Soaring CORSIA Credit Prices: Driving Aviation's Transition

What is CORSIA?

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), developed by the International Civil Aviation Organization 1  (ICAO), is a global offsetting scheme designed to limit the growth of international aviation emissions.

Airlines can purchase CORSIA credits to offset their excess emissions beyond 2020 levels. This incentivizes investment in emission reduction projects and promotes sustainable development.

CORSIA aims to cap international aviation emissions at 2020 levels. Through two implementation phases - a voluntary phase (2021-2023) and a mandatory phase (from 2024) - it encourages global sustainability investments and aligns the aviation sector with broader climate goals.

CORSIA credit prices

CORSIA credit prices are expected to fluctuate significantly based on supply and demand.

• Phase I (2024-2026): Prices are projected to range from $18 to $51 per ton of CO2, with tight supply potentially driving prices higher due to a potential deficit of 12-43 million tons of CO2.

• Phase II (2027-2035): Prices could soar to $27-$91 per ton driven by increased demand from both aviation and other sectors.

Supply and demand dynamics, influenced by factors such as aviation growth, sustainable aviation fuel (SAF) adoption, and regulatory developments, will ultimately determine the final price trajectory.

CORSIA credit demand

Demand for CORSIA credits varies significantly based on the growth rate of the aviation industry and the adoption of sustainable aviation fuels (SAF).

• High-Demand Scenario: Strong aviation growth and slow SAF adoption lead to high offsetting needs (137 MtCO2e in Phase I and 1,299 MtCO2e in Phase II).

• Medium-Demand Scenario: Moderate growth and increased decarbonization lower demand (123 MtCO2e in Phase I and 1,006 MtCO2e in Phase II).

• Low-Demand Scenario: Limited growth and poor SAF adoption minimize requirements (106 MtCO2e in Phase I and 502 MtCO2e in Phase II).

CORSIA credit supply

The supply of eligible CORSIA credits faces several challenges:

• Limited Supply: Currently, only a small fraction of credits meet Phase I criteria.

• Regulatory Challenges: Slow progress in developing national regulations hinders supply growth.

• Lack of Authorizations: The absence of authorizations from host countries further constrains supply.

Challenges

While CORSIA provides a framework for emissions reduction, the aviation industry faces significant challenges.

• Rising Costs: Airlines must contend with increasing credit prices, affecting profitability and ticket prices.

• Decarbonization Strategies: Investing in SAFs, fleet upgrades, and operational efficiencies is crucial for long-term sustainability and reducing reliance on offsets.

• Regulatory Evolution: Continued collaboration with governments and international organizations is essential to streamline regulations, expand credit supply, and ensure the environmental integrity of carbon markets.

CORSIA plays a pivotal role in the aviation industry's efforts to mitigate climate change. However, the complexities of credit pricing, supply constraints, and evolving regulations will significantly impact the industry's long-term success. As demand for high-quality offsets grows, the aviation industry must collaborate with carbon markets to develop innovative and sustainable solutions for the future.