Aviation Carbon Prices Set to Climb Amid Supply Uncertainty

Carbon credits used in global aviation could surge to $60 per tonne of CO₂ equivalent (tCO₂e) during the first CORSIA compliance phase, driven by a potential shortage of fully eligible units. That’s the forecast from carbon ratings agency Sylvera, which warns that credit availability under the UN-backed aviation offset programme will hinge on the number of countries ready to adopt key accounting rules.

Blue sky seen through tree branches, with planes crossing and leaving contrails behind. AI generated picture.

At the heart of the issue are ‘corresponding adjustments’ (CAs)—a technical requirement under Article 6 of the Paris Agreement. Countries must approve these adjustments to ensure carbon reductions aren’t counted twice: once domestically and again by airlines that buy the credits.

Sylvera’s analysis outlines six different market scenarios. If only a few countries—just seven—move forward with CAs between 2024 and 2026, the supply of CORSIA-eligible credits could drop to 136 million units, with estimated demand at 144 million. On the other hand, if participation is widespread, supply could rise to 274 million units, and prices could remain more stable, around $25/tCO₂e.

Ghana leads in Article 6 readiness, potentially providing 600,000 CORSIA-eligible units. It's followed by Zambia, Rwanda, Cambodia, and Peru, which together could contribute up to 3.7 million units. In contrast, countries like Brazil, Colombia, Mexico, and Nigeria show lower readiness levels, while South Africa, Vietnam, and Malaysia are rated very low.

The limited pool of eligible credits, if realised, could significantly impact pricing. MSCI, in separate research, forecasts demand ranging from 111 to 163 million EEUs, depending on the level of global buy-in. Ten major airlines—including Emirates, United, Singapore Airlines, and Delta—are expected to drive a third of that demand.

According to MSCI, CORSIA credit prices could average $63/tCO₂e in a tight market scenario, more than double the potential average in a looser, low-demand case.