Base Carbon: Call Notes 7/22
Water Tower Research interview with Wes Fulford.
Wes Fulford, the President of Base Carbon (BCBN), recently interviewed with Water Tower Research. You can watch the interview here.
Call Notes
CORSIA, the global mandatory offsetting scheme for airlines, is ramping up its Phase One, which runs until 2026. This is expected to be a significant driver of demand for the voluntary carbon markets (VCMs). Demand from CORSIA under this phase could be up to 250 million tons of CO2.
The impact of any potential political outcome in the United States regarding CORSIA should be limited because 126 countries have mandatory compliance. In the company's view, knocking that down to 125 isn’t a large concern to market dynamics. CORSIA is global.
ICAO, the approval body presiding over the CORSIA scheme, is conducting a meeting in November to outline offsetting requirements moving forward. Corporates looking to secure supply would likely start to position themselves around or before this time.
Using SAF fuel to mitigate airline emissions currently costs $400-$700 per ton of CO2, compared to the latest ICE CORSIA futures price of $34. Given the current economics, airlines should prefer to use carbon credits.
There are only around 25-30 carbon projects in the VCMs that are currently eligible to be used in the CORSIA scheme… so there will be a massive undersupply in this market.
Base is confident that the company will receive a corresponding adjustment (CA) label for the credits generated from its Vietnam project. They think they should be able to get approval once Vietnam finalizes new legislation about the carbon markets. SIPCO, the developer of the Vietnam project, already has four other CA-labeled projects and a vast portfolio of projects in general. So, the company knows what it’s doing and has the experience to work with the government to get that CA label.
The third issuance of carbon credits in Vietnam is underway right now. Base should receive more credits in early Q3, and the issuance is being processed. The fourth credit issuance from the project will happen early next year.
Base would choose to exercise their option to expand the Vietnam project’s size if they get a corresponding adjustment there.
Both the Vietnam and Rwanda cookstove projects are modeled out assuming that the credits will be sold for $5-$10… if they’re eligible for CORSIA and get sold for $30+, then they will be raking in cash. Just the 2 million credits from Rwanda would be worth $60 million… nearly double the company’s current market cap.
Disclaimer: I’m long Base Carbon. I hold an equity position that was acquired at an average share price of $0.35. I was not compensated by the company to create this post.
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