The withdrawal of the US from the Paris Agreement has raised questions over the supply of Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) Phase 1-eligible credits, with the market somewhat split on whether it will have any effect.
US President Donald Trump signed an executive order on Monday January 20 to signal the withdrawal of the country from the Paris Agreement for a second time. The process for leaving will take a year, meaning the country will still be bound by the Agreement until early 2026.
The withdrawal of the US raises questions over the future supply of CORSIA Phase 1 credits, particularly from ACR.
Credits must have a corresponding adjustment to avoid double counting by the host nation and be eligible for Phase 1, but the process for issuing those adjustments falls under the Paris Agreement.
Most market participants surveyed by Fastmarkets believe this will lead to no CORSIA Phase 1-eligible supply from US projects, as the country will be unable to issue corresponding adjustments.
The market consensus prior to Trump’s win was that the US was unlikely to issue corresponding adjustments to projects within the country, leaving the withdrawal a potentially moot point for supply. ACR was one of the first two registries to gain full approval for CORSIA Phase 1, but it has yet to tag any credits as CORSIA Phase 1 eligible because of the lack of corresponding adjustments.
Meanwhile, US airlines will still fall under CORSIA, which is governed by a different United Nations body, the International Civil Aviation Organization (ICAO), meaning that there should be no effect on the demand side.
CORSIA Phase 1 covers emissions from 2024-2026 with airlines having until January 2028 to retire eligible credits.
However, to complicate things further, penalties for non-compliance fall upon the host country to legislate, and if the US decides not to levy any penalties, then there is a question over whether US airlines would still participate regardless, Fastmarkets understands. US airlines have previously stated their commitment to CORSIA so it is unlikely they will roll back and disengage completely with the scheme, traders told Fastmarkets. But it could mean that demand from US airlines acts on a more voluntary basis and ends up covering only a percentage of emissions covered.
Some market participants are still digesting the recent news and whether corresponding adjustments would even be required for US-based projects post-withdrawal, as the country would no longer be bound by its Nationally Determined Contributions (NDCs) under the Paris Agreement, which could remove any double-counting risk. But even if this did become the case, it is likely that registries would struggle to tag credits as CORSIA Phase 1 eligible, given the current process they have put in place.
Other traders also told Fastmarkets that buyers could likely be reluctant to source US-based credits, even if they could be CORSIA Phase 1 eligible without a corresponding adjustment, as if a new administration were to re-sign up to the Agreement, it could cause complications further down the line.
In terms of market effects, there has so far been little movement in spot CORSIA Phase 1 prices. Fastmarkets assessed the CORSIA Phase 1 price at $21.75 per tonne of CO2 equivalent (tCO2e) in the week to January 22, up by $0.25 per tCO2e from the previous week.
Just one project – Guyana ART TREES (ART 102) – is currently eligible for CORSIA Phase 1, which has kept supply restricted. But demand has steadily been emerging since late last year, after the International Air Transport Association (IATA) held a procurement event in which 11 airlines bought credits at $21.70 per tCO2e. The association will hold further events throughout 2025.
The volume of credits sold has not been disclosed, but registry data suggests up to 300,000 tCO2e of credits could have transacted.
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