Verra says buffer pools, insurance can allay Corsia concerns

Quantum Commodity Intelligence – US carbon standard Verra said a 'buffer pool' and political risk insurance products are being considered for potential compensation mechanisms needed to get approval to become a full supplier of carbon credits to the Corsia aviation decarbonisation scheme.

In a presentation and following question and answer session held late Thursday, Verra elaborated on the measures that the standard and individual project developers can take.

That's in order to satisfy all the conditions required by the International Civil Aviation Organization, (ICAO), the UN aviation agency, for Verra and other standards to get full accreditation as a so-called supplier programme to Corsia by the third quarter of this year.

"We're addressing the risk option and providing confidence that the programme will be able to address those double-claiming. And we're looking at the full spectrum of options," said Justin Wheeler, senior director of VCS (Verified Carbon Standard) program development at Verra, in response to questions during the Q&A session.

A Corsia-compliant buffer pool is being considered in the event that credits end up being non-permanent, while insurance products are an option to mitigate risk in the event that host countries revoke an accounting classification that protects against double counting of emissions reductions, Wheeler told the call.

Verra said last week in an update that it had made "minor" updates to its VCS programme with a view to making it compatible with the Corsia aviation offset scheme and clarifying its alignment with the Integrity Council for the Voluntary Carbon Market's (IC-VCM's) Core Carbon Principles (CCPs).

The updates to be introduced would mean that Verra would meet "all conditions" for a full approval under the first compliance phase of Corsia (2024-2026).

ICAO's Technical Advisory Body (TAB) in March only gave conditional approval for Verra, Switzerland-based Gold Standard and US-based Climate Action Reserve to become supplier programmes to Corsia.

Corsia requires airlines to cut their emissions 85% in the 2024-2026 period compared with a 2019 baseline, and offsets that comply with ICAO rules could provide up to 164 million tonnes of abatement over the current compliance period, according to forecasts from airlines' lobby International Air Transport Association.

But only US-based standards ACR and the Architecture for REDD+ Transactions (ART) have been fully approved by ICAO so far, meaning the Corsia market currently lacks liquidity and a diverse supply of credits that can attract the attention of end users, most of which are airlines that do not have to fully comply with the first phase until early 2028.

Prior to getting full approval by the TAB last year, ACR updated its procedures and requirements to include revisions to its 'Buffer Pool Contribution Percentage' metric, which is an overall risk rating for the carbon project – typically in the agriculture, forestry and other land use or Afolu sector.

The metric translates into the number of credits that must be deposited in the buffer pool at the time of each issuance to mitigate the risk of reversals.

Insurance

Wheeler said insurance products that are under development or in some cases are already ready for market could help mitigate "political risks" including the possibility that host countries later cancel so-called corresponding adjustments (CAs).

"We've had some fruitful conversations with those folks and then of course we operate a buffer for non-permanent [credits]," Wheeler said, adding that Verra couldn't yet "publicly commit today to one particular path", adding that it would provide further details once the TAB had provided full approval.

"We are anticipating a little bit of back and forth with the TAB," Wheeler said.

CAs are an accounting procedure required under rules laid out for the Paris Agreement's Article 6, which cancel out emissions reductions from a domestic ledger and classify them for use as a transferable credit from countries or companies that buy credits that comply with UN requirements.

ICAO's rules for Corsia require that eligible emissions reduction units have CAs, but also safeguards if a host country government was to later decide to use these emissions reductions instead for domestic use to meet carbon targets pledged through the Paris Agreement.

Andrew Howard, senior director of climate policy and strategy at Verra, told the call that revocations of CAs by host countries are a highly unlikely outcome.

"Countries will be very aware that they have a reputation as well, and they need to portray themselves as being a secure place to do business," he said.

Asked about timings on future decisions relating to Verra's application to supply Corsia, Howard said he expected a decision on full accreditation to come in the TAB's meeting in September, although indications could possibly come before that date.

Verra said last week it will submit information on its updates, which include a new version (v4.7) of the VCS Standard, to ICAO in advance of the April 30, 'Material Changes' form deadline set by ICAO for further assessment by the TAB.

The original deadline was April 15, but was extended following requests from standards for more time to submit the information.