Asia risks missing growing CORSIA opportunity as authorization bottlenecks persist

Asia could miss a significant opportunity to supply carbon credits into the aviation sector unless governments accelerate project authorizations and corresponding adjustments, speakers said at the Climate Futures Asia Summit on Wednesday June 17, warning that regulatory bottlenecks are constraining supply just as demand signals strengthen across global carbon markets.

The discussion came while airlines prepare for mandatory compliance obligations under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) from 2027, with market participants highlighting a widening gap between expected demand and available eligible supply.

Carbon credits stay central to aviation’s near-term plan

Sharmine Tan, regional sustainability and policy lead for Southeast Asia at Boeing, said carbon credits remain a critical component of aviation’s decarbonization strategy alongside fleet renewal, operational efficiencies, sustainable aviation fuel (SAF) and emerging technologies.

While SAF could eventually account for a large share of emissions reductions, it currently represents less than 1% of global jet fuel supply, leaving airlines reliant on carbon credits to meet near-term climate commitments, she said.

Authorization is the supply bottleneck

Tan noted that Asia has a growing pipeline of projects capable of supplying CORSIA-eligible emissions units, but many remain unable to access the market because host governments have yet to issue Letters of Authorization (LoAs) and corresponding adjustments.

She said the region could unlock hundreds of millions of dollars in economic value if governments accelerate approval processes and provide greater clarity on eligible supply.

Trust and transparency define the next phase

The challenge reflects a broader shift underway across carbon markets, according to panelists, who argued that integrity, transparency and implementation are increasingly becoming the defining issues for market growth between now and 2030.

Thomas Earl, senior director at the European Federation for Transport and Environment, said trust would ultimately determine whether international carbon markets succeed.

While Article 6.4 represents a significant improvement on the Clean Development Mechanism (CDM), questions remain around monitoring, permanence and the treatment of legacy credits, he said.

Earl warned that the transition of older CDM credits into the new mechanism would serve as an important test of market credibility.

“The point is transparency allows for scrutiny and scrutiny builds trust,” he said.

Renewable offsets face an additionality test

He also questioned the long-term role of renewable energy offsets as falling technology costs make additionality increasingly difficult to demonstrate.

Solar generation costs have fallen sharply since the Paris Agreement was adopted in 2015, while battery costs have also declined significantly, raising questions about whether renewable projects will continue to qualify as additional sources of emissions reductions in future carbon markets.

As a result, future demand may increasingly concentrate in removals and hard-to-abate sectors such as aviation, shipping and heavy industry, he said.

Financing project development is the immediate challenge

Speakers also highlighted the growing importance of quality benchmarks in attracting institutional capital.

Donald Chan, Asia-Pacific director at the Integrity Council for the Voluntary Carbon Market (ICVCM), said initiatives such as the Core Carbon Principles (CCPs) are helping establish common standards across jurisdictions and improving confidence among buyers and investors.

But he argued that a more immediate challenge lies in financing project development.

Large corporations and governments are seeking growing volumes of high-integrity credits, while many project developers continue to face funding constraints and rising compliance costs.

“The buyers are large and well-funded, while many project developers remain relatively small,” Chan said, adding that the market must find ways to channel more capital toward project creation if supply is to keep pace with demand.

Regional cooperation could widen supply

Regional cooperation was another major theme of the discussion.

Muhammad Rizal Azmi, vice-president of business and product development at Bursa Carbon Exchange, pointed to efforts to develop an ASEAN Common Carbon Framework aimed at harmonizing methodologies, reducing project development costs and improving recognition of carbon credits across Southeast Asia.

While the initiative could improve market liquidity and support regional project development, significant challenges remain, including differing regulations, capital controls and legal treatment of carbon credits across jurisdictions, he said.

Panelists also noted that most carbon trading continues to occur through bilateral over-the-counter transactions rather than exchanges, raising questions about how quickly interoperability initiatives can translate into greater liquidity.

Meanwhile, Hongming Liu, Director of Carbon Market at Environmental Defense Fund said China’s CCER market is expected to expand further as additional methodologies are approved and compliance demand grows under the country’s emissions trading system.

The discussion reflected growing consensus that the next phase of carbon market development will be shaped less by creating demand and more by ensuring that supply is transparent, authorised and trusted.

With Article 6 implementation advancing, CORSIA obligations approaching and governments across Asia developing domestic carbon market frameworks, speakers said the region’s ability to convert policy ambition into investable supply may determine whether it becomes a leading source of carbon credits over the remainder of the decade.