A report analyzing carbon credit demand for over 400 airlines under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) projects significant fluctuations in credit prices and airline costs.
According to modeling by MSCI Carbon Markets, CORSIA-eligible carbon credits could cost between $18-51 per tonne of carbon dioxide equivalent (CO2e) during Phase I, rising to $27-91 in Phase II. If airlines pass these costs on to consumers, international ticket prices could increase by 0.5-1.0% in Phase I.
Alternatively, if airlines absorb the costs, their operating profits could decrease by up to 4%. The impact will vary depending on different demand and supply scenarios.
We crunch the report and here are our key takeaways.
What Are CORSIA Credits? A Flight Plan for Emission Reductions
The aviation sector is one of the fastest-growing contributors to global greenhouse gas (GHG) emissions. As international air travel expands, airlines face increasing pressure to mitigate their environmental impact.
The CORSIA, developed by the International Civil Aviation Organization (ICAO), is designed to limit emissions growth in international aviation. By purchasing carbon offsets known as CORSIA credits, airlines can balance emissions exceeding 2020 levels and invest in sustainability.
CORSIA credits allow airlines to compensate for their emissions by funding projects that reduce or remove CO2. These projects include renewable energy initiatives, reforestation, and carbon capture technologies. Verified under internationally recognized standards such as the Verified Carbon Standard (VCS) and the Gold Standard, these credits ensure that emission reductions are real, additional, and permanent.
CORSIA aims to cap international aviation emissions at 2020 levels. Through its two implementation phases—voluntary (2021–2023) and mandatory (from 2024)—the program encourages investment in global sustainability while aligning the aviation industry with broader climate goals.
Carbon Credit Demand: Will Airlines Keep Up with Rising Costs?
CORSIA’s demand for carbon credits hinges on international aviation growth and decarbonization efforts. Using a bottom-up modeling approach, MSCI Carbon Markets analysts assess individual airline emissions, growth rates, and adoption of sustainable practices to project credit needs.
Demand Scenarios
Three scenarios highlight the variability in credit demand:
- High-Demand Scenario: Strong aviation growth (+4% annually) and slow adoption of sustainable aviation fuels (SAFs) result in higher offsetting needs. Estimated demand reaches 137 million metric tons of CO2 equivalent (MtCO2e) in Phase I (2024–2026) and 1,299 MtCO2e in Phase II (2027–2035).
- Medium-Demand Scenario: Moderate aviation growth and increased decarbonization lower credit demand to 123 MtCO2e in Phase I and 1,006 MtCO2e in Phase II.
- Low-Demand Scenario: Limited growth and poor adoption of SAFs reduce requirements to 106 MtCO2e in Phase I and 502 MtCO2e in Phase II.
Regional and Airline-Level Insights
Demand will be concentrated among major airlines and regions. For instance, the top 10 airlines are expected to account for 40% of cumulative demand by 2035.
European carriers are likely to lead credit purchases despite regional compliance mechanisms such as the EU Emissions Trading System (ETS). If the ETS is expanded to cover more flights, global demand for CORSIA credits could decrease by 25–50% by 2050.
Supply Struggles: Why CORSIA Credit Availability Could Impact Aviation
The supply of CORSIA-eligible credits faces significant challenges. Credits must meet ICAO criteria, including corresponding adjustments that prevent double counting of emissions reductions under a country’s Nationally Determined Contributions (NDCs). This process requires host countries to authorize projects and align carbon accounting frameworks—a complex and underdeveloped requirement.
As of late 2024, ICAO-approved registries like Verra, Gold Standard, and Climate Action Reserve have expanded the potential credit pool to 230 MtCO2e. However, only 7 MtCO2e of these credits meet Phase I criteria due to limited corresponding adjustments.
Most eligible credits have been issued by a single REDD+ project in Guyana under ART TREES.
A lack of Letters of Authorization (LoAs) from host countries further constrains supply. Of 40 major credit-producing countries assessed, only two are highly prepared to issue LoAs. Without accelerated regulatory progress, substantial credit supply growth is unlikely until the late 2020s.
Projections and Flexibility
Supply projections factor in registry eligibility, crediting timelines, and the readiness of host countries to provide corresponding adjustments. A 30% reduction is applied to projects not yet in the registry pipeline. Despite these hurdles, expanded registry approvals and government action could gradually increase the availability of CORSIA-compliant credits.
Scenarios for Carbon Prices: How High Will CORSIA Credits Soar?
The prices of CORSIA credits will depend on supply-demand dynamics, influenced by credit availability, international aviation growth, and compliance requirements.
Under high-demand and tight-supply scenarios, Phase I credit prices are expected to range between $18 and $51 per ton of CO2. Prices could climb to $27–$91 per ton during the fourth compliance period (2033–2035) as demand peaks.
Supply-Demand Scenarios
- Tight Supply: A potential deficit of 12–43 million tons of CO2 in Phase I could drive prices higher.
- Loose Supply: A surplus of 2–33 million tons of CO2 may stabilize prices during Phase I. Airlines also have a grace period until January 2028 to offset emissions, easing initial supply constraints.
In Phase II, higher demand from aviation and other sectors, such as corporate voluntary commitments and sovereign programs, could lead to significant price increases.
Market Value Estimates
The market for CORSIA-eligible credits could reach $2–$8 billion by Phase I and grow to $5–$66 billion by the fourth compliance period. This growth reflects both rising demand and the financial implications of carbon market integration.
Implications for Airlines and Carbon Markets
CORSIA credits are an essential tool for airlines to manage emissions and comply with climate regulations. However, reliance on credits is only a short-term solution.
Long-term strategies include investment in SAFs or Sustainable Aviation Fuel, fleet upgrades, and operational efficiencies. Airlines with slower decarbonization may face higher offsetting costs, incentivizing innovation and sustainable practices.
Geopolitical factors and regulatory developments will heavily influence the carbon market. Expanding participation and ensuring the environmental integrity of credits are critical to maintaining trust and achieving emissions reductions.
CORSIA credits are pivotal to the aviation industry’s efforts to cap emissions and contribute to global climate goals. Although challenges remain in scaling credit supply and ensuring regulatory compliance, CORSIA serves as a transitional mechanism while the sector invests in greener technologies. As demand for high-quality offsets grows, the aviation industry’s collaboration with carbon markets will shape the roadmap of global emissions reductions.
The post CORSIA Credits Soaring Costs: How They Are Reshaping Aviation’s Future appeared first on Carbon Credits.
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
The accounting differences that decide whether your nature investment shows up in inventory, in BVCM, or nowhere at all.
The question reaches a procurement team about three weeks before the next sustainability committee meeting. Someone has read about insetting. Someone else has just signed off on an offset purchase. The CSO wants to know if the two are interchangeable. The answer is no, and the GHG Protocol Land Sector and Removals Standard is the reason why.
This article walks through what each term means at audit-grade specificity, what the standards actually say about how each gets counted, and how to decide which tool fits which target. The insetting vs offsetting question is one of the most-searched in corporate climate strategy, and one of the most poorly answered. By the end of this piece, you should be able to brief a committee on the difference without notes.
The two definitions, in plain English
Offsetting means buying carbon credits generated outside your value chain and retiring them against your residual emissions. The reduction happens somewhere else, financed by you, and the credit is the receipt.
Insetting means investing in emission reductions or removals inside your own value chain, typically with suppliers, where the reduction is directly linked to the products and services you buy. The reduction happens inside the boundary of your Scope 3 inventory, and the accounting treatment is fundamentally different.
The shorthand from the University of Oxford’s Nature-based Insetting Initiative is useful: insetting is what you do with the supply chain you have; offsetting is what you do with the supply chain you do not have.
What the GHG Protocol Land Sector Standard actually says
The GHG Protocol Land Sector and Removals Standard, finalised in 2024 after a multi-year pilot, sets the rules for how land-based emission reductions and removals enter corporate inventories. The Standard distinguishes between inventory accounting (Scope 1, 2, and 3) and project or intervention accounting (a separate methodology for crediting).
For insetting, the practical implication is that supplier-level interventions, when properly measured and attributed, can reduce your Scope 3 category 1 (purchased goods and services) emissions in your inventory. The reduction is not a credit retired against the inventory; it is a lower inventory number, period.
For offsetting, the credit is retired separately. It can be reported as a contribution toward a net-zero claim under the SBTi Beyond Value Chain Mitigation framework or as part of a VCMI Carbon Integrity claim, but it does not lower the inventory number.
A practical consequence: if your Science Based Target requires a 50% absolute reduction in Scope 3 emissions by 2030, insetting moves you toward the target. Offsetting does not. This single point of difference reshapes the procurement decision.
When insetting counts toward Scope 3 (and when it does not)
Insetting counts toward Scope 3 only when several conditions are met:
- The intervention must occur with an entity in your value chain.
- The emissions reduction or removal must be measured against a defensible baseline.
- The reduction must be attributed to your share of that supplier’s output, not double-counted with other buyers.
- It must follow the inventory accounting rules in the GHG Protocol Land Sector Standard, not the project accounting rules used to generate credits.
The most common failure mode is double counting. If your supplier sells the same reduction as a credit on the voluntary market and also reports it to you as a Scope 3 reduction, the math breaks. The Standard requires you to address this risk, typically by purchasing and retiring the supplier-issued credit as part of your inventory or by contractual provisions that prevent the supplier from selling the reduction twice.
When insetting does not count toward Scope 3: when the intervention sits with a supplier you do not buy from, when the baseline is not defensible, when the attribution is unclear, or when the documentation does not survive audit. Those cases default to Beyond Value Chain Mitigation, which is still useful but operates on a different ledger.
The procurement and supplier engagement question
Insetting is harder than offsetting. That is the unfashionable truth most buyers eventually confront. Offsetting is a transaction; insetting is a relationship.
To run an insetting program, you need supplier mapping precise enough to know which farms or facilities sit at which Scope 3 boundary. You need an engagement model that gets suppliers to participate, which usually requires multi-year commitments and shared economics. You need an MRV architecture that measures the right things and produces audit-ready documentation. And you need a contractual structure that prevents double counting and protects both sides.
The trade-off you receive in return is significant. Reductions count against your inventory rather than your residual. Supplier relationships deepen, which protects sourcing continuity. Yield and quality improvements often follow regenerative interventions, which reduces your input cost over time. And the regulatory file, under CSRD, CSDDD, EUDR, and the SBTi FLAG Guidance, is materially stronger.
Choosing the right tool for the right target
A practical decision rule. If your target is a science-based Scope 3 reduction and you operate in a FLAG sector or source FLAG commodities, insetting is the structurally correct tool. If your target is a net-zero claim that includes neutralising hard-to-abate residual emissions outside your value chain, BVCM via high-integrity offsets is the structurally correct tool. Most companies with material Scope 3 exposure need both, in different proportions, sequenced over time.
The sequencing matters. Insetting takes longer to stand up but produces a permanent reduction in the inventory. Offsetting can be transacted faster but does not change the inventory and now sits under tighter claim restrictions. Treat them as complementary tools with different jobs, not as substitutes. The Accountability Framework Initiative and the IUCN Global Standard for Nature-based Solutions both provide useful guardrails for the insetting side, with biodiversity, human rights, and benefit-sharing requirements that go beyond carbon math.
If you are mapping a Scope 3 reduction roadmap and need to scope which interventions count toward your inventory versus which sit in Beyond Value Chain Mitigation, the carbon and sustainability experts at Carbon Credit Capital can help you structure a nature-based supply chain investment program that fits your FLAG exposure, your target architecture, and your audit horizon. Schedule a consultation.
Net zero is often described as a balancing act: cut what you can, account for the rest, and reach zero on the ledger. That framing is useful, but it leaves something out. It treats every tonne of carbon as interchangeable and every route to zero as equally sound, while the science tells a more specific story.
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