MethodologyContact usSupportLogin
Does the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) have sufficient supplies of credits to function effectively? Ask three market participants and you are likely to receive three different answers.
One will point to roughly 38 million eligible emissions units (EEUs) already tagged for Phase 1 compliance and argue that the market is adequately supplied. Another will cite airline demand forecasts of 200-230 million EEUs and warn of a structural shortfall. And a third will point to hundreds of millions of tonnes that could theoretically be generated under approved methodologies and argue that scarcity concerns are overblown.
Each argument is defensible because each describes a different stage of the CORSIA credit supply chain.
That confusion, more than any single policy development or airline procurement decision, may be the most important story in the CORSIA market today.
Fastmarkets assessed CP1 spot credits at $9.50 per tonne of carbon dioxide equivalent (tCO2e) on Wednesday June 24, down from more than $20.00 per tCO2e in late 2025. And prices have continued to fall even as the three arguments are deployed – with developers warning of future shortages, governments launching new initiatives to unlock supply and industry groups publishing demand forecasts that dwarf current availability.
But the apparent contradictions reflect the fact that CORSIA credit supply is not a single figure but a chain stretching from theoretical project potential to compliance-ready credits.
The starting point is that supply is not a single number, it is a pipeline. And every stage reduces the volume that ultimately reaches an airline’s compliance account.
At its widest sits theoretical supply: the credits that could be generated under approved CORSIA methodologies. Some developers put this figure above 800 million tonnes. But that bears little relationship to what airlines can actually buy before January 2028.
Narrower still is forecast-eligible issuance. Fastmarkets analysts project around 107 million tCO2e of cumulative CP1-eligible issuance by the end of 2027 as a base case – a figure grounded in current project pipelines, but one that still assumes that authorizations, corresponding adjustments and registry processes proceed broadly on schedule.
The next layer is deliverable supply: the credits expected to complete authorization, insurance, tagging and commercial transactions in time for compliance. The size of that pool remains uncertain and will depend on how authorization, issuance and other compliance processes unfold over the coming years.
Current tagged supply amounts to roughly 38 million EEUs already carrying CP1 labels and available, in principle, right now.
Cutting across all of the above is a fifth category that is now taking shape: EU-eligible supply – representing credits that may satisfy future European eligibility requirements, but as yet remain undefined. The European Commission sent around a draft concept note in the second quarter of this year that suggested tightening eligible CORSIA supply for European airlines on quality grounds.
The figures below are not alternative estimates of the same supply pool. They describe different stages in the journey from theoretical project potential to airline compliance. Comparing them directly risks overstating or understating the supply ultimately available to airlines.
When one market participant cites 38 million tagged units and another warns of a 200 million unit shortfall, they are not disagreeing; they are looking at different rows of the same table.
Commodity markets rarely price theoretical supply. The oil market distinguishes between resources, reserves and production, while the metals market distinguishes between geological potential, reserves and refined inventories. In each case, what matters is not how much could exist, but how much can actually be delivered when buyers need it.
CORSIA is increasingly developing a similar hierarchy. The relevant question is no longer simply how many credits can be generated under approved methodologies, it is how many credits will successfully move through authorization, corresponding adjustments, insurance, tagging and commercial transactions before reaching an airline’s compliance account.
Three developments in June show where credits can disappear between the forecast and the airline.
Kenya announced it would make available up to 10 million tonnes of Article 6.2-authorized credits for international transfer through 2030, well below the Fastmarkets analysts’ previous base-case estimate of around 30 million tonnes of potential export capacity.
The difference reflects a sovereign policy decision rather than a project constraint. Kenya has the technical capacity to authorize more credits, but doing so risks cannibalizing progress toward its own Nationally Determined Contribution (NDC).
The lower-than-expected figure reinforced a growing perception among market participants that host countries are becoming more cautious as they balance carbon market participation against domestic climate commitments.
The challenge is compounded by the mismatch between CORSIA’s compliance timeline and country specific NDC cycles. Airlines must surrender Phase 1 units by January 2028, while current NDC commitments run through 2030, creating additional uncertainty around how much supply governments are willing to authorize.
Chile has described the same constraint from a different angle. Officials there told Fastmarkets that authorization requests from developers continue to grow, but the governments capacity to review methodologies and supporting documentation has not kept pace. The bottleneck is not political will, but administrative bandwidth.
Nigeria offers a third variant. Clean cooking companies BURN and Key Carbon recently secured authorization covering approximately 5.2 million tCO2e. Key Carbon said it currently expects to deliver around 3.4 million tCO2e into Phase 1, illustrating that authorization is only one step in the process.
Issuance schedules, insurance structures and tagging requirements still need to be completed before credits reach compliance buyers.
Taken together, the three examples point to the same conclusion: the gap between forecast issuance and deliverable supply is shaped not only by project pipelines but by sovereign decisions, administrative capacity, insurance structures and commercial timing.
Understanding the supply stack makes the price decline easier to explain, however.
Prices are not falling because the market has resolved the supply debate. They are falling because the airlines are not buying. And until procurement begins in earnest, demand matters more than distinctions between different layers of supply.
Although CORSIA’s first compliance phase covers emissions from 2024 to 2026, airlines do not need to surrender eligible emissions units until January 2028. That gap creates a strong incentive to defer procurement while prices remain under pressure and policy questions remain unresolved.
One market participant told Fastmarkets it was all about the absence of end-user demand.
“As supply has increased, demand has not responded in kind,” the market participant said.
Forward markets reinforce the same picture. The ICE December 2026 CORSIA contract was around $9.15 per tCO2e in late June, slightly below prevailing spot levels – suggesting that buyers see little reason to pay for future supply despite continuing discussions on longer-term supply constraints.
The result is a self-reinforcing loop. Airlines wait for policy clarity while developers continue bringing available volumes to market. If prices remain weak, however, future investment could slow and some projects may choose alternative demand channels instead of CORSIA.
European uncertainty has amplified the dynamic. Market participants said procurement decisions are being delayed not only because of the European Commission’s July 15 review of the EU Emissions Trading System (ETS), which could extend the ETS to cover international departing flights, but also because European airlines are waiting for guidance on future EU CORSIA eligibility criteria. Until those criteria are clearer, European carriers have little incentive to commit capital.
Market participants also cited rising jet fuel prices as another reason procurement has remained subdued, with airlines prioritizing more immediate operational costs while CORSIA compliance remains more than 18 months away.
Some signs of airline demand have begun to emerge, however. Japan Airlines and Singapore Airlines have already completed compliance retirements, while LATAM Airlines is in talks to source around 2.8 million CORSIA-eligible credits from Argentina’s Misiones province, subject to project issuance and federal approvals.
But market participants said these remain isolated transactions rather than evidence of a broad-based pick-up in procurement. Most airlines are still waiting for greater policy clarity, particularly in Europe, along with more confidence over future supply before committing meaningful volumes.
Several market participants said they expect procurement to accelerate once policy uncertainty is resolved, although there is less consensus over when non-European airlines will begin buying.
Some developers are beginning to show signs of pressure. Offers for certain Madagascar cookstove credits have been heard around prevailing spot levels, with sources indicating that some participants may be prioritising near-term cashflow.
“Prices are already testing uneconomical levels for some developers. I would not be surprised if some are making a loss simply to bring cash through the door,” one market participant told Fastmarkets, adding that project-specific credits continue to attract interest from buyers seeking diversified compliance portfolios even as generic CP1 prices remain under pressure.
Most buying activity so far has come from intermediaries building positions ahead of broader airline procurement later in the compliance cycle, sources told Fastmarkets, which suggests that prices are still being shaped more by intermediary positioning than airline compliance demand.
Few recent events better capture today’s market than the auction of CP1-labelled credits from Cambodia’s VCS 3052 water purification project in the last week of May.
The auction attracted strong buyer interest and was oversubscribed. But no credits were traded and all bids fell below the reserve price.
The outcome revealed a market where buyers and sellers are present but remain fundamentally divided on value. Buyers bidding below the reserve price appeared to be betting that additional deliverable supply will arrive before the airlines begin purchasing in earnest.
Sellers, by contrast, appeared to believe that buyers will eventually have to pay more for deliverable supply.
The auction’s failure to clear any volumes did not reflect an absence of demand, however. Rather, it reflected the disagreement over which supply buyers are willing to pay for.
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.
If falling prices suggest growing market comfort with future supplies, the recent actions of the International Air Transport Association (IATA) point in a different direction.
Earlier this month, IATA expanded its Supporting Alliance for CORSIA Eligible Emissions Unit Supply, bringing additional host governments into an initiative alongside airlines, developers, standards bodies and market infrastructure providers. The alliance has set a target of making 225-250 million EEUs available by spring 2027.
The more important question is not how many credits the alliance hopes to unlock, but which layer of the supply stack it is actually targeting. IATA’s target of making 225-250 million EEUs available by spring 2027 refers to tagged supply, the same category that currently totals roughly 38 million units.
The alliance is seeking to expand that pool by helping host countries accelerate authorizations and corresponding adjustments. Those are the same sovereign bottlenecks illustrated by recent developments in Kenya, Chile and Nigeria.
In other words, IATA is not trying to create more theoretical supply. It is trying to convert a much larger share of the roughly 107 million tCO2e of forecast issuance into tagged, usable EEUs by accelerating the sovereign processes that have so far left tagged supply at a fraction of that figure.
Luke Leslie, chief executive of Key Carbon, compared the market to commodity cycles, arguing that prolonged periods of weak prices discourage future investment and could set the stage for sharper corrections once demand accelerates.
“The longer the prices remain lower, the more violent that price response is [likely to be],” he said.
Leslie also argued that many market participants underestimate the complexity of moving credits through authorization, insurance, corresponding adjustments and tagging.
“It is much harder than people anticipate to get all the way through,” he added.
Not everyone shares that view, however, and one trader argued that the authorization processes are steadily improving and that the market has demonstrated an ability to deliver supply that will only grow as policy frameworks mature in origination countries. The disagreement, between those who believe deliverable supply will arrive and those who believe the pipeline is more fragile than prices currently imply, sits at the heart of the debate.
Zimbabwe provides another example. Recent developments there illustrate how ICAO eligibility alone does not guarantee market availability. The country’s evolving registry and approval framework shows how additional domestic processes can emerge even after projects satisfy international eligibility requirements, adding further steps before credits ultimately reach airline buyers.
The European Commission’s forthcoming review adds another dimension.
Whatever eligibility criteria Brussels ultimately establishes will not change how many credits are generated, authorized or tagged. But they will determine which of those credits European airlines can actually use for compliance – and European carriers represent around 27 million tCO2e of forecasted Phase 1 demand, or around 10-15%.
If the Commission applies meaningful quality filters, the market will not lose aggregate supply. Instead, it will narrow the pool of credits available to European airlines. Current draft concept proposals include excluding high forest low deforestation credits and applying tighter quality criteria to cookstove supply.
A portion of today’s tagged supply would no longer qualify for European airlines. Generic CP1 credits could remain usable outside the EU framework, while EU-eligible supply becomes a smaller and potentially more expensive subset.
That uncertainty is itself affecting procurement decisions and buyers that anticipate tighter EU criteria have a rational incentive to wait before committing capital.
If the current concept note were adopted, it would eliminate almost all of today’s tagged supply for European airlines. Fastmarkets’ latest supply forecasts nevertheless suggest that EU-aligned supply would still exceed the trading bloc’s projected demand of around 27 million tCO2e.
That does not necessarily mean European airlines would have abundant supply. The same credits would also remain available to airlines outside Europe, meaning European carriers could still have to pay a premium to secure them.
One interpretation of $9.50 per tCO2e is that the market is pricing CORSIA credit supply appropriately. Supply is continuing to reach the market, authorization processes are gradually improving and the airlines have until January 2028 to comply. Under this view, prices simply reflect a market where near-term demand remains well below available supply.
Another view is that the market is underestimating what comes next. Low prices discourage investment at precisely the moment when future supply needs to be secured. Host-country authorizations remain uncertain, administrative bottlenecks have yet to be resolved and future methodology changes could reduce issuance from important project categories.
And when procurement accelerates, the credits that matter will be the ones that have moved all the way through the chain, past tagging and into deliverable supply – not simply those counted as forecast issuance or theoretical potential.
Both views have serious supporters and both have evidence. But what the current price clearly shows is that the airlines are not buying. What it cannot show is how much of the forecast supply stack will successfully navigate authorizations, sovereign decisions, administrative constraints, insurance and European eligibility requirements before January 2028.
So the market’s central question has shifted. It is not whether CORSIA has enough supply, but which stage of the CORSIA credit supply chain the current price is actually reflecting.
The demand and supply gap has a price. Fastmarkets tracks it through independent CORSIA assessments built for compliance decisions