Navigating the Current Impasse
The global aviation sector continues to engage with the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). However, the market for Phase 1 eligible carbon credits is encountering a complex landscape marked by supply limitations and fluctuating buyer sentiment.
Recent developments highlight a trend of cautious engagement from airlines, with most procurement activities focusing on relatively small volumes. This tentative approach underscores the uncertainties that still surround CORSIA Phase 1 implementation, especially as buyers and sellers weigh long-term viability and credit quality.
Credit Sourcing Begins with Caution
behaviourTo date, 15 airlines have secured Phase 1 eligible credits through procurement initiatives from entities such as IATA, Guyana, Mercuria and Xpansiv. Notably, transaction sizes often remain modest, ranging from 10000 to 20000 metric tons of carbon dioxide equivalent. This restrained behavior suggests airlines are testing the operational and regulatory reliability of this emerging compliance mechanism.
A few outliers have attempted to procure larger volumes, stretching into the hundreds of thousands. These cases, however, have largely stalled due to price sensitivity and a limited pool of verified credits. Long-term purchase agreements have also been slow to materialize, affected by delays in the eligibility tagging of certain projects.
Supply Set to Grow but Questions Remain
There is reason for guarded optimism. The upcoming months are expected to witness increased availability of credits, especially from cookstove projects. However, a critical factor shaping demand lies in insurance requirements for CORSIA eligibility. Most carbon registries now require insurance coverage to protect against revocation risks between the issuance of a host country Letter of Authorization and the application of Corresponding Adjustments.
At present, only insurance provided by the Multilateral Investment Guarantee Agency is accepted by the Gold Standard registry. This restricts eligibility to a narrow slice of the market and adds an extra layer of complexity for developers hoping to scale up supply in time for heightened demand.
Methodological Shifts Add to the Challenge
Verra’s cookstove methodology VMR0006 was recently deemed ineligible for CORSIA Phase 1. Developers must now pivot to the VM0050 methodology and ensure coverage under Verra’s soon-to-be-published insurance criteria. This shift introduces logistical and financial uncertainty, making it harder for project proponents to guarantee near-term supply.
Nonetheless, some developers remain hopeful. While the pathway may be slow and riddled with procedural changes, new methodologies and insurance frameworks may ultimately enable a more robust supply pipeline by late 2025.
Quality and Selectivity: Emerging Themes
Interestingly, the demand side is not entirely shaped by compliance pressure alone. Some airlines and institutional buyers are signaling interest in higher-quality projects, particularly those tied to specific regions or co-benefit categories. This reflects a growing preference for carbon credits that go beyond mere eligibility, signaling a shift toward impact-driven procurement.
Moreover, registry-specific demand behavior is emerging. For instance, some buyers are currently excluding credits issued by the Global Carbon Council. While the total eligible supply from this registry may reach up to two million metric tons during Phase 1, market sentiment remains reserved.
A Quiet Period before the Buildout
As many airlines have until January 2028 to retire credits for Phase 1 compliance, immediate demand pressures remain relatively subdued. Some market analysts refer to this period as the year of building. They anticipate that a more active market with greater liquidity will develop in 2026 and beyond.
This buffer period is viewed by some as an opportunity. Developers and registries can fine-tune methodologies, expand insurance options, and improve transparency to reduce buyer hesitation. Early engagement by select airlines also hints that proactive compliance strategies could offer long-term advantages in cost and reputation.
Looking Ahead with Constructive Realism
While the current market may seem fragmented and slow, it is evolving. The interplay between regulatory updates, project verification pathways, and buyer education is shaping a future where CORSIA may emerge as a more stable compliance instrument. The gradual nature of this evolution suggests that progress may not always be fast, but it is likely to be deliberate and aligned with broader sectoral goals.
The CORSIA Phase 1 carbon credit market is more than a compliance mechanism. It is becoming a litmus test for how aviation players balance quality, cost, and credibility in their climate actions. The fact that several airlines are not waiting until the last minute signals a shift in market culture—one where foresight and engagement may become as valuable as the credits themselves.