CORSIA supply gap widens as Base Carbon tags 640,000 Rwanda credits for aviation compliance

Why it matters: CORSIA’s first compliance phase covers 2024 through 2026, meaning airlines face their initial offsetting obligations within months. The gap between eligible supply and projected demand is not marginal; it is roughly 4.6 times the available supply. That ratio turns CORSIA eligibility tagging into a pricing event, not just a registry update. Every batch of newly tagged credits enters a market where regulated buyers outnumber available units by a wide margin.

What airlines outside the credit business need to decide now

For international carriers that have not yet secured CORSIA-eligible units, the math is uncomfortable. With 175 million tonnes of unmet demand in the first phase alone, the cost of waiting rises with every compliance deadline. Airlines that hedged early, locking in futures or bilateral agreements when prices were lower, hold a measurable advantage over those still exposed to spot markets. The 39% rise in futures prices since June 30 is one data point; the structural shortage suggests further pressure unless new supply enters at scale.

The second phase, running from 2027 through 2035 with 134 participating states, will expand the buyer pool. ICAO approved only four programs for the 2027 to 2029 window (American Carbon Registry, Architecture for REDD+ Transactions, Gold Standard, and Verra’s VCS/Jurisdictional Nested REDD Programme). That narrower list of approved programs, combined with broader participation, could extend or worsen the supply constraint.

The question CORSIA has not settled: host-country authorization

One element that remains unresolved for many countries is the issuance of Letters of Authorization. ICAO encourages governments to confirm that credits used under CORSIA will not count toward national climate targets under the Paris Agreement. Without these letters, credits from a given country may face additional scrutiny or may not qualify in practice, even if the program and methodology are approved. The number of countries that have issued these letters, and under what conditions, is not uniformly tracked in public databases. This creates a layer of uncertainty for both project developers and airlines trying to assess which credits will hold their compliance value through the end of each phase.

For countries that host large volumes of carbon credit projects, the decision to authorize or withhold authorization is also a strategic one. A government that issues authorization opens its credits to the aviation compliance market but loses the ability to count those reductions toward its own Nationally Determined Contribution. Countries with ambitious domestic targets may hesitate, further constraining supply.

Who benefits and who faces pressure

The winners in this dynamic are project developers that already hold CORSIA-tagged inventory. Base Carbon’s position, with nearly 2 million tagged credits and an estimated 2.6 million more expected over the crediting period, places it among the larger holders in a thin market. The cookstove methodology (VM0050), approved by both Verra and the ICVCM under its Core Carbon Principles, gives those credits a layer of integrity validation that some other project types lack.

The pressure falls on airlines, particularly those in regions where CORSIA participation is mandatory and where carriers have not built carbon management functions. Smaller international operators without dedicated sustainability teams or carbon trading desks are less likely to have hedged early. They will enter the compliance market at higher prices, and those costs will eventually reach operating budgets. The European Commission’s proposal to integrate CORSIA into EU law, which Base Carbon said could generate at least 29 million tonnes of first-phase demand, adds a regulatory layer that makes non-compliance harder to defer.

via CarbonCredits.com