CORSIA - A Feasible Second Best Solution?

Abstract

This paper studies the feasibility of CORSIA’s carbon neutral growth goal based on verifiedvcarbon offsetting. It is motivated by an ongoing general debate about the climate and regulatory integrity of carbon offsetting, thus systematically identifying critical carbon offset characteristics. Using registry data from the largest carbon offset verifiers eligible under CORSIA, we show that the majority of carbon offsets have minor climate integrity. This challenges CORSIA’s neutral growth objective. However, unconditional offset price differentials are only weak signals for climate integrity. To increase environmental effectiveness, a narrower scope of eligibility rules is necessary in order to ensure maximum compliance of projects and strengthen the necessary price effect of carbon offsets. However, it is highly questionable whether there is enough potential supply of offsets to ensure such high integrity, indicating that carbon offsetting should be considered as a transitory measure only.