CORSIA: Market developments and forecast scenarios

The Voluntary Carbon Market (VCM) is entering a decisive chapter. Amid political hesitation, budget tightening, and an oversupply of legacy credits, confidence in the market has wavered. But there are signs of resilience — credit quality is improving, consolidation is boosting efficiency, and Article 6 may inject the momentum needed to catalyze a turnaround. At the heart of this shifting landscape lies CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation), where AlliedOffsets’ new forecasting model provides a much-needed compass.

Below is a summary of the report, full report can be downloaded here.

In this report, AlliedOffsets explores the supply, demand, and pricing in the voluntary carbon market (VCM) for CORSIA credits, highlighting the challenges and opportunities for different emission scenarios. Some of the key findings includes: 

Supply Constraints:

• Only 15 million credits currently meet the eligibility criteria for CORSIA First phase, representing less than 10% of projected demand (101–148 million credits).

• Potential supply could reach 1.8 billion credits by 2027; however, 81% are from pending projects yet to be validated, and substantial delays are expected due to complex regulatory and authorization processes.

• Demand for CORSIA-aligned credits is forecasted to outstrip supply unless significant policy and market interventions occur. 

• Retirements of CORSIA-aligned credits increased over 200% annually from 2021 to 2024, driven by non-aviation sectors like energy. Airlines currently account for only 6% of these retirements.

Pricing Trends:

• Prices for CORSIA-aligned credits have risen sharply, with some increasing fourfold in 2024 due to supply constraints.

• Projections suggest prices could reach $14–$16 per credit by 2027, particularly in high-emission scenarios, significantly exceeding the current market averages.

Policy Influence:

• Enforcement frameworks and penalty mechanisms, such as the UK's £100 per tonne penalty, are crucial for ensuring compliance.

• Uncertainties surrounding major markets like China and the United States add complexity to supply and demand projections.

Forecast Scenarios:

1. Undersupply: Insufficient supply by 2027 could lead to non-compliance among airlines without robust enforcement, driving prices beyond $20 per credit and limiting the broader adoption of CORSIA-aligned credits.

2. Tight but Sufficient Supply: If supply increases ~x10, the aviation sector could meet compliance requirements, but rising demand from other sectors may continue to elevate prices. Enforcement mechanisms will be vital to achieving an 80% compliance rate globally.

3. Success Scenario: Adequate supply and price stability, supported by strong regulatory frameworks, could ensure compliance and bolster the credibility of CORSIA as a market-driven solution for reducing aviation emissions.

Outlook:

To meet CORSIA’s objectives, the supply of eligible credits must increase tenfold within the next two years. Stakeholders must  secure corresponding adjustments, and incentivize high-integrity credit generation. Clear and robust policy measures and market-based penalties will be key for addressing compliance gaps in the market. 

Overview of current landscape

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is entering a critical phase as the aviation sector begins to address its carbon offsetting obligations under the scheme. This report explores the dynamics of supply, demand, and pricing in the voluntary carbon market (VCM) for CORSIA credits, highlighting the challenges and opportunities for compliance.

The most pressing concern regarding CORSIA First phase is lack of eligible supply. In order for a registry to provide a CORSIA-eligible tag to an issuance, credits must comply with ICAO methodological and vintage criteria, and have either received a corresponding adjustment (CA) from the project’s host country or have an insured LoA. Currently, only one project has any issued credits that fulfill this criteria: ART102 Guyana, with 15.9m issued eligible credits, or less than 10% of ICAO’s medium-emissions scenario projected demand. 

Existing supply of CORSIA credits: issued credits

Only 111m credits that fulfill ICAO’s eligibility criteria (pending corresponding adjustment) have been issued to date, plus an additional 38m from conditionally approved registries. Excluding credits from the United States and projects likely to be excluded due to their project type aligning to a country’s NDC, the 111m falls to 94m. 

To put this into perspective, ICAO predicts offsetting requirements for CORSIA First phase to be between 101m and 148m. Therefore, credits yet to be issued will need to comprise CORSIA First phase supply.

Forecast supply of CORSIA credits 

AlliedOffsets estimates that up to 1.8b CORSIA First phase eligible credits could be issued in time for the November 2027 offsetting deadline. However, the actual availability of credits will likely be much smaller. Of the 1.8b credits, 81% (1.48b) are projected issuances from projects not yet validated by their registry (“pending projects”), and 128m are expected to be issued in the United States or from a sector covered by its host country NDC (from both pending and actively issuing projects). 

Once credits are issued, developers need to secure either an insured LoA or a corresponding adjustment in order for credits to become fully eligible. The time frame to do this depends on existing Article 6 frameworks within a project’s host country and host country willingness to provide a corresponding adjustment. 

CORSIA Supply dynamics 

Based on our LoA and country regulation assessments, plus expected time between vintage and issuance, AlliedOffsets forecasts only 543m credits to be issued and receive necessary protection against double counting by November 2027, including the 15m existing eligible credits. The vast majority of these credits (395m) are not yet issued, and from projects that have not received an LoA for any previous issuances. Excluding supply from the United States and from sectors included in NDCs for the largest 37 countries by potential CORSIA First phase supply, the total drops to 176m credits, of which only 33m have been issued.

CORSIA Demand dynamics

In March 2025, ICAO released predicted offsetting requirements for CORSIA First and Second phases. ICAO predicts CORSIA First phase compliance requirements to be between 101M and 148M credits. Based on ICAO emissions by state-pairs and data on international flights, AlliedOffsets has estimated the proportion of total demand attributable to each airline’s host state, between each state pair, through CORSIA Second phase. 

CORSIA forecasting model outputs 

Due to uncertain supply and political support for CORSIA, the aviation industry is having to make decisions about when and how to source CORSIA-aligned credits with incomplete information.

In order to fill this gap, AlliedOffsets has developed a forecasting model to predict how demand and price will fluctuate under different supply scenarios. The interplay between supply, demand, and price will ultimately determine the success or failure of CORSIA as a scheme. 

Forecast Scenarios

1. Undersupply scenario: Insufficient supply by 2027 could lead to non-compliance among airlines without robust enforcement, driving prices beyond $20 per credit and limiting the broader adoption of CORSIA-aligned credits.

   With prices exceeding predicted market rates (~$8) by at least 100%, we would expect that general VCM demand for CORSIA-eligible credits to drop while demand for CORSIA-aligned credits that may not have a corresponding adjustment or insured LoA stays high.

2. Tight but Sufficient Supply: If supply increases ~x10, the aviation sector could meet compliance requirements, but rising demand from other sectors may continue to elevate prices. In this scenario enforcement mechanisms will be vital to achieving an 80% compliance rate globally.

3. Success Scenario: Adequate supply and price stability, supported by strong regulatory frameworks, could ensure compliance and bolster the credibility of CORSIA as a market-driven solution for reducing aviation emissions.

Summary

In summary, CORSIA has buy-in from the majority of the world but faces significant challenges.

Political uncertainty

The first challenge is political uncertainty. Two of the top 4 largest countries by projected CORSIA demand, the US and China, have indicated no or uncertain support for the scheme. In the case of the US, airline exposure to external compliance schemes (e.g. EU ETS) will likely mean that airlines will comply on a voluntary basis. China’s lack of support for CORSIA offsetting may cause a more significant issue, if Chinese airlines feel no pressure to comply. The two countries’ predicted offsetting requirement combined is approximately 25% of total CORSIA demand for the First phase, so lack of buy-in from both parties could lead to a demand failure. 

Supply uncertainty

The second, and most pressing, challenge facing CORSIA is supply uncertainty. While it is distantly possible for there to be an over-supply of eligible EEUs by the offsetting deadline, likely supply scenarios are much more tight. 

AlliedOffsets predicts that, excluding NDC sectors and credits from the US, the maximum available supply will be approximately 176M credits. With the vast majority of those credits not yet issued, and many host countries having insufficient regulatory infrastructure to issue corresponding adjustments, there is significant risk of a supply failure. 

In a tight-but-sufficient supply scenario, it is likely that non-compliance demand for CORSIA-aligned credits will drive prices above market rates. Therefore, state-level enforcement frameworks will be necessary to ensure compliance in most emissions scenarios. 

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