This is the second in a three-part series focusing on CORSIA. Read our introduction to CORSIA here, and Part 1 — the case for CORSIA — here.
It may be your all-access pass to the lucrative Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) market, but a Letter of Authorization (LoA) — which serves as a commitment by your host country to register a corresponding adjustment against your project — is not a one-way ticket.
Parties to the Paris Agreement record their corresponding adjustments officially only once every other year. A lot can happen in two years. If your government fails to submit or apply a corresponding adjustment or revokes prior Article 6 authorization during that period, any credits you may have issued or sold into the CORSIA market will be deemed invalid and need to be replaced. The reputational and financial risk is significant — and unknowable.
To pre-empt widespread credit defaults and systemic risk, world-leading carbon registries Verra, Gold Standard, and the American Carbon Registry have indicated that project developers will be required to either have a corresponding adjustment already in place or a remedy for double claiming. Their recommended remedy? Insurance.
The benefits of LoA insurance are twofold. Most obviously, it gives you a license to sell credits to CORSIA buyers. In addition, however, the backing of a regulated insurer is seen as an additional marker of quality. It raises the perceived and potential dollar value of your inventory, effectively reversing the unavoidable reputational and financial risk you carry in the absence of insurance.
WHAT DO YOU NEED?
Given the size of the CORSIA opportunity — and with few corresponding adjustments expected this side of 2024 — project developers would be wise to ring-fence their eligibility today. Corresponding Adjustment Protect™, underwritten by Lloyd’s Oka Syndicate 1922, is the first policy designed to do just that. It provides a safety net for your LoA, ensuring that you and your clients (and their claims) are protected if a host country fails to honor its commitment.
Our coverage involves a thorough review of the LoA, the project, and the host country. But what separates one LoA from another?
Oka analyzes a combination of political risk elements dynamic to each LoA. Underwriting factors are included but not limited to:
- Relationship between the project’s credits and the host country’s climate strategy
- Specific NDC commitments of the host country
- Alignment of financial incentives between the host country and the developer
- Positive societal benefits that the project delivers on the ground
(For a full list of underwriting criteria, please contact us.)
Securing your LoA is a vital step towards accessing CORSIA, but its inherent risks could undermine more than just your relationships with CORSIA customers. A failed corresponding adjustment could jeopardize the value of any credits sold, in addition to your wider market reputation. Insurance grants you a fast-track to CORSIA and an opportunity to market your credits at a premium, while taking that risk off your plate.
Is your project and LoA eligible for Corresponding Adjustment Protect?
Speak to a member of our team to find out.
Corresponding Adjustment Protect™
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