Stakeholders in the Carbon Offsetting and Reduction Scheme for International Aviation (Corsia) credit market are concerned that an estimated supply gap of 200mn tonnes or more will not be bridged before the programme's first compliance deadline, but they differ sharply on how to address the issue.
The first phase of Corsia ends this year, with airlines required to demonstrate compliance by the end of January 2028. But at this point, supply uncertainty is raising concerns about whether they will succeed.
Some developers said the airlines need to get into the market now, which will lead to more project development to meet demand. The industry said it is dealing with surging fuel costs but will enter the market in time for compliance. Other factors are also complicating demand and supply, including uncertainty about whether the EU will expand its emissions trading system (ETS) to cover international aviation.
"It might be the case that airlines are not necessarily thinking of buying their Corsia credits just yet," said Marie Owens Thomsen, senior vice president for sustainability at the International Air Transport Association, during an International Emissions Trading Association event at the UN Cop 31 climate summit in Antalya, Turkey.
But a year out, the industry feels "an acute compliance anxiety" because of the projected shortfall, and as a result "we are here to beg the UNFCCC [UN Framework Convention on Climate Change] community and all the member states" to do what they can to "bring the missing 200mn t onto the market," she said.
Some developers are skeptical of industry's reasons for waiting until the last minute to buy credits, pointing to the fact that some airlines are still making significant profits.
"That to me should be a sign that they should go and buy some credits," DelAgua chief executive Euan McDougall said.
But more credits are about to hit the market, as much as 25mn t from African nations, which should ease supply concerns, according to McDougall.
"Demand is what needs to needs to come to the market now" to drive more project investment, he said.
Complicating matters is the political uncertainty coming from the EU as it considers whether to include international aviation in its ETS. If it waits too long, airlines will be put in a difficult situation, according to Lev Gantly, a partner at the law firm Philip Lee in Dublin, Ireland, who advises on carbon market transactions.
"It's completely unacceptable that the EU, we're 14 months away from the deadline, are still here without a decision", he said.
Some developers have suggested that more pressure from governments in the form of non-compliance fees could push airlines into the Corsia market quickly.
"The stick at this point is necessary," McDougall said.
But the threat of penalties at this point may not do much unless supply shows up in the market, according to Owens Thomsen.
"We hope...that we will have the missing 200 million when the airlines are obliged to comply, but we do not know that", she said.
