Carbon credit procurement is no longer a sustainability side-topic in the aviation industry: the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) now presents financial and reputational exposure for most airlines.
Independent forecasters, including MSCI, expect carbon credit prices under CORSIA to rise sharply, surpassing the peaks previously seen in the voluntary market. And with compliance penalties looming; treasury and procurement professionals must adopt a structured risk management approach to sourcing the Eligible Emissions Units that are required under CORSIA.
In this article, we outline four key risk categories in carbon procurement under CORSIA and share mitigation strategies that airlines can consider as part of their strategy for CORSIA Phase 1.
Airlines are now exposed to carbon market risk
Carbon credits are transitioning from discretionary purchases to an obligation for the aviation industry, where non-delivery or pricing missteps can result in cost overruns, audit issues or non-compliance determination from regulators.
Key drivers include:
- ICAO’s tightening credit eligibility criteria, including registry and methodology restrictions
- Finite issuance of CORSIA-eligible units from projects authorised by Article 6
- Registry delivery bottlenecks, especially during year-end submission periods
- Growing demand as Phase 1 accelerates and more airlines enter the market
This is why a passive or reactive approach to credit sourcing can present many risks for airlines.
Key risk categories in procuring Eligible Emission Units
1. Volume constraints
CORSIA’s complex eligibility criteria is likely to limit the supply of Eligible Emissions Units. For example, it only considers reduction projects starting after 2016 and specific vintages. These criteria also specify methodology restrictions and require host-country approval, which affects carbon credit eligibility.
Airlines that act early are better positioned to lock-in supply and mitigate this risk.
2. Credit price volatility
Carbon markets remain fragmented and opaque, with pricing influenced by:
- Project type and the methodologies that have been used
- Article 6 authorisation premiums
- Market sentiment ahead of compliance deadlines
Small moves in the market can result in price swings.
3. Counterparty and delivery risk
Carbon markets involve a complex network of developers, registries, brokers, traders, and various intermediaries. However, their financial standing, operational reliability, and regulatory oversight vary significantly. Large aviation industry participants, with stringent internal compliance and KYC requirements, may find it challenging to onboard a broad spectrum of these counterparties.
Partnering with financially robust and reputable entities is critical. Counterparts with strong balance sheets, and operations regulated within relevant jurisdictions are more likely to fulfill contractual obligations, mitigating risks of non-delivery or financial default.
4. Timing and procurement mismatch
Another risk stems from airlines underestimating the lead times inherent in the carbon market, leading to procurement efforts commencing too close to compliance deadlines. This critical timing mismatch can expose them to registry congestion, spot market illiquidity, and unacceptable delays in credit delivery.
Successful procurement depends on recognising the time required for all key functions, including credit verification and issuance, registry processing, and contract negotiation.
Mitigation strategies for airline carbon credit risk
Work with trusted counterparts
Finding the right partner can help you turn a compliance obligation into a competitive advantage. Look out for partners that:
- Have a track-record in carbon markets
- Can demonstrate balance sheet strength
- Understand host-country authorisation processes
- Have skin in the game and have invested in high-quality projects
Start Early
Starting procurement in 2025 can maximise your chances of securing favourable terms in a market that is forecast to be under-supplied, and provides a buffer to handle delays.
Contract Forward
You can secure future delivery of Eligible Emission Units with trusted counterparts. This might not be your full obligations under CORSIA, but it can provide a significant portion of your obligations.
Consider deliveries of EEUs on a regular basis, rather than waiting for the tight window before retirements are due.
Diversify your sourcing
Consider splitting your required volume between multiple sources, to reduce the risks of a single point of failure.
Planning for treasury and procurement
To stay ahead of the curve, treasury and procurement professionals may consider:
- Beginning credit planning 12–18 months ahead of expected delivery requirements
- Defining procurement needs by volume, delivery timeframes, and preferences for registries, activities and host countries
- Considering the multiple different types of procurement structures available
- Auditing EEU proposals against ICAO’s eligibility and tagging requirements
- Building supplier relationships that combine registry access, delivery assurance and contractual reliability
How we help airlines de-risk their carbon procurement
CSC Commodities, a division of Marex, supports the aviation industry with a dedicated trading desk and origination team that offers:
- Direct access to a wide range of CORSIA eligible carbon credits via ICAO-approved registries
- Flexible procurement structures including spot, forward and conditional to suit your specific hedging, timing and budget needs
- Support for due diligence, documentation and administration
Whether helping you secure annual compliance needs or building a procurement roadmap for Phase 1 and beyond, at CSC we can help you access this market and provide execution confidence in a volatile market.
Speak with our team about structuring a CORSIA carbon credit procurement strategy:
