Carbon credit demand will exceed supply by 2030
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Abatable, a carbon intelligence and procurement platform, said in a new report that the demand for carbon credit provided through the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) scheme will exceed its supply by 2030.
CORSIA is the first global market-based initiative. It provides appropriate ways to regulate emissions and minimize market distortions while respecting the special functionalities and capabilities of International Civil Aviation Organization (ICAO) member states.
Under CORSIA, aircraft operators on select international flights must purchase CORSIA-compliant carbon credits to offset any surges beyond the 2020 baseline level in their emissions.
Carbon credits are essentially permission slips bought by companies to generate CO2 emissions. They are also known as carbon allowances. If a company has excess credits, it can sell them to other entities. Otherwise, the cash flows usually vertically from the companies to the regulators.
The aviation sector is responsible for nearly 3% of the world’s greenhouse gas emissions(GHG). Although multiple solutions for the aviation industry exist to regulate its carbon emissions, the developments will require time before they are accessible and affordable on a global scale. Potential solutions include sustainable aviation fuel (SAF) and electrification.
As alternatives to power this industry have not yet been found, this industry is considered among the hardest-to-abate sectors. CORSIA was adopted in 2016 to address the problems associated with these sectors. The first phase of CORSIA began in January 2024 and will be active until 2026. The current phase only involves nations that have volunteered to participate.
However, the second phase, which is planned to begin in 2027, will make the CORSIA scheme a compulsion. This means that all airlines will have to use SAF, increase the efficiency of their flights, or buy credits.
In addition, the involved members of CORSIA face another major obstacle—the lack of eligible standards through which credits can be bought by the airlines. As of now, there are only two standards—American Carbon Registry (ACR) and ART TREES. These standards block supply as they require Letters of Authorisation from the host nations to grant access to the credits.
Currently, there is no fresh supply of carbon credits, as reported by Abatable. Their report suggests that the demand for these credits will exceed the supply by 2030. According to the organization’s report, the demand will be 14 times higher than the supply between 2029 and 2030 if new projects requiring credits do not emerge.
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