CORSIA phase 2 begins in 2027: How will carbon credit demand shift for Asian airlines?

CORSIA is set to enter its second phase in 2027. As the scheme expands its coverage, demand for carbon credits from the aviation industry is expected to rise further. (Photo: iStock)

As the first phase of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) draws to a close, a widening gap between carbon credit supply and demand is coming into view.

In June, the International Air Transport Association (IATA) estimated that cumulative emissions subject to offsetting during the first phase, from 2024 to 2026, would reach 213 MtCO₂e. By comparison, the supply of CORSIA Eligible Emissions Units (EEUs) stands at just 38 MtCO₂e, enough to cover about 18% of estimated demand and leaving a potential shortfall of 175 MtCO₂e.

With considerable uncertainty surrounding the supply, price and actual availability of eligible carbon credits, discussions around CORSIA have largely focused on whether supply can keep pace with demand. However, as the market approaches the second phase in 2027 and the scheme expands its coverage, growth on the demand side is set to become an important market variable.

This article offers a different perspective by shifting the focus from carbon credit supply to airline demand. It examines the potential compliance exposure of major Asian airlines and estimates the procurement pressure they could face in 2027. For an introduction to emissions from international aviation, as well as CORSIA’s framework, compliance mechanism and eligibility requirements for carbon credits, see RECCESSARY’s related Reccpedia article.

Unlock the full article to explore three key takeaways:

1. CORSIA will enter its second phase in 2027. With China joining the offsetting scheme, demand for carbon credits from Asian airlines is expected to rise sharply.
    
2. Singapore Airlines, Korean Air and Cathay Pacific are each projected to require more than 2 million tonnes of carbon credits in 2027, bringing their purchases into the million-tonne range.
    
3. Cathay Pacific faces both high demand and high compliance exposure, making it particularly sensitive to the availability and price volatility of eligible carbon credits.