Thanks to a “perfect storm” of market factors, demand for CORSIA credits is set to outstrip nearterm supply by a significant margin. Project developers must ready their credits today to capitalize on this window of opportunity, which will close as the market stabilizes.

If you happen to be a project developer a) aiming to sell into CORSIA, but b) lacking the necessary corresponding adjustment or letter of authorization (LoA) permitting you to do so, you could be one of the majority of sellers trapped in a tale of two timelines. 

The first timeline — that of approved crediting programmes (or registries) — is dictated by the International Civil Aviation Organization (ICAO’s) Technical Advisory Body (TAB). The second — that of your project’s corresponding adjustment — is determined by your host country. 

The former is beyond the purview of most market participants. The latter, on the other hand, is well within that of any developer with the mandate to pull the trigger on LoA proceedings and the means to accelerate registry authorization. 

For those, timing really matters. Slow TAB approvals and ambiguous nation-state processes have created a shortfall in eligible CORSIA credits, leading to a generation-defining opportunity for first-movers who time their market entry correctly — and an equally significant missed opportunity for those too slow to act.

Though voluntary at a state level, Phase 1 (2024-26) is mandatory for all international flights that travel between participating countries. Given the involvement of 126 of 193 member states, it will account for a significant portion of annual emissions from the aviation sector.

In a recent co-authored report, the International Emissions Trading Association (IETA) (of which Oka is a member) and AlliedOffsets estimates that Phase 1 demand for eligible emissions units (EEUs) could reach 230 million. That figure far surpasses their highest supply forecast of 171 million, and is almost a third higher than the International Air Transport Association (IATA)’s demand projection — made just last year — of 164 million. 

By comparison, the current supply of authorized Phase 1 credits stands at just 8 million. All derive from ART TREES, one of just two standard bodies approved by ICAO. The second, ACR, has issued 28 million credits that are eligible, but which have yet to receive an LoA. Between the eight conditionally approved standard bodies are a further 42 million credits, which — subject to TAB’s verdict — will be made eligible for Phase 1 at some point in the next four months.

That still leaves a yawning supply-demand imbalance, and a shrinking timeframe in which developers can access the opportunity. Developers have a decision to make. 

Insure Your LoA to Ensure First-Mover Advantage

Oka’s Article 6 insurance solution, Corresponding Adjustment Protect™, makes credits more marketable by, first, sending a strong signal about their quality, and second, reassuring buyers their financial and environmental claims are secure. But the value of insurance goes beyond ‘competitive differentiation’ in a buyers market. It is also a fast pass into a sellers market.

For authorized developers with outstanding corresponding adjustments, Corresponding Adjustment Protect™ serves as the registry-mandated third-party guarantee needed to sell into CORSIA. As such, it is an essential component of any accelerated on-ramping strategy. 

Option (A), up to 40 months total: Once TAB has delivered a verdict on registry approvals [up to four months], submit for your LoA, and thereafter, wait for your host country to complete the corresponding adjustment [up to 36 months];

Option (B), as little as four months total: Submit for your LoA immediately, and — once granted Article 6 authorization — apply for corresponding adjustment insurance in order to sell into CORSIA as soon as your registry gains TAB approval.

While Option A may be lower lift in the nearterm, it is potentially vastly more expensive in the long term.

Since markets are (generally) efficient, any dislocation will be quick to contract. Seeking to avoid procurement risk, airlines will look to purchase eligible credits at large volumes and potentially multi-year purchasing agreements. Other industries will find themselves competing for a small pool of high-quality credits, sending prices soaring. Projects under approved registries and methodologies will converge on the market, unlocking billions in available credits and restoring price equilibrium. 

Developers who reach CORSIA buyers before demand is satisfied, on the other hand, will be among the beneficiaries of soaring revenue and price margins. For that reason, we believe many will look back at this point in time as an inflection point or the beginning of a bifurcation for the market. On which side will you fall?

Contact us to find out how insurance can accelerate your access to CORSIA.