The document summarizes analysis on the potential supply of carbon offsets for the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) from existing projects. It finds that supply from existing projects could exceed expected demand from CORSIA by a factor of 5. However, without eligibility restrictions, CORSIA is unlikely to incentivize new emission reductions or support vulnerable projects. The document recommends setting robust eligibility criteria, such as restricting offsets to new projects started after a certain date, to ensure CORSIA delivers on its goals of supporting further abatement.

1. Innovate4Climate
Costs and climate impact of
offsetting emissions under CORSIA
Carsten Warnecke, Thomas Day, Harry Fearnehough,
Lambert Schneider
Frankfurt, 22 May 2018

2. Vulnerability of existing project-
based mitigation activities to
continue abatement
Thomas Day

3. Vulnerable projects depend on
carbon credit revenues to operate
Which CDM projects are most at risk of discontinuing
mitigation?
What is the potential mitigation impact from supporting
(vulnerable) projects?
What options exist for supporting vulnerable projects?
3www.newclimate.org
Assessing a project’s vulnerability is based on its current dependence on
carbon market revenues to continue GHG abatement activities
The assessment of the current economic conditions of the project does not
offer insight into the additionality of a project at its point of inception

4. www.newclimate.org 4
Assessing vulnerability

5. www.newclimate.org 5
Assessing vulnerability
Low – medium risk Potentially high risk
Coal mine methane
EE Industry
EE own generation
EE supply side
Geothermal
Hydro
Solar
Wind
Forests
Fossil fuel switch
Biomass
Fugitive
Landfill gas
Methane avoidance
PFCs+SF6
HFC-23
Household stoves
N2O abatement
Risk of discontinuing
abatement:
-----------------------------------------
Low risk
Low - medium risk (variable)
Low - high risk (variable)
High risk

6. 6
Hydro
Wind
Biomass
N2O
HFCs
Fugitive
CMM
Others
~ 4.6 bn CERs
Total potential CER
supply for 2013 - 2020
Project vulnerability
Generally low
Generally high
Variablevulnerability
Not assessed
CER supply
potential to
2020 by
project
vulnerability

7. Analysis of the potential supply
of credits for CORSIA from
existing projects under different
eligibility restrictions
Harry Fearnehough

8. Carbon Offsetting and Reduction
Scheme for International Aviation
Overview
• Overseen by International Civil
Aviation Organisation (UN body)
• Aims to ensure carbon neutral
growth for international aviation
from 2020 through a combination
of abatement measures as well
as offsetting
Scope
• International aviation
• Voluntary participation in pilot
and first phase; compulsory in
second phase
• Exclusively focused on carbon
dioxide emissions
www.newclimate.org 8
End of
pilot
phase
End of
Phase
1
End of
Phase
2
CORSIA
introduction
Carbon dioxide emissions
from international aviation
maintained at 2020 levels
Potential growth of
emissions = demand for
offsets of ~3 bn tCO2

9. We have analysed the potential
supply from 4 offset programmes
www.newclimate.org 9
For the CDM, we have examined the marginal
cost of supplying offset credits for emission
reductions over the period 2013 - 2020
For all 4 programmes we have analysed the
supply potential for emission reductions over the
period 2013 – 2035
Analysis covers registered projects as well as
the existing pipeline of projects that could
register in the future

10. Scenarios include vintage and
project type eligibility restrictions
www.newclimate.org 10
Base case
Emission reduction date
vintage
Registration date vintages
Investment date vintage
Excluding low vulnerability
projects
All potential emission reductions over the period
2013-2035
Restricting the use of credits to those issued for
emission reductions post 2016
Restricting the use of credits to projects registered
post 2012 and 2016
Restricting the use of credits to projects that made
their investment decision post 2012 and 2016
Restricting the use of credits to projects dependent
on carbon revenues to continue abatement
Start of operations date
vintage
Restricting the use of credits to projects that
started operations post 2012 and 2016

11. Eligibility restrictions have a large
impact on the CER supply curve
www.newclimate.org 11
Supply curves for emission reductions between 2013-2020 for
registered CDM projects under different elegibility restrictions
4,3002,892275
121
690
Up to 3.8bn new CERs
could supply the market
at prices below €1
A large share of projects
do not depend on CER
revenues to continue
emission reductions
Investment date vintage
restriction most likely to
incentivise development
of new projects in
response to new demand

12. CDM and VCS projects could
supply 5x CORSIA demand
www.newclimate.org 12
Supply potential for emission reductions between 2013-2035 for CDM and
voluntary market projects under different eligibility restrictions
Under several
restriction scenarios
supply from existing
projects exceeds
likely demand from
CORSIA to 2035
Large potential
supply within the
pipeline of CDM
projects
Even excluding the
CDM, the potential
supply would exceed
CORSIA demand in
some scenarios
DRAFT results
27m
190m
+
existing stock: = enough to meet pilot phase demand
~ CORSIA demand

13. Implications and policy
recommendations for CORSIA
Lambert Schneider

14. Key findings in a nutshell
1. Supply from existing projects could exceed demand by a factor of 5
2. On the order of 3.8bn CERs could be issued to registered CDM projects at
prices below €1 for emission reductions up to 2020
3. Without eligibility restrictions, demand from CORSIA over the period to 2035
is unlikely to:
Alter the overall level of GHG abatement undertaken; or
Materially impact the current CER price level
 Lose-lose situation:
No benefits for the environment
No benefits for project developers and host countries: no incentives to
implement new projects or continue abatement in vulnerable existing
projects, no value for ”old” CERs
www.newclimate.org 14

15. How can CORSIA incentivise
further emission reductions?
CORSIA should incentivize further emission reductions that would not occur
without the scheme
Robust eligibility restrictions essential for CORSIA to deliver on its goal
CORSIA demand should be targeted to:
1. Vulnerable projects, i.e. projects that require carbon market or other
revenues to continue GHG abatement, and/or
2. New projects implemented in response to the incentives from CORSIA
www.newclimate.org 15

16. Which eligibility restrictions are
effective to deliver CORSIA’s goals?
www.newclimate.org 16
Emission reduction date
vintage
Registration date vintages
Investment date vintage
Excluding low vulnerability
projects
• Still significant over-supply
• Many non-vulnerable projects eligible
• Up to 8,000 old, non-registered CDM
projects eligible
• Can effectively limit participation to
newer projects
• Can effectively limits participation to
projects that require support
• More difficult to operationalize
Start of operations date
vintage
• Can effectively limit participation to
newer projects
✓
✘
✓
✘
✓

17. Robust eligibility criteria essential for CORSIA to deliver on its goal
Simple approach: Limit eligibility to new projects
• Projects with an investment decision date later than X (e.g. 2017, 2020), or
• Projects that started operation later than X (e.g. 2020)
Differentiated approach: Limit eligibility to new or vulnerable projects
• Projects with an investment decision date later than X (e.g. 2017, 2020), or
• Projects that started operation later than X (e.g. 2020)
AND
• Project types that are typically vulnerable to discontinuing GHG abatement
Recommendations
www.newclimate.org 17

18. Contact details:
Thank you for your attention!
Carsten Warnecke
c.warnecke@newclimate.org
Thomas Day
t.day@newclimate.org
Harry Fearnehough
h.fearnehough@newclimate.org
Lambert Schneider
lambertschneider@googlemail.com
Interested to know more about the
topic? See our recent blog post:
bit.ly/2GFV4hm