Decoding CORSIA First Phase: What it means for sustainable aviation and the future of carbon credits

This blog was updated on 11th December 2024 with more specific language on CORSIA eligible credits for the first phase.

As we started this year, the aviation industry was set to witness a pivotal moment with the implementation of the First Phase of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) from January 1, 2024, to December 31, 2026. This change is expected to have many ripple effects for all voluntary carbon market (VCM) participants.

Why is CORSIA First Phase important for the VCM?

• CORSIA’s First Phase will require many airlines and aircraft operators to purchase carbon credits from a limited approved selection that would compete with demand and supply in the VCM and other carbon markets such as Article 6.2.
• Market stakeholders have historically used credits eligible for CORSIA as a benchmark for quality. Notably, the Integrity Council for the VCM (ICVCM) has taken steps, such as fast-tracking CORSIA-eligible crediting programs, to streamline its own assessment processes. This acknowledgment underscores the substantial groundwork laid by CORSIA, enhancing the credibility of the scheme and amplifying attention and demand for CORSIA-eligible credits.

Understanding CORSIA's First Phase

CORSIA, established by the UN’s International Civil Aviation Organization (ICAO) in 2016, is a market-based mechanism to ensure carbon-neutral growth for international aviation, against a baseline set at 85% of 2019 levels. All airline operators with annual emissions over 10,000 tonnes of CO₂ must monitor and report emissions while purchasing carbon credits to offset emissions so they don’t exceed the baseline emissions. The Pilot Phase ran from 2021-2023, and now, as we enter the First Phase, from 2024-2026, the requirements become more stringent.

CORSIA’s First Phase holds substantial importance for the aviation industry. Like the Pilot Phase, the First Phase is voluntary for states, meaning countries can elect to participate. However, for airlines, in the First Phase, CORSIA compliance is mandatory for all international flights between those participating states. With 126 countries committed to participating in the First Phase, a significant portion of international flights will be subject to CORSIA compliance.

What does compliance to CORSIA's First Phase look like?

CORSIA enforces carbon-neutral growth for the international aviation sector from 2019 onwards. Airlines seeking compliance have three options:

• Improving operational and fleet efficiency (see our blog on this here);
• Purchasing carbon credits that comply with CORSIA Eligible Emissions Units criteria;
• Increasing use of sustainable aviation fuels (SAFs).

Sustainable aviation fuel (SAF) is one of the most discussed levers in air transport’s net zero solution portfolio. The airline industry’s trade association, the International Air Transport Association (IATA), has set an industry-wide goal of net zero by 2050 and estimates that SAF will contribute around 65% of the emissions reductions needed for this.

SAF will be key to the industry’s net zero journey, however in the short term, SAF is relatively expensive. Also, uncertainties around technology development and the scalability of SAFs that predicate much of the sector’s net zero modeling mean that there is a significant risk to delaying action. For the vast majority of airlines and other aircraft operators who need to comply with CORSIA sooner rather than later, carbon credits are a more realistic, scalable, and affordable option.

Which carbon credits are CORSIA eligible as of December 2024?

In order to purchase carbon credits that can be used under CORSIA, the credits must come from CORSIA-approved standards and be hosted on their registry. The approval process for CORSIA’s First Phase has been stringent and the start of 2024 was plagued by supply concerns since ICAO had only approved two standards at the time, namely American Carbon Registry (ACR) and Architecture for REDD+ Transactions (ART). In December 2024, four more standards were approved: Climate Action Reserve (CAR), Global Carbon Council (GCC), Gold Standard (GS), and Verra’s VCS.

The approved standards are subject to exclusions based on methodology, vintage, crediting period, and more, which have expanded compared to the Pilot Phase.¹ Notable additions to the exclusions list include carbon capture and engineered removals, large-scale² grid-connected renewable energy methodologies across Verra and GS registries, and two Verra cookstove methodologies recently replaced by a new consolidated methodology. A comparative table of select exclusions for the Pilot Phase and First Phase is below.

¹ Some of the new First Phase conditions have also been imposed retrospectively to the Pilot Phase, see the CORSIA Technical Advisory Body (TAB) Report (August 2024) for specific details.

² Defined as “grid-connected renewable electricity generation/supply that are estimated to have a maximum output capacity greater than 15 megawatt of electricity, individually or grouped”.

The rationale behind ICAO’s decisions is not explicit, but the exclusion of popular activity types such as forestry and large-scale grid-connected renewable energy will eliminate a significant volume of carbon credits from First Phase eligibility. Others, such as carbon capture and storage or enhanced removals are likely to have little impact on supply as they are relatively new with few credits in the market, and relatively high prices. 

Some more standards have been conditionally approved and will have to meet conditions stipulated by ICAO in order to achieve full approval. The next opportunity for their re-assessment would be at the 234th session of the ICAO Council in March 2025, which, if successful, could greenlight more methodologies and credits for the First Phase.

What does the current state of supply mean for CORSIA and beyond?

The publication of the list of First Phase eligible carbon credits has helped build supply confidence, but a major challenge remains due to host countries’ readiness and willingness to authorize and correspondingly adjust these credits, which is a pre-requisite. To date, there are only 4.5M credits from the ART TREES standard that are authorized, correspondingly adjusted, and fully eligible for the First Phase. Estimates from ICAO, IATA, and the International Emissions Trading Association project First Phase demand between 65M and 200M credits over the period 2024-2026. Even if the newly approved standards and their methodologies could meet this demand in theory, in practice, it would have to be equally matched by host countries authorizing these credits for CORSIA use. The rulebook for Article 6.2 of the Paris Agreement (under which authorization and corresponding adjustments are governed) was finalized at COP29 in November 2024, after many years of negotiation. This is expected to provide momentum to countries’ capacity and interest in authorizing carbon credits for various purposes, including CORSIA.

Airlines have until 31 January 2028 to meet their compliance requirements for the First Phase, and it is critical for authorized and adjusted CORSIA-eligible credits to be available in the lead-up to that deadline. Failing this, a supply crunch could equally affect airlines and the voluntary carbon market, since many corporations outside of aviation use CORSIA eligibility as a minimum threshold for their credit portfolios. This will also further increase overall demand for CORSIA-eligible credits and escalate costs if coupled with inadequate supply. 

In addition to supply and demand, CORSIA’s First Phase hinges on a third factor: enforcement. The success of CORSIA depends on domestic enforcement of the scheme by countries that are participating in it. At present, 126 countries participate in CORSIA but only six of them (Brazil, the Republic of Korea, Canada, Japan, New Zealand, and the UK) in addition to the European Union, have taken steps to enforce CORSIA on airlines within their jurisdiction. Unlocking the supply of eligible carbon credits would not deliver the desired result if the lack of enforcement leaves airlines without an incentive to act on CORSIA offsetting obligations.

How Sylvera can help

As CORSIA’s First Phase is expected to have an impact on carbon credit markets, Sylvera assists stakeholders in adapting to related changes. Strategic actions taken today not only contribute to a more sustainable and responsible future but can also be substantially more cost-effective than waiting for tomorrow.

• Investing in high-quality carbon credits is crucial for the aviation industry, Sylvera’s end-to-end platform can support the creation of a holistic climate action strategy. 
  • Our Country Profiles help understand a given country’s readiness to authorize and correspondingly adjust carbon credits for First Phase eligibility.
  • Our Methodology Profiles help identify First Phase eligible methodologies and flag any risks associated with them.
  • Our Project Catalog offers project-level labels for CORSIA First Phase eligibility and helps identify project opportunities, including Sylvera's assessment of their quality. Our pricing also helps set the CORSIA budget.

• We can also help define your climate & CORSIA compliance strategy. Our policy experts can help you get a realistic picture of the possible scenarios following recent eligibility updates and future market developments so you can navigate the uncertainty and be ready to take action before prices rise.

• Our deep project-level due diligence through our carbon credit ratings data can help navigate your concerns about the risks associated with carbon credits so you can make informed decisions.  

Interested in learning more? Reach out to our team.

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