An aviation carbon-offset deadline looms, but credits are in short supply

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🗞️ Driving the news: Airlines face a looming carbon-offset deadline under the UN’s CORSIA aviation scheme, but with fewer than two years left in Phase I, there may not be enough eligible carbon credits to meet demand

🔭 The context: Offsetting meets Paris rules
• CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) requires airlines to offset emissions exceeding 85% of 2019 levels during Phase I (2024–2026)
• Compliance is due by January 2028
• As of late February, only 32 million credits were available — far short of the at least 200 million IATA estimates will be needed
• Under Article 6 of the Paris Agreement, host countries must issue Letters of Authorization to export credits without double-counting them toward their own national targets

🌍 Why it matters for climate and markets: A structural supply crunch
• Only 10 countries have so far authorised credits for CORSIA use
• Each exported credit reduces a country’s ability to count that reduction toward its own nationally determined contribution (NDC)
• Some Global South countries may lack surplus reductions to export without jeopardising their climate targets
• Kenya, for example, has pledged a 32% emissions reduction by 2030, requiring roughly 45 million tons of CO₂e cuts, leaving little room for credit exports
• Sustainable aviation fuel (SAF) production reached 1.9 million barrels in 2025, but that represents just 0.6% of global jet fuel use, limiting its impact on offset demand

⏭️ What’s next: Price signals vs. policy constraints
• Phase I credits are trading between $14 and $23.50 per ton, levels some investors say are high enough to attract supply
• However, credit issuance depends on political decisions about NDC compliance, not just market pricing
• More countries may authorise exports, but many face difficult trade-offs between climate ambition and carbon revenue
• Without rapid scaling of supply or SAF adoption, airlines could face tightening markets ahead of the 2028 compliance deadline

📈 One stat: Airlines may need at least 200 million carbon credits for CORSIA Phase I, but only 32 million are currently available

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