carbon markets

Burgeoning Carbon Trading Business Poised for Further Growth

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The ecosystem of service providers that has grown up alongside carbon markets stands to benefit as more companies and countries pursue net-zero goals. As one of the original firms providing solutions for climate change mitigation, Switzerland-based Aither is well placed to expand its customer base.

Aither’s stated mission is to assist companies in reducing their environmental footprint and generating revenue. It has been an active player in the carbon markets since its founding in 2010. Compliance with the EU's Emissions Trading System (ETS) provided initial traction for its business, which has since grown to encompass six offices across Europe, one in California in the US and one in Dakar, Senegal. Their clients range from the cement industry to shipping to aviation, which all trade allowances to meet their ETS obligations.

For the global aviation industry, carbon offsets are viewed as a bridge to reduce emissions until sustainable aviation fuels (SAF) are widely available across the globe. If commercialization of SAF takes longer than expected, that bridge could become much longer. That means airlines may need to rely on offsets well beyond the 2030 timeline anticipated for widespread SAF availability.

European airlines became active players in carbon markets from 2012 when the EU started to phase down free allowances that allowed airlines to skirt their ETS obligations. Virtually all of the world’s airlines are now using carbon offsets with the launch in 2019 of the first voluntary phase of ICAO’s Carbon Offsetting and Reduction System for International Aviation (Corsia).

Reflecting the current structure of carbon markets, Aither is most active in helping airlines and other companies comply with government schemes like the EU ETS, which accounts for about 65% of its business. The growing number of companies and industries with net-zero goals has expanded the voluntary carbon market, which makes up the other 35% of Aither’s portfolio.

Verifying Emissions Reductions

Reputational damage to voluntary markets from offsetting projects with dubious claims has put a premium on verifiable results. Aither has credentials as a global supplier of environmental commodities. These include compliance with the US Esco certification system in 2016 and with the EU’s Markets in Financial Instruments Directive compliance in 2018. The firm was designated as a Silver Consultant in 2021 and received accreditation by the Science-Based Targets Initiative as a solution provider.

Aither trades millions of units of CO2 worldwide and manages a large portfolio of projects around the world that are underpinned by verifiable emission reductions. These include initiatives for clean cook stoves and clean water, enhancing efficiency by shifting companies to renewable energy, and projects for solar, hydropower and wind energy as well as forest protection.

Demand for voluntary carbon offsets has tripled in the last several years following the international treaty on climate change agreed in Paris at COP21. Agreement on Article 6 of the Paris accord that allows for cooperative approaches to achieving emissions targets across borders is providing further momentum for market growth.

Aside from regional schemes like the EU ETS, individual countries are introducing their own regulations on carbon that create a complicated matrix of carbon-related obligations. Denmark and Switzerland have imposed carbon taxes, France mandates SAF usage on domestic flights, Germany has an aviation tax, while Sweden and Norway stipulate a 1% SAF minimum for all flights.

Gerardo Mesias, a sales and trading executive at Aither, is confident that demand for high-quality carbon offsets will continue to grow as airlines join the fray in larger numbers to comply with Corsia. Already 115 countries are participating in the second voluntary phase that starts in 2024. He says that 2024 could be a turning point: when global air traffic is expected to surpass the 85% of 2019 level's baseline agreed at last month’s ICAO Council meeting in Montreal. “That will be a more powerful driver for carbon market growth than the start of Corsia’s mandatory phase from 2027,” he tells Energy Intelligence.

In effect the evolution of carbon markets is closely intertwined with how quickly the aviation industry restores its operations to pre-pandemic levels. And China is the wild card for the air traffic prognosis, since the government’s zero Covid policy has put its air traffic recovery on a V-shaped trajectory. Latest figures from the International Air Transport Association show global international traffic was still at 67% of 2019 levels in August, with China lagging behind at just 62%.

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