Aviation Carbon Scheme Faces Severe Credit Shortage

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is facing a critical shortage of eligible carbon credits as its first mandatory phase concludes. Approximately 130 countries participate in the scheme, which requires airlines to purchase credits by January 2028 to offset emissions generated between January 2024 and the end of 2026.

Data from the International Civil Aviation Organization suggests that available credits may cover only 25% of the estimated 200 million metric tons of demand. This deficit stems from strict eligibility rules designed to prevent fraud and the reluctance of developing nations to sell credits required for their own UN climate targets. The financial impact is significant, with estimates suggesting compliance costs for the industry could range from $3.6 billion to $9 billion.

While Singapore Airlines has already begun securing units, other carriers like Air France-KLM have not yet made purchases. In response, governments are establishing penalties for non-compliance, including a proposal from the Government of the United Kingdom to fine airlines £100 per non-compliant ton of carbon. The shortage has already impacted suppliers; for example, the Zimbabwe-based developer Cicada saw buyers withdraw after its credits were rejected by CORSIA due to technical concerns.