Airlines face billions in offset costs under ICAO emissions scheme

Airlines may be required to purchase up to 150 million tonnes of carbon credits during the first compliance phase of the aviation sector’s global offsetting programme, according to the International Civil Aviation Organization (ICAO).

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) has now entered its formal implementation stage, requiring airlines to offset a portion of their international emissions through the purchase of approved carbon credits or the use of lower-emission fuels.

In a recent report, ICAO warned that demand for carbon credits is expected to outpace the use of Sustainable Aviation Fuels (SAF) and CORSIA-eligible fuels (CEF), as both alternatives remain limited in availability and significantly more expensive. While SAF can cost between $600 and $800 per tonne of CO₂ equivalent, CORSIA-eligible credits currently trade for as little as $5.70 to $17.20 per tonne.

This price gap could lead to wide-ranging compliance costs for airlines, from $1.3 billion if only carbon credits are used, up to $8.4 billion if SAF and CEF are included in the mix. According to ICAO, these costs could account for 2% to 13% of projected airline profits over the period.

The report also highlighted that offset demand could rise sharply by 2035, reaching up to 1.5 billion tonnes of CO₂ equivalent in a scenario of strong air traffic growth and limited progress on fuel decarbonisation. This projection assumes that airlines must offset 85% of their 2022 emissions.

However, ICAO cautioned that the market for CORSIA-compliant carbon credits remains underdeveloped. Currently, only a limited number of credits—such as sovereign REDD+ units from Guyana verified under the Architecture for REDD+ Transactions (ART) standard—are eligible under the scheme. Market stakeholders are hopeful that credits backed by World Bank guarantees or host-country Letters of Authorisation will broaden the available supply in the near future.

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