Chapter 1 | The Real Question Is Not “Can Verra Units Be Used under CORSIA?” — It’s “Does This Design Still Hold in a Paris Agreement World?”
On Verra’s official page, VCS in Compliance Markets, the core claim is stated plainly: VCUs issued under the Verified Carbon Standard (VCS) can, subject to certain conditions, be used for compliance under CORSIA, the global aviation offsetting scheme. For many actors still living inside the legacy voluntary market narrative, this sounds like an “upgrade”—as if attaching a CORSIA label automatically converts a voluntary credit into a compliance-grade international asset. But anyone who actually understands Paris Agreement Article 6 will immediately see the problem: the question is not whether CORSIA allows VCUs to be used; the question is whether the mechanism achieves sovereign accounting alignment in the Article 6 sense.
CORSIA is a sectoral compliance regime created by ICAO. Its governance logic is fundamentally about aviation compliance, not about acting as the final authority over global carbon accounting. From the outset, CORSIA was always destined to converge with UNFCCC accounting and Article 6 rules—but it also had to face a hard reality: after 2021, most countries did not yet have fully operational Article 6 sovereign accounting capacity. That gap is precisely the “institutional seam” into which Verra inserts its insurance-based solution.
The problem is that this seam is not a stable, permanent space. The Article 6 worldview is brutally simple: the highest principle is the uniqueness of the sovereign ledger. In other words, if a tonne cannot be demonstrated to have been subtracted from a host country’s NDC accounting boundary, it cannot simultaneously be used by another entity at the international level. This is not a matter of Verra’s opinions, nor ICAO’s preferences; it is the accounting logic embedded in the Paris Agreement architecture itself.Therefore, when Verra repeatedly emphasizes that VCUs may be used under CORSIA if conditions are met, the decisive question is not “eligible or not,” but rather: among those conditions, is there evidence of Corresponding Adjustments (CAs) as required under Article 6? If not, on what basis are these units treated as international mitigation outcomes that have genuinely exited the host country’s sovereign accounting boundary? Once this question is asked directly, much of the surrounding narrative starts to structurally collapse.
Crucially, CORSIA has never claimed it can override Article 6. On the contrary, ICAO documents repeatedly underscore that CORSIA’s requirement to avoid double claiming must remain consistent with the Paris Agreement. This is why, after 2021, CORSIA introduces Host Country Authorization (LoA) and explicitly states that if CAs have not been completed, “additional assurance” is required. Verra’s insurance mechanism is designed to fill that “additional assurance” slot.
But here is the institutional problem: “additional assurance” is not an Article 6 accounting method. It is a risk-management tool meant to protect the user from compliance risk, yet it cannot prove—at the level of global carbon accounting—that the mitigation outcome is unique. That difference is the first key to understanding the Verra–CORSIA–Article 6 dispute.
Chapter 2 | What Exactly Is Verra’s “Insurance Mechanism”? It Does Not Solve an Accounting Problem — It Outsources Responsibility
To understand Verra’s insurance mechanism, the first step is to eliminate a common misunderstanding: this mechanism is not designed to prove that a mitigation outcome has completed Corresponding Adjustments (CAs). Instead, it is designed to absorb the risk of potential double claiming in situations where CAs are not yet completed. These are not the same category of solution; they operate at different institutional layers.
Structurally, Verra’s design contains three core elements.
First, there is a CORSIA Accounting Statement Contract—a legal undertaking signed by a responsible entity (which may be the project proponent, the credit holder, or a third-party guarantor). The obligation is straightforward: if it is later established that certain VCUs were subject to double claiming, the signatory commits to compensate affected airlines. The key word here is compensation, not ledger correction, and not retroactive CA completion.
Second, there is an approved insurance product. These insurance products are provided by specific insurers and technically reviewed by major intermediaries such as Howden. Functionally, this is simple: if the Accounting Statement Contract is triggered, the insurer pays. Payment may take the form of cash or an equivalent replacement, but its substance remains financial indemnification—not accounting adjustment.
Third, there is Verra’s role in approval and labeling. Through this process, Verra signals to ICAO and the market that certain VCUs carry sufficient assurance to be used under CORSIA. That has real operational value within a transitional CORSIA compliance context—but the dispute begins when the boundary of that functionality is blurred into the claim of “alignment with Article 6.”
In plain terms, Verra’s insurance mechanism converts a potential sovereign accounting failure into an insurable financial risk. For airlines, this is attractive: it reduces future compliance uncertainty. But for global carbon accounting, it is a dangerous substitution, because it encourages a false equivalence: “if someone can pay, then the accounts must be fine.”
In an Article 6 world, that logic does not hold. Sovereign accounting is not about who bears liability; it is about whether the mitigation outcome exists uniquely in the global ledger system. Whether a tonne exists as an internationally transferable unit depends on whether it has been subtracted from the host country’s NDC accounting boundary—not on whether someone is willing to compensate a buyer later. Insurance can compensate the user, but it cannot retroactively amend a country’s NDC accounting, nor can it create a legitimate CA record in UNFCCC reporting systems.
This is why, under PACM/Article 6 logic, Verra’s insurance mechanism can only be understood as a transitional risk tool, not a sovereign accounting substitute. If regulators and markets confuse these layers, integrity collapses—not because a credit is “immoral,” but because the system becomes vulnerable to financial instruments overriding accounting truth.
Chapter 3 | Why a LoA Without Completed CAs Is Functionally “Null” under the Paris Agreement Framework
Many defend Verra by saying: “At least there is a LoA; at least the host country agrees.” This sounds like sovereign endorsement—an implication that authorization alone should move the unit across a compliance threshold. But this is a classic institutional misread: a LoA is political authorization, not accounting reconciliation, and certainly not proof of sovereign asset transfer. In the Article 6 architecture, authorization is necessary but not sufficient. More importantly, once sovereign accounting is fully switched on, authorization without auditable reconciliation results is merely a well-worded document—not evidence that can stand in global carbon accounting. A simple analogy works: a LoA is like an “export permit,” while a CA is the actual “customs stamp plus ledger posting.” Without the stamp and posting, shouting with an export permit at the border does not mean the asset has legally left.
To make this precise, the most effective approach is to distinguish three types of LoA—because the market’s favorite trick is to package Type 1 as if it were Type 3.
Type 1: Pure Authorization LoA. The host says the mitigation outcome may be used internationally, but the document does not provide an auditable CA evidence chain, nor does it specify enforceable CA timing, method, responsible authority, and reconciliation pathway.
Type 2: Authorization-Plus-Promise LoA. The host commits to completing CAs in the future, but no actual subtraction evidence is provided.
Type 3: Authorization-Plus-Completion Evidence LoA. The LoA is accompanied by traceable information that links the unit to the national registry (NR)—status, serial identifiers, use labels—and provides a verifiable accounting record demonstrating that CAs have been completed, with an auditable trail that can be checked against reporting/ledger systems.
Only Type 3 can credibly be treated, in Article 6 accounting terms, as a unit that has “exited sovereign control” and become an internationally transferable mitigation outcome. So the claim that “a LoA without completed CAs is useless” is not a denial of LoA’s value; it is a recognition that Type 1 and Type 2 are intentions or promises, not accounting existence.
This requires an even harder point: in Article 6, CAs are not an optional add-on; they are the core act that constitutes the international mitigation asset. CAs do more than avoid double claiming. They are a ledger operation that declares: the tonne has left the host country’s NDC accounting boundary and has been transferred to international use, leaving a traceable subtraction mark in sovereign accounting records. CAs are not “moral assurances”; they are accounting events. And accounting events create the condition that the tonne cannot belong to two parties at once.
Without CAs, the mitigation outcome remains within the host’s accounting boundary—even if it has been traded repeatedly, even if a private registry shows retirement. In Article 6 terms, the host could still count it toward the NDC while the airline claims it under CORSIA. This is not merely possible; it is structurally unpreventable without CA. Therefore, a LoA without CA evidence cannot create accounting existence; it has not completed the “asset transfer ledger action.”
The deeper failure is that without CAs, the market cannot build a “NR → CA → International Use” evidence chain. A unit that is truly Article 6-aligned must be able to answer three audit-level questions:
- What is the unit’s unique identifier and status in the host country’s NR (serials/batches, use labels, rights status)?
- When and how were CAs completed (reporting period, subtraction quantity, adjustment direction, responsible authority, verifiable ledger record)?
- After CA, how is the unit legally authorized for international use (ITMO/A6.4ER use definition; eligibility for CORSIA/ETS/other compliance requirements)?
If a party can only present a LoA but cannot answer these questions, then it cannot prove the VCU was “transferred out” through NR and CA. It can only prove someone said “you may use it”—not that the tonne has been subtracted from sovereign accounting and has achieved uniqueness at the international level. For regulators, auditors, compliance procurement teams, and financial disclosures, this is the fatal gap: no accountability → no asset quality → only narrative value.
This is precisely where Verra’s insurance mechanism enters—and precisely why it is often misunderstood as “Article 6 substitution.” But the sober institutional truth is: insurance solves responsibility allocation, not accounting uniqueness; it reduces the user’s compliance risk, not the global ledger’s double-counting risk. Insurance plus contract logic means: if double claiming is later proven, airlines are compensated so they are not left exposed. But that compensation will not amend the host’s NDC, will not write a CA record into the NR, and will not generate a legitimate adjustment in UNFCCC accounting systems. It is money after the fact—not accounting before the fact. Like a “defective goods insurance,” it can refund you, but it cannot turn a defective item into a genuine one.
Thus, insurance cannot convert “no CA” into “CA completed.” It can only convert “no CA risk” into “someone will pay if it blows up.” Article 6 does not require someone to pay; it requires uniqueness. It requires auditable subtraction. The moment the market shifts attention from “are the accounts reconciled?” to “is the risk insured?”, it effectively permits the real question to be dodged: who does this tonne actually belong to? Without CA answering that, no financial architecture—however sophisticated—can be more than surface repair or, worse, an anesthetic that extends the life of a legacy market model.
Chapter 4 | Why Post-2021 VCCs Not Aligned with Article 6 Can Only Be Treated as “Junk-Grade”
We return to the statement that sounds harsh but is institutionally accurate: after 2021, voluntary carbon credits (VCCs) not aligned with Paris Agreement Article 6 can only be treated, under current conditions, as “junk-grade.” This is not a moral insult directed at project quality, developer intention, or whether some emission reductions occurred. It is a classification outcome produced by sovereign accounting logic. Once Article 6 is accepted as the final language of cross-border carbon, the classification is not optional; it is the end of a reasoning chain.
The year 2021 is a true dividing line not because of headlines or politics, but because it marks the shift from promise to operational accounting under the Paris Agreement. Before this, there existed a grey zone: mitigation outcomes could be generated outside UNFCCC systems; voluntary markets could define “offsetting” and “neutrality” language on their own; the relationship between national ledgers and private registries was not strictly enforced. But from 2021 onward, this grey zone began to shrink. Any new mitigation outcome must be assessed against NDC logic and must answer a core question: has this tonne been recognized, registered, and made unique within sovereign accounting?
This is why post-2021 issuance of large volumes of VCCs that are not aligned with Article 6 becomes increasingly indefensible. The core issue is not whether “some reduction occurred”; it is that these credits continue to use the old market language—offset, neutralize, comply—within a world that has been redefined by sovereign accounting. They claim offsetting value without providing sovereign-level evidence that the tonne was subtracted from the host’s NDC boundary. Institutionally, this resembles attempting to claim a tax deduction using outdated invoice rules after the tax code has changed. You can call it legacy, but you cannot call it a compliance asset.
The statement “only two countries are truly compliant and others are trying” may inspire sympathy, but it provides no accounting exemption under Article 6. Article 6 is cold: it does not recognize “on the right track,” “trying,” or “almost ready.” In accounting and compliance language, there are only two statuses: accounted and not accounted. If it is not accounted, it cannot be recognized. If it cannot be recognized, it should not be treated as a usable asset. This is not hostility toward developing countries; it is the minimum requirement a sovereign accounting system must maintain to prevent systemic distortion.
From this viewpoint, post-2021 non-aligned VCCs face not a “confidence problem” but a system position problem. In an Article 6 fully-on world, carbon units fall into three tiers:
- Sovereign units with completed CAs and auditable reconciliation across national registry and UN accounting channels.
- Units clearly labeled as contribution-only, explicitly not claiming offsetting, avoiding the compliance language space.
- Units without sovereign reconciliation that still attempt to occupy the “offset” language space.
Tier 3 has no legitimate institutional position. It simultaneously undermines ledger uniqueness and blurs the boundary between contribution and offsetting.
Within this classification logic, “junk-grade” stops sounding emotional and becomes a blunt institutional descriptor. It does not mean “no climate value in any sense.” It means no compliance position. In a sovereign accounting system, a unit that cannot be reconciled cannot function as a compliance asset—no matter how good its story, how polished its standard, or how credible its marketing. Such units may still have relevance in demonstration projects or philanthropic funding, but in compliance, markets, and financial disclosure language, they are forced into categories like unusable, non-offsettable, non-recognizable. The word “junk” is used because markets need a brutally clear reminder: these units are being structurally excluded by the new system.
So the real issue is not whether the wording is “too harsh.” The real issue is whether the market is willing to face the consequence. In the Article 6 fully-on future, no one receives accounting amnesty for trying hard, spending money, or having good intentions. The only units recognized will be those that can prove sovereign reconciliation and non-overlapping claims. Everything else must either honestly retreat into the “contribution” lane—or be treated as a failed asset.
This is not a moral verdict, and not a political allegiance.
It is simply the irreversible institutional judgment imposed by the sovereign accounting era on legacy market language.
Conclusion | Insurance Is Not CA; LoA Is Not NR; VCU Is Not a Sovereign Mitigation Asset (Approx. 644 words)
Overall, Verra’s insurance mechanism under CORSIA is not designed to complete the sovereign accounting process required by Paris Agreement Article 6. It is a transitional risk arrangement created to prevent immediate market disruption while sovereign accounting is still unevenly implemented. What it manages is the compliance uncertainty faced by airlines and users—not the uniqueness of mitigation outcomes in the global accounting system. If this distinction is not clearly recognized, the mechanism is easily misread as “Article 6 alignment,” producing a structural misplacement at the institutional level.
In the logic of Article 6, Corresponding Adjustments (CAs) are the non-substitutable core act. CA is not merely about avoiding double claiming; it is the accounting event that declares a tonne has been subtracted from the host country’s NDC boundary and transferred to international use. Without CA, no sovereign transfer exists; without sovereign transfer, no international mitigation asset exists. Regardless of how sophisticated insurance products may be, they can only assume post-fact liability and compensation obligations—they cannot amend national ledgers, write adjustments into UNFCCC accounting channels, or perform sovereign accounting actions.
Likewise, a LoA (Host Country Authorization) is a political and policy authorization instrument, not an accounting proof. It can express “permission to use,” but it cannot prove “ledger subtraction.” Without an auditable CA evidence chain, a LoA remains an intention or promise and cannot constitute accounting existence under Article 6. Therefore, in a fully sovereign accounting world, a LoA without completed CAs is functionally null.
For the same reason, even if VCUs are accepted for use under CORSIA during a transitional period, they do not automatically become sovereign mitigation units. Eligibility within a scheme and completion of sovereign reconciliation are different layers of reality. When Article 6 becomes the only language for cross-border carbon, the determining criterion is the existence of a complete “NR → CA → International Use” evidence chain. That is the standard by which a unit’s legitimacy is finally decided.
This is not a matter of values, nor a matter of choosing sides.
It is the irreversible institutional conclusion that follows once sovereign accounting becomes the operating system of global carbon.
References
- Verra — VCS in Compliance Markets
https://verra.org/programs/verified-carbon-standard/vcs-in-compliance-markets/ - Verra — Verra marks key CORSIA milestone with release of approved insurance products
https://verra.org/verra-marks-key-corsia-milestone-with-release-of-approved-insurance-products/
