Our Take: Grounded or Soaring – The Future of CORSIA in Meeting Aviation’s Climate Goals

Written by Jay Tipton

The aviation industry is a major contributor to worldwide greenhouse gas (GHG) emissions, accounting for approximately 2-3% of total carbon dioxide (CO2) emissions globally. As international travel continues to grow, emissions from aviation are expected to rise, with projections that it could make up an enormous 25% of global GHG emissions by 2050.

Needless to say, this poses a significant challenge to our global climate goal of hitting net-zero emissions by 2050.

To address this, the International Civil Aviation Organization (ICAO) introduced the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), a global framework aimed at reducing emissions from international aviation.

Established in 2016, CORSIA is designed to complement other decarbonization efforts, such as technological innovation and sustainable aviation fuels (SAF). The scheme works by requiring airlines to offset their emissions growth by purchasing carbon credits.

This essay examines the mechanics of CORSIA and its broader impact on the voluntary carbon market (VCM), as well as its role in helping the aviation industry achieve its carbon reduction goals for a more sustainable sector.

What is CORSIA?

CORSIA is a market-based measure developed by ICAO with the goal of capping emissions from international aviation at 2019-2020 levels. The initiative was launched as a response to the aviation sector’s growing emissions, which are difficult to reduce through traditional decarbonization strategies alone.

CORSIA is requiring participating airlines to offset any emissions growth beyond a baseline set at the average emissions of 2019. This mechanism encourages airlines to invest in cleaner technologies and fuels while also making them accountable for emissions that cannot be immediately eliminated.

The scheme is designed in a way that balances the need for environmental protection with the economic realities of the airline industry. CORSIA allows airlines to invest in carbon credits from a variety of projects that represent emissions reductions, avoidance, or removals that are verified through stringent standards to ensure environmental integrity. CORSIA is not meant to replace other mitigation efforts but to complement them, providing a cost-effective way to bridge the gap between current capabilities and long-term sustainability goals.

How CORSIA Works

CORSIA is being rolled out in three key phases (Figure 1).

Pilot Phase (2021-2023): During this phase, participation was voluntary, allowing states (countries) to opt in as they developed their capacity to meet the scheme’s requirements. The voluntary nature of this phase provided flexibility to early adopters, which allowed them to test their readiness.

First Phase (2024-2026): For the current phase, participation remains voluntary. The expectation is that more states and airlines will join as the scheme gains momentum and international pressure for emissions reductions increases.

Second Phase (2027-2035): This phase is mandatory for states with significant international aviation activity. States that meet certain thresholds based on their share of global air traffic will be required to participate, ensuring that the majority of global emissions from aviation are addressed under the scheme. Least Developed Countries, Small Island Developing States, and Landlocked Developing Countries are exempt unless they volunteer to participate.

*Figure 1 – 3 Phases of Implementation. Voluntary participation of states in CORSIA’s pilot phase (2021–2023) and first phase (2024–2026).*

CORSIA’s primary mechanism is carbon offsetting. Airlines will be required to offset their annual emissions above 85% of their 2019 baseline by purchasing carbon credits, also known as Eligible Emissions Units (EEUs). These credits are generated by projects that reduce, avoid, or remove GHG emissions. To ensure the credibility of these credits, ICAO has established strict eligibility criteria that projects must adhere to and provide verifiable emissions impacts. To achieve this, carbon credit standards that oversee projects (e.g., Gold Standard) must apply for CORSIA eligibility. We’ll expand more on this later.

Figure 2 below illustrates how airlines’ offsetting requirements under CORSIA are calculated using a blend of sectoral growth factors (reflecting overall industry-wide emissions growth) and individual airline growth factors (specific to each airline’s emissions increase). Once an airline’s offsetting needs are determined, operators report their use of CORSIA-eligible fuels, such as Sustainable Aviation Fuels (SAF) and Lower Carbon Aviation Fuels (LCAF), for that compliance period. The state then adjusts the operator’s final offsetting requirements, deducting the emissions reduction benefits gained from these eligible fuels to arrive at the final offsetting obligation.

*Figure 2 – How to calculate CO2 offsetting requirements*

The airline proceeds by purchasing and canceling eligible emissions units to meet its offsetting obligations. It then submits a verified Emissions Units Cancellation Report to the state, which reviews and sends aggregated compliance data to ICAO. This process combines fuel use and emissions unit cancellations to satisfy CORSIA’s offsetting requirements efficiently.

This system ensures that airlines with larger emissions growth are responsible for a greater share of the offsetting burden. Ideally, this should incentivize them to adopt more sustainable practices. At the same time, it promotes investment in carbon credit projects globally, helping to reduce overall GHG emissions.

Impact on Carbon Markets and Carbon Credits

Starting in 2025, 129 states will voluntarily participate in CORSIA, including major aviation hubs and emerging markets. Countries like the United States, European Union member states, and Canada are actively involved. Notably, China is not participating.

In the second phase, beginning in 2027, participation becomes mandatory for countries that account for over 90% of international aviation emissions. The broad participation of states is crucial for CORSIA’s success, as international aviation spans borders and requires coordinated global action. By involving both developed and developing nations, CORSIA hopes to create a level playing field while addressing the emissions from a global industry.

Demand for Carbon Credits

CORSIA will generate significant demand for carbon credits. As airlines seek to comply with the scheme’s offsetting requirements, they will need to purchase increasing amounts of EEUs. This demand has the potential to drive growth in the VCM and consequently create opportunities for project developers and investors alike. This increased demand is also likely to boost the development of new carbon credit projects.

A July 2024 report from IETA and Allied Offsets stated the potential compliance demand for 2024 and 2025 is estimated to range between 17 and 80 million credits per year. Other sources report demand could reach as high as 150 million credits per year. Even on the conservative end, this is a huge amount of carbon credits that will be required.

Supply of Carbon Credits

CORSIA only allows carbon credits from projects that meet their specific eligibility criteria, which are designed to ensure that the credits represent real, additional, and permanent emissions reductions. As of November October 2024, for the 2024-2026 Compliance Period (First Phase), six standards – the American Carbon Registry (ACR), Architecture for REDD+ Transactions (ART), Climate Action Reserve (CAR), Global Carbon Council (GCC), Gold Standard (GS), and Verra (VCS) – are fully approved for CORSIA eligibility, meaning that their credits can qualify for airlines to meet offsetting requirements during this period.

Another important factor affecting credit supply is the Integrity Council for the Voluntary Carbon Market (ICVCM). The ICVCM framework was designed to ensure that carbon credit standards and methodologies, upon achieving Core Carbon Principles (CCP) approval, meet high-quality standards. Significantly, ICVCM’s framework closely aligns with CORSIA’s requirements, meaning that CCP-eligible standards should theoretically also qualify for CORSIA eligibility.

Furthermore, IETA and Allied Offsets reported on the effects of ICAO’s March 2024 decision to limit additional registries for the First Phase. Presently, the market includes 7 million fully authorized credits sourced from an ART project in Guyana. Additionally, 28 million ACR credits meet ICAO requirements but lack Letters of Authorization (LoAs) from their host countries, preventing them from reaching full compliance. Another 42 million credits from standards, such as VCS and GS, could be added if they receive LoAs from host countries.

This situation shows the critical need for final program approvals and host-country authorizations to meet the rising demand for CORSIA-compliant credits. As the market grows, these elements will be important for supporting airlines in meeting offsetting obligations and ensuring stability in the CORSIA credit supply.

Airline Case Study

Let’s use a case study involving Delta Air Lines, a major American airline, to understand how CORSIA’s offsetting requirements impact a large carrier and the overall market.

As mentioned earlier, according to CORSIA guidelines, beginning in 2024, airlines will be required to offset any emissions that exceed 85% of their 2019 baseline. We will consider Delta’s emissions baseline for 2019 and its reported emissions for 2023 as a stand-in for 2024 emissions. Delta’s total GHG emissions for 2019 were approximately 48.6 million metric tons of carbon dioxide equivalent (CO2e). Using CORSIA’s threshold, 85% of this 2019 baseline would be around 41.3 million metric tons.

In 2023, Delta’s emissions reached roughly 53.3 million metric tons, which exceeds the 85% threshold by about 12 million metric tons. Based on this figure, Delta would need to purchase approximately 12 million CORSIA-eligible carbon credits for 2023-level emissions (assuming similar emissions levels for 2024).

Notably, this simple Delta compliance calculation does not include potential reductions from CORSIA-eligible fuels, such as SAF or LCAF. The use of these fuels could decrease Delta’s final offsetting requirement, as emissions benefits from these fuels are deducted from the total emissions needing offsets. That said, Delta’s GHG Emissions Inventory shows limited use of SAF, so that is unlikely to impact the equation. Additionally, this calculation does not factor in any adjustments specific to the United States, which could also impact the final number of credits Delta needs to purchase.

The bottom line is that this case study shows the significant demand Delta and other major airlines are likely to face in securing sufficient carbon credits, especially if emissions remain at current levels or continue to rise. With CORSIA’s phased requirements, Delta’s offsetting obligations highlight both the potential strain on credit availability and the financial implications of rising credit prices driven by increased demand across the aviation sector.

As airlines work to meet CORSIA requirements, they face the dual challenge of reducing emissions through operational improvements, such as fuel efficiency and sustainable aviation fuels, while also acquiring enough high-quality carbon credits to cover any remaining emissions growth.

Challenges and Future Outlook

A central challenge for CORSIA lies in achieving a sustainable balance between the supply of and demand for high-quality carbon credits. Current projections indicate that demand for CORSIA-eligible credits will likely outstrip supply as more airlines enter the program, particularly as offsetting requirements increase in the upcoming mandatory phase. This anticipated shortage of eligible credits presents a potential bottleneck for CORSIA’s success, which could potentially limit airlines’ ability to meet their offsetting obligations.

To sustain a reliable supply of eligible credits, it is important that continued investment in new high-integrity carbon credit projects and careful management of existing ones will be essential to meet CORSIA’s standards.

However, as demand rises, credit prices are likely to increase, which could introduce additional financial pressures on airlines with large emissions footprints. Higher credit prices, while potentially spurring more carbon project development, may ultimately impact airline operations and could lead to increased costs passed down to consumers.

As CORSIA enters its mandatory phase, addressing these supply constraints will be fundamental to the scheme’s long-term efficacy and the aviation industry’s ability to contribute meaningfully to global emissions reduction goals.

Other CORSIA Considerations

When considering CORSIA’s future, several additional factors influence its potential success and adaptability.

A key factor is the growing demand for carbon credits across industries outside of aviation. The “CORSIA-eligible” label provides an additional layer of quality assurance, enhancing the credibility of these credits. This endorsement makes CORSIA-approved credits particularly appealing to companies in other sectors seeking high-quality, verified offsets.

Another consideration is the timeline. Airlines have until January 2028 to purchase the required credits, allowing time for potential updates in program approvals and the issuance of LoAs. This window could also enable the market to expand, encouraging the development of new standards, projects, and credit sources. Such developments could alleviate potential supply constraints while ensuring a variety of high-quality offsets are available for airlines.

The next consideration is the emphasis on quality over quantity. As the market shifts towards verifiably high-quality credits, there is growing scrutiny over credits that may lack transparency or verification, often referred to as “junk” credits. While CORSIA will face a tightening balance between supply and demand, the priority remains on quality. Ensuring airlines cannot offset emissions using low-quality credits is essential for maintaining the scheme’s credibility and achieving genuine sector-wide emissions reductions.

Finally, CORSIA is still in its early stages and will likely require refinements. As the program advances, adjustments may be necessary to baseline years, credit eligibility criteria, and the stringency of offsetting requirements. With advancements in technology and the emergence of new emissions reduction strategies, CORSIA’s focus may gradually shift from offsetting to direct emissions reductions within the aviation sector. These potential modifications would enhance CORSIA’s impact, supporting its role in reducing aviation’s carbon footprint more directly and effectively over time.

Conclusion

CORSIA represents a critical step toward reducing the carbon footprint of international aviation. By requiring airlines to offset their emissions growth, it provides a mechanism for addressing the environmental impact of a hard-to-decarbonize sector.

However, the success of CORSIA will depend on several factors, including the availability of high-quality carbon credits, the balance of supply and demand in the carbon markets, and the ongoing commitment of participating countries and airlines.

As the scheme evolves, it has the potential to drive significant progress in both the aviation industry and the broader effort to mitigate climate change. With careful management and international cooperation, CORSIA could serve as a model for other sectors seeking to reduce their emissions and contribute to global climate goals.

Cover picture by Frank Cone