FEATURE: Expect more issuances soon, but won't relax rules -- Global Carbon Council

Qatar's Global Carbon Council has emerged as an alternative to other emissions standards like Verra and the Gold Standard as GCC is still considering projects from non-least developed countries. However, with only a single issuance so far, a few developers and market participants have termed GCC as too strict while others have raised concerns about the expected response once GCC credits start trading.

Talking to S&P Global Commodity Insights, GCC said it would continue to consider projects on a case-by-case basis.

"That said, we are not ready to relax any rules," said Chief Operating Officer Kishor Rajhansa.

Interest in the GCC heightened after it got approval from the International Civil Aviation Organization's Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA. The GCC is one of only eight programs approved worldwide for the supply of CORSIA-eligible credits. All programs will undergo a reassessment this year by the ICAO's Technical Advisory Body.

A developer told S&P Global he was concerned about the GCC's CORSIA eligibility renewal as it had made only one issuance so far.

"When we got initial approval by ICAO, we didn't have a single project. Now we have an entire system in place with 196 projects submitted, 5-6 methodologies, a fully functional registry and six verifiers. In one year, we have achieved tremendous progress. We are also submitting our guideline on avoidance of double counting. We are very optimistic we will get [CORSIA] approval again," said Amit Thusu, director-climate actions, GCC.

Common practice analysis

Common practice analysis is an essential component of the additionality test required for carbon projects, where it is determined whether a proposed project's practices are already a common practice in the area. If a project is deemed as common practice, it fails the additionality test.

Verra and Gold Standard have stopped accepting new project registrations from non-LDC countries because of the view that renewable energy projects from these countries have reached a certain level of penetration and carbon financing is not required to stimulate their development.

Project developers have been struggling with common practice analysis and wanted to know if the GCC was looking to relax some of these requirements so that more projects get registered.

While saying it was unfair to have a blanket ban against projects from certain countries, GCC's Rajhansa added, "We would like project owners to follow rules of common practice. It's a very essential component of additionality."

Buyer concerns

Several buyers in the UK and the US did not seem confident about GCC credits, a broker said.

The GCC said it was following all rules and best practices.

"We would want to know from buyers as to what prevents them from buying GCC credits and would like to clear their preemptive notions. If buyers have questions about quality, they must talk to us," said Rajhansa.

He added that 30 buyers have already opened accounts on their registry. "We believe that forward contracts are already happening. Purchase agreements are happening behind the scenes in anticipation of future issuances."

Future issuances

In response to some traders calling the GCC too strict, Rajhansa said, "I'm happy about that. We don't want to create an impression we are lenient at all. At the same time, we are not unrealistic."

The GCC said it has the potential to issue 40 million-50 million credits in 2022 despite the issuance delays. These credits will have to be utilized by airlines for emissions under the CORSIA pilot phase (2021-2023), so they would have to be issued on time.

"Registration takes about five months for projects where all documentation is complete. As we have received most submissions only recently, to expect that everything submitted is ready for issuances is not fair. There is a process. Once the registration is complete, the issuance process will start," said Thusu.

There are likely to be more issuances in the next month, it said.

"And in next 3-4 months, we expect many more. We have market intelligence that verifications of several projects owners are close to being complete. Nothing is in our hands, as the initiation of request for issuance depends on project owners and verifiers," said Thusu.