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Imposing Eligibility Constraints on CORSIA Offset Credits Could Have Significant Impact on UN CDM, Finds Study

Submitted by on April 7, 2018 – 6:30 pmNo Comment

(GreenAir Online)  The UN’s Clean Development Mechanism (CDM) is likely to be a primary source of carbon credits for airlines seeking to offset the industry’s growth in CO2 emissions post-2020 under ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). However, slow demand for the credits – known as Certified Emission Reductions (CERs) – from registered CDM projects has led to a prolonged period of low prices, but CORSIA is likely to have a major impact on the market. A 2017 study estimated the potential demand for emission units at around 2.7 billion across the life of the scheme, which is due to run until 2035. A new analysis prepared for the German Emissions Trading Authority (DEHSt) finds that up to 3.8 billion new CERs could supply the market at prices below €1 per unit but recommends eligibility restrictions are required to drive up the price of CERs and incentivise new and vulnerable projects that could lead to real emission reductions.

Without eligibility restrictions, the demand from CORSIA is unlikely to either materially impact the current price level for CERs or alter the overall level of greenhouse gas abatement undertaken, says the study led by the NewClimate Institute. Applying constraints and restrictions on eligible CERs would be an effective way for CORSIA to incentivise reductions beyond those that are likely to occur anyway, it suggests, and recommends two courses of action.

One is to exclude CERs from registered project types with what it describes as ‘low vulnerability’, which are largely to blame for the low price of CERs. 

The second course of action is to impose vintage restrictions that limit supply based on the date of project milestones such as the registration date or start date of the project. 

Commenting on the DEHSt study, Kelsey Perlman, the NGO’s Policy Officer for Aviation, said: “It repeats what we know about the history of carbon markets, namely there are a lot of bad credits out there. If no restrictions are applied on what kind of offsets can be used – by year and by activity – the aviation offsetting scheme will not reduce emissions anywhere and airlines will pay practically nothing for their climate impact.”  READ MORE

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