The entire existing supply of first-phase credits tagged for approval under the Carbon Offsetting and Reduction Scheme for International Aviation (Corsia) could become ineligible in the EU under additional requirements to be proposed by the European Commission, according to a draft document seen by Argus today.
The document proposes excluding from Phase 1 compliance (CP1) for EU-based airlines "at least" units issued under high forest, low deforestation (HFLD) methodologies — activities credited based on existing carbon stocks — and credits issued by projects whose fraction of non-renewable biomass (fNRB) is above the host country value, as adopted in Table 3 of version 3.0 of TOOL33 of the Clean Development Mechanism.
None of the existing CP1-tagged credits meet the proposed requirements, the EU said. A jurisdictional reducing emissions from deforestation and forest degradation (J-REDD+) project in Guyana, which has issued around 25mn of the total 33mn credits in the scheme, was an HFLD initiative.
"Crediting the mere existence of stocks does not contribute to addressing climate change, for which real additional anthropogenic impact on stocks are needed, whether in the form of removals or emissions reductions," the document says. Its fNRB restriction aims to curtail over-crediting and align with methodologies under Article 6.4 of the Paris Agreement.
Under the proposed rules, clean cookstove projects could cancel some of their credits to reach the volume they would have issued with an appropriate fNRB value and become eligible ex-post. This would make about 10pc of existing credits eligible.
The EU would not impose any additional requirements on accepted registries for Phase 1 to those listed by Corsia's ruling body the International Civil Aviation Organisation (Icao), the commission said in the draft.
For Phase 1, only credits supplied by countries that are members of the Paris Agreement and apply Corsia would be eligible for compliance. About 100 countries meet both requirements from 2027 onwards, the EU said. It proposed updating the list of countries annually.
The commission may at a later date also propose that credits only be eligible if the host country specifies "authorisation or issuance" and not "use or cancellation" for export when notifying "first transfer" — establishing the obligation to apply a corresponding adjustment in an upcoming biennial transparency report. The carbon would therefore have to be accounted for at authorisation or issuance, rather than when the buyer uses it or cancels it, preventing host countries from stepping back from their obligations.
And the commission could propose more stringent requirements under Corsia's second phase, from 2027-35.
This could include limiting eligibility to credits supplied under Article 6.4's Paris Agreement Crediting Mechanism (Pacm), and possibly to other credits of equivalent standards, the draft said. It could also impose more stringent carbon reporting standards on project host countries that would have to be considered at a "later stage" to ensure alignment with the relevant provisions dealing with international credits post-2030.
The draft would, if approved, sharply constrain supply, and it is a "sub-optimal outcome", one market source said.
European airlines have been holding off from procuring Corsia-eligible credits in anticipation of potentially more stringent requirements being imposed. Activity from end-users in Asia has also been dampened by budgets tightened by disruptions from the Middle East war, and because they are looking to Europe for clarity.
