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.
Most businesses that decide to act on their net-zero targets reach the same point of friction. Buying carbon credits has meant tracking down brokers, sitting through sales calls, and requesting a quote just to learn a price, sometimes with limited proof of what you are buying.
The earnings calls that quietly reframed climate from sustainability question to operating risk.
Three earnings calls in the last 18 months tell the story without any help from a press release.
Hershey, May 2024: cocoa price exposure compresses margin, and the company attributes part of the cost shock to West African weather. Olam, July 2024: coffee climate exposure quantified in the annual report. JBS, January 2025: supply chain climate disclosures expanded materially in response to investor pressure and regulatory expectation. None of these companies issued the announcement as climate news. They issued it as financial news. The climate-linked supply chain risk did not arrive with a sustainability framing; it arrived as a P&L line.
You are probably reading this article because you suspect the same thing is happening to your business. This piece walks through what is showing up on which earnings calls, how procurement and finance leaders are quantifying the exposure, and what serious corporates are doing about it before the regulator asks.
Where climate risk has already appeared in earnings
The pattern is consistent across resource-intensive sectors. A weather event compresses supply, the price spikes, the cost flows through the income statement, and the analyst on the call asks whether the event is anomalous or structural. Increasingly, the honest answer is the second one.
Cocoa is the cleanest example. The 2023 to 2024 West African harvest fell sharply on the back of erratic rainfall and disease. Cocoa futures more than tripled. Companies with concentrated West African sourcing absorbed the cost; companies with diversified sourcing absorbed less. The exposure was not climate as ESG topic. It was climate as cost of goods.
Coffee follows the same pattern. Brazilian and Vietnamese harvests have moved on weather more sharply across the last several seasons. Roasters with long-tenor supplier relationships and origin diversification have managed the volatility; roasters with spot-market exposure have not. Wheat, sugar, palm oil, beef: the same dynamic in different commodities, a pattern the IPCC AR6 Working Group II report projects will intensify across agricultural systems through mid-century.
What this means: climate risk is no longer a footnote in the 10-K. It is a line item the CFO has to explain on the call.
The three commodity exposures that hit margin first
For most companies with material Scope 3 exposure, three exposures dominate the near-term P&L risk.
- Concentrated single-origin sourcing in a climate-vulnerable region. If your tier-one supply for any material commodity sits in one geography, you have a concentration risk that climate amplifies. Diversification across origins is the obvious hedge, but it takes years to build and requires relationships you cannot acquire by tender.
- Supplier financial fragility under climate stress. Smallholder farmers, who supply a large share of the global cocoa, coffee, and palm oil market, do not carry the balance sheets to absorb yield shocks. When yields collapse, they exit. When they exit, your supply base shrinks, and the surviving suppliers raise prices. The risk is structural, not cyclical.
- Logistics and storage exposure to extreme weather. Hurricane disruptions to Gulf shipping, drought-driven Panama Canal restrictions, flooding in European inland waterways: each of these has moved input costs in the last three years, a pattern documented in Munich Re’s natural catastrophe data. The exposure shows up as a one-quarter event in the financial press but accumulates over time on the cost line.
TCFD and ISSB disclosure changes
The disclosure architecture has now caught up with the risk. The Task Force on Climate-related Financial Disclosures, whose recommendations are now embedded in the ISSB’s IFRS S2 climate standard, requires companies to disclose climate-related risks across physical and transition categories, with quantification where possible.
For physical risk specifically (the climate-linked supply chain risk you are reading about), the disclosure must address both acute exposures (extreme weather events) and chronic exposures (gradual changes in temperature, precipitation, and growing seasons). The disclosure must address the time horizon over which the risk is material, the parts of the value chain exposed, and the financial impact under different scenarios.
The CSRD imposes similar requirements under European law, with double materiality (both financial and impact materiality) embedded in the assessment. The practical effect: your auditors and your investor relations team now need a defensible answer to the climate-linked supply chain risk question, and the answer needs to be quantified.
What procurement and finance can do now
Three actions matter near-term.
Map your exposure. Most companies do not have a clear view of which tier-one and tier-two suppliers sit in which climate-vulnerable geographies. Without the map, you cannot quantify the risk, and without the quantification, you cannot disclose it credibly. The map is the foundation, and World Resources Institute climate risk research provides useful public tooling to start.
Diversify and deepen, in that order. Diversification across origins reduces concentration risk, but the deeper move is to invest in the resilience of the suppliers you already have. Regenerative practices, agroforestry, soil health interventions: these reduce yield volatility under climate stress and protect your input cost trajectory.
Embed the climate spend inside procurement, not outside it. Treating climate risk as a sustainability cost line subordinates it to the ESG budget. Treating it as a procurement and resilience investment puts it in the budget that matters, which is the cost-of-goods budget that the CFO defends quarterly.
Nature-based supply chain investments are the asset class designed for exactly this purpose. They sit inside the value chain, they reduce climate-linked supply risk, they generate verifiable Scope 3 reductions, and they produce the documentation an auditor and a regulator can both test.
If you are quantifying climate-linked supply chain risk in advance of the next earnings cycle or the next disclosure period, the carbon and sustainability experts at Carbon Credit Capital can help you map your exposure and structure a Dual-Value Model response that addresses reduction, resilience, and disclosure-readiness in a single program. Schedule a consultation.
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.
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