CORSIA Phase 1 cookstove supply tighter than market expects as LOA constraints, rising costs bite

The pool of deliverable Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) Phase 1 (CP1) cookstove credits is likely to be materially smaller than the market currently assumes, and at prices that may not reflect the cost of producing them, according to Key Carbon co-founder and chief executive Luke Leslie.

Leslie told Fastmarkets that current supply expectations were “massively overestimated,” with limited government capacity to issue letters of authorization (LOAs), declining crediting rates under updated fraction of non-renewable biomass (fNRB) rules and rising host country charges all constraining the pipeline.

He said reduced investment in new stove deployment among major developers was the clearest forward indicator of what was coming. “You are going to get a big supply crunch,” he said.

Key Carbon’s own Nigeria pipeline illustrates the gap between headline LOA volumes and deliverable supply. While Nigeria’s LOA covers 5.2 million tCO2e, Key Carbon said it currently has capacity to deliver around 3.4 million tCO2e into Phase 1, with the remainder subject to further investment for Phase 2, where the company indicated potential capacity of 4 to 8 million tCO2e per annum.

The company is pursuing the insurance route to achieve Phase 1 eligibility and said it was at an advanced stage, with credits expected to be issued within approximately six weeks. The LOA applies specifically to CORSIA rather than authorization toward other countries’ nationally determined contributions (NDCs).

Rather than pre-selling ahead of CP1 tagging, Key Carbon said it was exploring bilateral discussions and a potential auction, which could provide one of the first transparent price discovery mechanisms for CP1 cookstove credits in a market where bilateral trades have dominated and public price signals have remained opaque.

On costs, Leslie described a broad cost curve across the sector, with marginal producers requiring prices above $20 per tCO2e to remain viable. Tighter fNRB rules, rising host country charges and ongoing methodology upgrades are all pushing that curve higher.

He said some developers were currently selling credits below sustainable levels to generate near-term cashflow. “That behavior will be temporary,” he said, adding that it was suppressing near-term price signals rather than reflecting underlying market value. With costs rising and supply set to tighten, current sub-$20 pricing is unlikely to reflect where the market will need to clear over the medium term.

Airline engagement has increased from minimal six months ago to more active discussions, though buyers remain predominantly price-sensitive and many are still in a wait-and-see mode. “Six months ago, there was very little engagement with the airlines,” Leslie said. “Now you have airlines engaging directly. They are not in a huge hurry, but they’re beginning to treat this with some urgency.”

He added traders rather than compliance buyers were driving most early market activity, and that a shift toward genuine compliance procurement had yet to materialize at scale, with many airlines still assessing policy certainty ahead of the January 2028 Phase 1 deadline.

On the voluntary market, Leslie said demand for Core Carbon Principles (CCP)-labeled credits had become the effective minimum standard for structured purchases, with Key Carbon’s first CCP-labelled issuance fully pre-sold.

The growing preference for CCP-labeled supply is reinforcing price divergence between labeled and unlabeled credits, with buyers paying a meaningful premium for the label while non-CCP cookstove credits trade at single-digit prices. Key Carbon said it was not generating credits outside CORSIA and CCP channels.

Key Carbon finances clean cooking projects through Global Cookstoves Ltd, a joint venture with BURN Manufacturing, under which the joint venture holds the credits and Key Carbon retains marketing and sales rights across 17 funded projects.

The company described Nigeria as relatively lower risk compared with other jurisdictions given its insurability, and confirmed it was pursuing LOAs across multiple countries with a focus on markets that could transition into compliance channels.

Key Carbon expects total issuance of around 2 million credits in 2026, of which approximately 1 million will be CORSIA-eligible and the majority of the remainder CCP-labelled.

With deliverable supply narrower than headline LOA figures suggest, costs rising across the sector and compliance buying still largely deferred, the market appears to be pricing current conditions rather than the structural constraints building beneath them.

Whether Key Carbon’s planned auction delivers a clearing price that reflects those dynamics will be one of the first real tests of where CP1 cookstove credits are genuinely valued.

Fastmarkets quantifies this market through regular CORSIA Phase 1 spot benchmarks, demand and supply forecasts, and eligibility tracking, translating policy and registry data into the signals airlines use to manage cost exposure and compliance. Discover more.