guard against any risk of revocation between a host country issuing a letter of authorization (LoA) and granting a corresponding adjustment.

This has taken the form of insurance on the Verra and Gold Standard registry, but so far only the World Bank’s Multilateral Investment Guarantee Agency (MIGA) insurance is allowed by Gold Standard.

The registries are expected to issue guidelines for other eligible insurance providers over the summer this year.

On the Zimbabwe registry, this risk is not present because the corresponding adjustment has already been applied and accounted for.

Some traders also expressed concern whether airlines would want to engage with credits that had potential eligibility concerns. The volume of credits available is also small, with the 5,000 tCO2e on the Zimbabwe registry dwarfed by the 15.88 million tCO2e of Phase 1 eligible credits already issued from the Guyana project.

At the same time, market participants were expecting increased supply from Verra and Gold Standard issued projects later this year, including other cookstove projects. So, while some confusion remains over the state of the credits, demand from airlines is likely to be minimal.

On top of this, because the registry is based on blockchain technology, processing fees were currently around $6.40, much higher than the few cents charged by voluntary carbon registries, which could make transactions prohibitively expensive.

But even if questions remain around the credits eligible under CORSIA Phase 1, because the credits have been authorized and correspondingly adjusted, they can be used by other countries to help reach their Nationally Determined Contributions (NDCs) under Article 6 of the Paris Agreement.

Despite the above uncertainty, spot prices were steady in the week to June 4, with offers reported to Fastmarkets at $22.25 per tCO2e for CORSIA Phase 1 eligible emissions units, unchanged from the previous week.

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