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Supply and strategy: Addressing the risks of CORSIA compliance

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) mandates the industry to procure carbon credits to offset its emissions. Here's why now is a good time to act.

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is the first international regulation that mandates an entire industry group to procure carbon credits to offset its emissions. From January 2027, CORSIA requires airlines operating international flights to source eligible carbon credits to offset increases in their emissions above a 2019 baseline. A challenge is emerging: as the deadline approaches, airlines face a tight supply of qualifying carbon credits available to purchase — creating potential procurement, financing, and reputational exposure. Airlines can benefit from clear strategies to promote CORSIA compliance, including insurance and financing solutions to mitigate the risks of carbon credit purchases.

What is CORSIA and how does it work?

The International Civil Aviation Organization (ICAO) launched the first voluntary stage of CORSIA in 2016 to establish a global framework for reducing the industry’s carbon footprint, amid growing concern about the sector’s role in climate change. According to the International Energy Agency (IEA), aviation accounted for 2.5% of global energy-related CO2 emissions in 2023, and its emissions grew faster between 2000 and 2019 than those from rail, road, or shipping.

CORSIA applies to international — not domestic — flights between participating countries. Its implementation is phased. Phase 1 (2024–2026) is voluntary for ICAO member states but mandatory for participating airlines. Phase 2 (2027–2035) will be mandatory for most ICAO states. Approximately 130 countries fall within the scheme’s scope.

Enforcement

Enforcement of CORSIA ultimately depends on how national authorities implement ICAO’s framework: the ICAO sets the rules, but countries adhere to them, setting penalties and enforcement mechanisms on their own. Readiness varies — some countries have yet to announce positions. Others have proposed penalty levels (the UK, for example, has proposed a fine of £100 per ton of carbon for CORSIA non-compliance). Some countries, such as Canada and Brazil, have folded enforcement into their national frameworks. In some jurisdictions, serious non-compliance can trigger operational sanctions, including grounding and financial penalties. Reputational risk for all participants is likely to be substantial: investors, customers, and regulators closely scrutinize airlines’ climate claims, so demonstrable, auditable compliance is essential.

Carbon credit procurement strategies

Once airlines have quantified their annual credit needs, procurement teams should engage the most appropriate counterparties — trading houses, intermediaries, or project developers — based on internal capability and scale. Because not all voluntary credits qualify for CORSIA, teams must perform eligibility checks covering vintage, standard/program, project category, and the presence of valid and letters of authorization (LoAs). LoAs allow the host country to formally approve those credits for international use and to commit to issuing a corresponding adjustment (CA), making them eligible to be counted under CORSIA rather than being claimed twice.

Moreover, different project types carry different risk profiles. Procurement should weigh these considerations and include contractual protection if eligibility is later questioned. Forward purchasing can then be used to lock in price and volume, reduce exposure to market volatility, and help developers to secure project finance.

Role of insurance and financial structures

Developers looking to sell credits into the CORSIA scheme must now procure insurance to qualify their credits as eligible emissions units. Both Verra and Gold Standard require developers to hold an approved insurance policy that covers the risk of double claiming (also called corresponding adjustment risk), seeing that if the host country fails to apply a corresponding adjustment or revokes its authorization, the developer will replace the credits or provide compensation. Therefore, the airline can still meet its CORSIA obligation.

Airlines are increasingly investing directly in these projects to supplement their procurement pipeline. They may keep a portion of those credits for their own compliance or hedging needs and sell the remainder as demand rises. Whether buying credits or investing directly in projects, airlines face risk: if a project under-delivers, they can lose part of their investment.

Insurance can protect against that downside by reimbursing lost capital and covering the cost of sourcing replacement credits. That protection strengthens multi-year procurement strategies and mitigates the financial risk of sudden demand spikes or delays in project delivery.

• For developers: CORSIA guarantee insurance protects developers against the risk of a CA failing to take place, effectively rendering it unusable under CORSIA.

• Carbon delivery insurance covers replacement costs or provides replacement credits if a project fails to deliver due to operational failure, natural catastrophe, or insolvency.

• Non-payment insurance (NPI) and tripartite financing structures, for developers, banks, and insurers, can assist in unlocking developer finance and make long-term offtakes more bankable.

Why now is a good time to act

Projected demand for Phase 1 credits (roughly 175–200 million tons) far outstrips the current eligible supply (about 40 million as of April 2026). That imbalance could drive sharp price volatility and make it harder for airlines to secure CORSIA-eligible units at reasonable terms if they wait.

Acting now lets airlines own that risk. Forward purchases create more predictable demand that can unlock structured financing for project developers, expanding future credit supply. Paired with insurance and bespoke finance structures, the risks of forward buying can be mitigated — protecting against project under-delivery, replacement cost spikes, and balance sheet exposure. Early procurement also gives airlines time to diversify across registries, vintages, and project types, build contractual protections (warranties, indemnities, and delivery guarantees), and ensure measurement, reporting, and verification (MRV) and retirement processes are in place.

With sustainable aviation fuel (SAF) still scarce and significantly more expensive in the near term, securing eligible credits now is the most practical way to hedge compliance costs, avoid last-minute market squeezes, and reduce operational and reputational risk. It also buys time for SAF and other low-carbon solutions to scale, while demonstrating proactive, auditable compliance to regulators, investors, and customers.

At Marsh, our in-house carbon specialists bring deep, long-standing capabilities in the carbon markets and a strong understanding of their mechanics and practical solutions to mitigate client risk. Combined with our advisory, actuarial, and insurance placement capabilities, we deliver locally tailored, globally-informed solutions across the carbon value chain.

Speak to a Marsh representative to learn more.

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Supply and strategy: Addressing the risks of CORSIA compliance