CEC, CNC carbon assessments spread narrows on rising interest in CORSIA credits

The spread between the S&P Global Platts CEC and CNC carbon assessments has narrowed significantly since the start of September on increased interest in CORSIA credits.

The CEC is reflective of CORSIA-eligible credits while the CNC reflects nature-based credits in the global voluntary carbon market. On Sept. 20, the Platts CEC was assessed at $7.40/mtCO2e, while the CNC was assessed at $7.70/mtCO2e -- a difference of only 30 cents.

In comparison, on June 14, when the CNC was launched, it was assessed at $4.65/mtCO2e. On the same date, the CEC -- launched in January -- was trailing behind at $2.61/mtCO2e.

According to Platts data, a turning point was seen on Aug. 25. The CNC had seen a gradual dip the previous week and slowly started picking up after Aug. 25. But, the CEC saw a steep incline upwards post Aug. 25.

It was assessed at $5.15/mtCO2e on Aug. 25 to soon reach neck and neck with the CNC by Sept. 2, when the CNC was assessed at $7.25/mtCO2e while the CEC was assessed at $7/mtCO2e.

The spread has remained relatively narrow since, with the CEC and CNC even converging on various dates in September. On Sept. 6 and Sept. 9, the CEC and CNC were assessed at $7.30/mtCO2e and $7.55/mtCO2e, respectively. On Sept. 7, Sept. 8 and Sept. 10, the CEC was assessed higher than the CNC -- a trend not seen before in Platts' assessments.

CORSIA interest

The spread has narrowed primarily because of the surge of prices in the CORSIA space. Platts had earlier reported that there was a significant difference between the prices seen on exchange platforms like CBL and ACX and those taking place in over-the-counter market. However, that lag has now closed, according to market sources.

"The CORSIA space has gone ballistic. People seem to be holding credits and that is driving up prices. The sudden interest seems to be coming out of nowhere," a market source said on the price surge in the CORSIA space.

The price surge has led to more players getting interested in playing the market -- both in the OTC space as well as on standardized contracts like CBL's GEO and ACX's CET. Both GEO and CET are based on CORSIA eligible credits.

"Prices are going up in CBL because of speculation. Price shoots on platforms have been happening as key players are trading with each other. We, however, see a lot of interest in OTC as well," a second market source said.

When asked about the recent higher price on the GEO contract, a spokesperson from CBL told Platts that price trends on the contract recently are reflective of heightened interest overall in carbon credits.

ACX said the markets have been very active in recent months. "Previously, Nature Credits (GNT and GNT+) were valued higher than CORSIA (CET) credits. We have seen an increase in demand for CORSIA but lagging supply which contributed to the recent jump in prices narrowing the spread between CET and GNT/GNT+," said ACX when contacted by Platts.

The GNT+ contract is similar to GNT except there is a requirement to have additional CCB Certifications and more recent vintages.

Eligibility barriers

Market participants also pointed to eligibility barriers regarding entering the CORSIA segment. According to the eligibility criterion set by the International Civil Aviation Organization, or ICAO, for the various standards, the crediting period for CORSIA credits is 2016 to 2020.

As a result, 2021 vintages are not yet CORSIA-eligible due to which certain participants cannot belatedly enter the market unless they trade older vintages.

An African developer who spoke to Platts said that it was difficult to enter the GEO contract as only vintages from 2016 to 2020 could be traded. "For those issuing credits in 2021 like us, we can't trade in GEO. We are unable to trade newer vintages. We are struggling with that," he said. The developer creates cookstoves credits and was interested in entering the CORSIA segment because of the recent price rise.

CBL had earlier highlighted the resulting certification arbitrage taking place, with players buying 2021 vintage credits at a discount in the hope that they will soon be CORSIA-eligible.