Bringing Carbon Credits to Market

Why It Matters

The imbalance threatens airlines’ ability to meet regulatory obligations and could drive up compliance costs, influencing the economics of international aviation as the mandatory CORSIA phase looms.

Key Takeaways

• Only 32 Mt credits available by early 2026, demand rising sharply
• LoAs now issued by Rwanda, Tanzania, Laos, Gambia, Malawi
• Verra and BURN expand African clean‑energy credit pipelines
• Off‑take agreements lock prices but add project‑risk exposure
• Pricing volatility includes government fees, insurance, and intermediaries

Pulse Analysis

CORSIA’s transition to a mandatory framework in 2027 will push the aviation sector into uncharted regulatory territory. While airlines needed 55.6 million tonnes of eligible emissions units (EEUs) in 2024, the market supplied just 32 million tonnes for the first quarter of 2026. IATA projects demand could surge to as high as 236 million tonnes by the end of the first phase, creating a supply‑demand mismatch that could force carriers to seek higher‑priced credits or risk non‑compliance. Understanding this gap is essential for investors and airlines planning their climate‑risk strategies.

Supply constraints stem largely from the slow issuance of Letters of Authorisation (LoAs), the bureaucratic green light that lets credits count toward CORSIA compliance. Countries such as Rwanda, Tanzania, Laos, Gambia, Malawi and Sierra Leone have begun issuing LoAs, signaling a modest but meaningful shift in policy mindset. Meanwhile, project developers like Verra and BURN are scaling clean‑cooking, household‑energy, and renewable‑energy projects across Africa and Latin America, generating the credits needed for the market. Their success hinges on robust verification standards and the ability to replicate models quickly across regions.

Pricing volatility adds another layer of complexity. Airlines are experimenting with off‑take agreements to lock in lower rates before credits achieve full eligibility, yet these contracts expose carriers to project‑delay risks. Additional costs—government charges, insurance, and intermediary fees—inflate the effective price per tonne, often diverging sharply from headline market quotes. As coordination improves among airlines, developers, governments, and ICAO, the market may evolve into a more predictable ecosystem, but until supply catches up, airlines must balance cost, risk, and regulatory compliance carefully.