CORSIA market review: Supply integrity, demand uncertainty and price differentiation

Executive summary

• CORSIA has reached a crunch point. Phase 1 credit demand is projected to exceed 150 million, while only 32 million eligible credits have been issued to date. With the January 2028 retirement deadline for airlines fast approaching, time is running out to scale supply.

• Supply is expanding, but remains concentrated. Over two-thirds of the eligible volume issued to date comes from Guyana’s jurisdictional REDD+ project. Future credit supply is expected to come primarily from cookstove and water purification projects in Africa and South Asia.

• The CORSIA price premium is shrinking. Reports suggest that CORSIA credit prices have dipped in recent months, but still command a premium relative to comparable credits without CORSIA eligibility.

• Forecasts typically predict a supply shortfall. Under Fastmarkets’ base scenario, demand for Phase 1 credits is expected to outstrip supply.  However, structural risks to demand remain.

• Policy uncertainty persists. The pending EU review of CORSIA, combined with the lack of policy guidance from the US present risks to supply and demand forecasts. With Phase 2 expected to exceed 1 billion credits, such uncertainties present a notable challenge for the market going forward.

• Low-risk credit supply is limited. BeZero’s publicly available ratings database shows that all CORSIA Phase 1-eligible supply assessed to date is rated below ‘BBB’, a threshold for environmental integrity used by many voluntary buyers. Considering potential additional supply that could achieve Phase 1 eligibility, three-quarters of this is below ‘BBB’. Buyers who want to take account of environmental integrity risk in their CORSIA purchases could find a limited supply, but can use ratings to guide a more strategic, future-oriented procurement approach.