CORSIA explained: how aviation carbon offsetting works and why Phase 2 matters

CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) is not aviation net zero. For the wider route map, use the CORSIA aviation carbon market guide. It is narrower than net zero: a global offsetting framework for international aviation emissions growth. The reason it matters in 2026 is that the scheme has moved from policy design into real demand for eligible carbon credits, just before Phase 2 expands the test from 2027.

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is the global framework for addressing CO2 emissions growth from international flights. Adopted by the International Civil Aviation Organization (ICAO) in 2016, it is the first global market-based climate measure applied to a single sector. It is not a cap-and-trade scheme. It does not set absolute emissions limits. Its objective is more specific and more limited: carbon-neutral growth in international aviation from the agreed baseline. Airlines can grow, but incremental CO2 growth above the baseline must be offset with eligible units or reduced through eligible fuels.

Before Phase 1 properly began, the scheme's baseline had been adjusted twice. ICAO's own analysis found earlier changes would reduce CORSIA's total mitigation achievement by 25% to 75% compared with the original design. Environmental groups warned the adjustments would damage the scheme's credibility. They were right about that. And yet Phase 1 is live. One hundred and thirty states are participating. Airlines are buying eligible credits. The International Air Transport Association (IATA) estimated in June 2026 that total Phase 1 demand could reach 170 to 236 million Eligible Emissions Units (EEUs). The scheme that absorbed damaging baseline changes is now generating one of the larger sources of near-term compliance demand in global carbon markets.

That tension between political damage and market reality is what this guide is about.

Quick answer

Why aviation needed its own scheme

The cross-border problem

Many major emitting sectors operate under some form of national or regional carbon pricing: the EU Emissions Trading System (EU ETS), the UK ETS (UK Emissions Trading Scheme), national carbon taxes, fuel duties. International aviation presents a different problem. A flight from London to Singapore operates in international airspace and crosses multiple jurisdictions. The emissions from that flight cannot be cleanly attributed to any single country's carbon pricing regime.

This is not a new problem, and it is not one that the Chicago Convention (1944) alone created. Several structural factors compound the difficulty: state sovereignty over airspace; bilateral air service agreements that govern route rights between countries; the longstanding norm under Article 24 of the Chicago Convention against taxing aviation fuel on international flights; the practical impossibility of assigning international aviation emissions to a single national inventory; and the political difficulty of getting 193 ICAO member states to agree on a consistent mechanism.

The consequence is that most countries' Nationally Determined Contributions (NDCs) under the Paris Agreement either exclude international aviation entirely or include it with a note that it is addressed through ICAO. The UNFCCC (United Nations Framework Convention on Climate Change) process that produced the Kyoto Protocol and the Paris Agreement could not resolve the jurisdictional question. ICAO, as the UN body governing international civil aviation, took on the task.

What CORSIA set out to do

CORSIA's stated objective is carbon-neutral growth from 2020. Not absolute emissions reduction. Not net zero by 2050. Carbon-neutral growth: the aviation sector can grow, but incremental CO2 emissions above the agreed baseline must be offset by eligible credits purchased by airlines.

This is a less ambitious objective than net zero targets being adopted across other sectors. It was also designed as a floor rather than a ceiling: a starting point within ICAO's broader basket of measures that includes technological improvements, operational efficiencies, sustainable aviation fuel (SAF) and longer-term net zero aspirations. The question of whether CORSIA's floor has remained at its intended level is at the centre of the baseline controversy.

How CORSIA works

International flights only

CORSIA covers international aviation, meaning flights between countries, not domestic flights. It uses a route-based approach: only routes where both the origin and destination state are participating in CORSIA generate offsetting obligations. A flight from a participating state to a non-participating state generally creates no CORSIA offsetting obligation for that state pair in that year. This creates coverage gaps that will narrow but not fully close in Phase 2.

State pairs and participation

Participation is state-level. Countries decide to join CORSIA, and the routes between participating pairs are then covered by the scheme. As of January 2026, 130 states are participating in Phase 1, including the United States, EU member states, the UK and most high-traffic jurisdictions. The list of participating state pairs determines which routes generate compliance obligations. Airlines must track their emissions by route to calculate their individual obligations.

Monitoring, reporting and verification

Airlines operating on covered routes must monitor and report their annual CO2 emissions to their national civil aviation authority under a defined Monitoring, Reporting and Verification (MRV) framework. ICAO collects the aggregate data annually and publishes total international aviation emissions alongside a Sectoral Growth Factor (SGF). The SGF, combined with each airline's own emissions trajectory, determines individual offsetting obligations.

The baseline and how obligations are calculated

The baseline for Phase 1 is set at 85% of 2019 international aviation emissions. Airlines whose collective emissions exceed that baseline must offset the difference. The Phase 1 baseline was arrived at through a process described in detail in the next section. It was not the baseline CORSIA was originally designed around.

For 2024, IATA reports that total international aviation emissions from participating states were 597 million tonnes of CO2, up 12.6% from 2023. Emissions subject to CORSIA offsetting were 363 million tonnes. The 2024 offsetting requirement was 55.6 million tonnes. Aviation traffic recovered faster than many earlier projections anticipated.

Eligible Emissions Units

Airlines cannot use just any carbon credit for CORSIA compliance. Credits must be CORSIA Eligible Emissions Units (EEUs) from programmes approved by ICAO against defined quality criteria. ICAO publishes the relevant programmes, unit dates, activity limits and conditions in its CORSIA Eligible Emissions Units documents.

Beyond programme approval, eligible credits also need the right host-country authorisation where CORSIA rules require it. A Letter of Authorisation (LoA) is the document from the host country, meaning the country where the emissions reduction took place, that connects the credit to the corresponding adjustment required under Article 6 of the Paris Agreement. The LoA helps prevent double counting: it ensures the host country does not also claim the same emissions reduction toward its own Nationally Determined Contribution (NDC). Without the necessary authorisation, a credit can be high quality in the voluntary market and still fail the CORSIA compliance test. For full detail on eligible credits, standards and the LoA process, see our guide to CORSIA eligible carbon credits. For the separate voluntary quality-label question, read ICVCM and CCP labels explained.

CORSIA eligibility is not the same as credit quality

Sustainable Aviation Fuel

Airlines can reduce their CORSIA obligations by using Sustainable Aviation Fuel (SAF) in place of conventional jet fuel. SAF can be produced from lower-carbon feedstocks such as agricultural residues, forestry residues, municipal solid waste, used cooking oil and, in development, synthetic fuels produced using renewable electricity and captured carbon. The CO2 lifecycle savings from SAF, calculated against a fossil fuel comparator under ICAO's defined methodology, count toward CORSIA compliance. An airline that uses eligible SAF on a covered route can reduce the volume of EEUs it must purchase by the equivalent carbon reduction.

SAF is not, however, a realistic primary compliance route for most airlines in Phase 1 or the early years of Phase 2. Production volumes remain a small fraction of global jet fuel demand. The cost premium over conventional fuel is significant, and SAF can cost several times more than standard aviation fuel depending on feedstock, production method and market conditions. Blending mandates in the EU and UK are beginning to create minimum SAF use requirements for flights departing from those jurisdictions, but those mandates are separate from CORSIA obligations and do not remove the need for EEU purchases where CORSIA obligations remain.

For the foreseeable future, EEUs are the primary compliance mechanism for CORSIA. SAF is a parallel pathway that will grow in significance as production scales and costs fall, but it is not currently a substitute for the credit market.

The three-phase structure

Key dates and decisions

The pandemic baseline crisis

This section explains how CORSIA arrived at its current baseline, and what that journey cost the scheme in credibility.

The original design

When ICAO adopted CORSIA at its 39th Assembly in 2016, the baseline was agreed as the average of 2019 and 2020 international aviation emissions. The two-year average was a deliberate design choice. Using a single year risked a distorted baseline if that year turned out to be anomalous in either direction. The average provided stability.

The scheme was designed to generate offsetting obligations from 2021 onwards as international aviation grew above that average. Environmental groups, carbon market standards bodies and project developers invested in the framework on the expectation that the baseline would remain as agreed.

What the pandemic did to the calculation

In 2020, international aviation Revenue Tonne Kilometres, the standard measure of air traffic volume, fell by almost 60% from 2019. The pandemic did not merely reduce emissions. It nearly eliminated international air travel for months.

If the original 2019/2020 average baseline had been retained, the baseline would have been set at a level far below normal pre-pandemic traffic. A lower baseline would have made CORSIA more stringent once international aviation recovered, because emissions would rise above that lower level sooner. But in the early recovery years, if traffic remained below even the lower baseline, offsetting demand could still be limited. That is why the baseline decision mattered so much: it changed both the timing and eventual scale of mitigation across recovery scenarios.

The June 2020 decision

In June 2020, ICAO's Council, comprising 36 member countries, voted to remove 2020 from the baseline calculation for the pilot phase and use 2019 emissions only. The stated rationale: including 2020 would impose an inappropriate economic burden on airlines and would contravene the spirit of the CORSIA framework agreed in 2016, since actual 2020 emissions were far lower than the 2020 projections used when the methodology was designed.

The reaction from the environmental and carbon market community was immediate. A coalition including the Environmental Defense Fund, Carbon Market Watch, Gold Standard, WWF (World Wide Fund for Nature) and Natural Capital Partners signed an open letter to ICAO warning that changing the rules after adoption would damage the credibility and long-term stability of the scheme. They argued that carbon market mechanisms must be governed through predictable, consistently applied processes. Otherwise, project developers cannot make investment decisions with confidence.

ICAO's own Committee on Aviation Environmental Protection (CAEP) assessed the impact. It found that a 2019-only baseline, compared to the agreed 2019/2020 average, would reduce the overall mitigation achieved by CORSIA by between 25% and 75%, depending on how quickly aviation recovered. ICAO proceeded with the change.

The 2022 periodic review

The baseline adjustments did not end there. At the 41st ICAO Assembly in 2022, following a periodic review, ICAO adopted a further change: for Phase 1 (2024-2026) and beyond, the baseline would be set at 85% of 2019 emissions.

Understanding the implications of the 85% figure requires care. Compared with using 100% of 2019 emissions as the baseline, the 85% threshold means airlines must offset emissions that exceed a lower level. In that narrow sense, it requires more offsetting for any given level of traffic growth. But that comparison is not the right one. The relevant comparison is with the original 2016 framework.

The original design assumed that 2020 emissions would be close to 2019 levels and that the two-year average would produce a baseline at roughly 2019 levels or slightly above. Had the pandemic not occurred and the original methodology been applied, the baseline would have been higher than 85% of 2019. Aviation legal and policy analysis at the time noted that the 85% adjustment reduced total mitigation compared with what the original 2016 framework would have achieved.

The balanced assessment: ICAO's decisions were presented as protecting the scheme's viability against a genuine operational crisis. The pandemic genuinely distorted the original baseline design in a way that would have created obligations bearing no relationship to the original framework's intent. Critics correctly argued that changing agreed rules damaged the scheme's credibility as a stable policy framework and reduced its environmental ambition. Both things are true. The pandemic created a real problem. The adjustments still left CORSIA weaker than the standards bodies and project developers who had aligned their investment decisions to the original framework had reason to expect.

Phase 1: what is actually happening

The demand numbers

Phase 1 is generating one of the larger sources of near-term compliance-driven demand in the global carbon credit market. IATA's June 2026 estimates put total Phase 1 demand at between 170 and 236 million EEUs. The 2024 offsetting requirement was 55.6 million tonnes. For 2025, IATA estimated an offsetting requirement of 58.8 to 81.5 million tonnes.

The point is not only the volume. It is the kind of volume. Airlines need units that pass the CORSIA eligibility screen, fit the relevant compliance period and carry the right Article 6 authorisation evidence where required.

The LoA bottleneck

The Letter of Authorisation requirement is the most significant practical obstacle to Phase 1 compliance. ICAO's April 2026 CORSIA newsletter reported that ten countries had issued LoAs for CORSIA eligible credits. Credits from projects in countries without the required LoA cannot be used for CORSIA compliance, regardless of their quality, vintage or standard approval status.

Airlines are therefore competing for a limited pool of credits that are compliant with Article 6. Price premiums for credits backed by LoAs can be significant and are expected by several market analysts to rise as the Phase 1 compliance deadline approaches. IATA has also pointed to a near-term supply base that remains much smaller than total Phase 1 demand. For current aviation-specific price context, use the CORSIA credit prices guide.

The final cancellation deadline for the 2024-2026 compliance period is 31 January 2028, giving airlines time to accumulate credits across the full period before final retirement.

For Phase 1 procurement detail and compliance timelines, see CORSIA Phase 1 2024-2026. For current eligible credit prices, see CORSIA credit prices.

Phase 2: what changes from 2027

Mandatory participation

Phase 2 begins 1 January 2027. The fundamental change is that participation transitions from voluntary to mandatory for most ICAO member states. Defined exemptions apply for states responsible for less than 0.5% of international aviation Revenue Tonne Kilometres in 2018, Least Developed Countries (LDCs), Small Island Developing States (SIDS), and Landlocked Developing Countries (LLDCs).

The transition from a 130-state voluntary scheme to near-universal mandatory participation significantly increases both geographic coverage and the volume of routes generating offsetting obligations.

The demand scale

IATA estimates that airlines will need to purchase nearly 2 billion EEUs through to 2035 across Phase 2. That is an order of magnitude larger than Phase 1. The compliance cost from 2027 onwards will depend on traffic growth, eligible supply and credit prices, but the scale is clearly larger than the first main compliance period.

Whether the supply of LoA-backed eligible credits can meet that demand is the central question for carbon markets heading into Phase 2. Building the Article 6 infrastructure, meaning the administrative frameworks through which host countries issue LoAs and record corresponding adjustments, requires significant capacity that many developing countries hosting eligible projects do not yet have. The speed at which that capacity develops will determine whether Phase 2 demand is met by eligible credits, by SAF, or by compliance shortfalls.

CORSIA demand scenarios

The useful way to read CORSIA demand is not as a single fixed forecast. It is a range of compliance demand shaped by traffic growth, route coverage, baseline calculations, eligible credit supply, SAF deployment and the speed at which host countries issue LoAs. IATA estimated Phase 1 demand at 170 to 236 million EEUs in June 2026 and describes the requirement through 2035 as nearly 2 billion credits. The table below translates those public figures into a simple market lens. The midpoint is a TPB reference midpoint of IATA's range, not an official forecast.

The investor-relevant question is therefore not simply how many credits airlines need. It is which credits qualify, which countries can issue usable LoAs, which project types can meet CORSIA eligibility rules, and whether SAF growth reduces credit demand in later years. If eligible supply remains narrow while Phase 2 demand expands, CORSIA could become a price-discovery mechanism for high-integrity, Article 6-authorised credits rather than a generic aviation offsetting scheme.

The Article 6 connection

Phase 2's scale makes the Article 6 framework more critical. Corresponding adjustments, the mechanism ensuring that emissions reductions credited under CORSIA are not also counted toward the host country's own NDC, require operational bilateral frameworks between host countries and the registries through which CORSIA operates. Building those frameworks at the scale Phase 2 demands is a significant challenge. Countries that establish Article 6 infrastructure early will attract disproportionate Phase 2 demand for their projects. For the full accounting background, read Article 6 of the Paris Agreement explained.

For the interaction between CORSIA and the EU ETS on international routes, see CORSIA vs the EU ETS.

What CORSIA does not solve

Non-CO2 climate effects

CORSIA covers CO2 only. Aviation's climate impact extends well beyond carbon dioxide. Nitrogen oxide (NOx) emissions at cruising altitude contribute to the formation of ozone, itself a greenhouse gas, and deplete methane. Contrails form behind aircraft engines in cold, humid air and can persist for hours, spreading into cirrus cloud cover. IPCC (Intergovernmental Panel on Climate Change) assessments describe aviation's non-CO2 effects, including contrails, contrail cirrus and NOx-driven ozone changes, as significant short-lived climate forcers. Aviation's total radiative forcing, meaning its overall warming effect, is therefore larger than its CO2 contribution alone.

CORSIA does not address non-CO2 effects. No binding international mechanism currently does. This is the most significant gap in international aviation climate policy and the most consistent criticism of CORSIA from climate researchers. The EU has discussed extending its aviation climate framework to include non-CO2 effects; ICAO's periodic reviews have not produced a mechanism. Until a scheme covers the full climate forcing of aviation, any carbon-neutral growth claim based on CORSIA alone is incomplete.

Domestic flights

CORSIA covers international aviation only. Domestic aviation is excluded. Many major aviation markets, including the United States, China, Australia and Brazil, have large domestic flight networks. These fall under national climate frameworks where they exist but are not subject to CORSIA.

Absolute emissions

CORSIA's objective is carbon-neutral growth from the 2020 baseline, not absolute emissions reduction. Even full Phase 2 compliance still permits total international aviation CO2 emissions to grow, provided that growth is offset. Net zero by 2050 for aviation requires absolute emissions reduction, not just offset-adjusted carbon-neutral growth. The gap between CORSIA's objective and the trajectory required for net zero is significant and unresolved at the international level.

Offset quality and permanence

The quality of eligible credits varies across approved programmes and individual projects. Permanence risk, particularly for forestry and land-use credits, means the emissions reduction associated with a credit may be reversed if a forest burns, land use changes, or a project collapses. ICAO's eligibility criteria include quality requirements, but they cannot eliminate permanence risk. For a full analysis of carbon credit quality and what to verify before relying on offset claims, see how carbon credits work and the carbon credit quality checklist.

Enforcement

ICAO has limited direct enforcement powers. Compliance is enforced through national civil aviation authorities in participating states. The consistency of enforcement across 130 states, and eventually across most of ICAO's membership, is not guaranteed. Airlines operating under aviation regulators with limited capacity face a different compliance environment from those in jurisdictions with strong regulatory oversight.

What CORSIA means for carbon markets

Structured compliance demand

CORSIA is creating structured, non-discretionary demand for a specific category of carbon credit that did not previously exist at scale: credits backed by Article 6, authorised by host countries and approved by ICAO. This demand is qualitatively different from voluntary carbon market purchases. It is not discretionary. It has a defined compliance deadline. And it has explicit quality requirements, including the LoA, that exclude a large proportion of otherwise eligible credits.

The LoA premium

Credits with host-country LoAs can command a significant price premium over comparable credits without them. As Phase 2 demand grows through to 2035, that premium is expected to increase if supply remains constrained. Countries that establish operational Article 6 frameworks and begin issuing LoAs will attract CORSIA demand for their domestic project pipelines. The pace of LoA issuance, ten countries reported by ICAO in April 2026, is one of the most closely watched indicators in the CORSIA market.

Market segmentation

CORSIA is accelerating the segmentation of the broader carbon credit market. Credits that meet CORSIA eligibility requirements, including the LoA where required, are trading at a premium to comparable credits that do not. This segmentation is reshaping project development incentives, registry practices and buyer strategies across the voluntary carbon market. For detail on how CORSIA is changing voluntary market dynamics, see CORSIA and the voluntary carbon market. For current CORSIA credit prices and the market context, see CORSIA carbon credit prices.

Conclusion

CORSIA entered Phase 1 with a baseline weaker than the one ICAO agreed in 2016, adjusted twice under political and economic pressure before the scheme had generated a single year of compliance demand. ICAO's own analysis confirmed the mitigation cost. Environmental groups were right that those changes damaged the scheme's credibility as a stable policy framework.

And yet it is operational. Phase 1 is generating meaningful compliance demand for eligible credits. Phase 2 from 2027 will be substantially larger. The combination of compliance demand, Article 6 connection and EEU quality requirements is reshaping how the global carbon credit market prices and segments quality credits.

CORSIA is not ambitious. It does not address non-CO2 effects, domestic aviation, or absolute emissions reduction. Its enforcement is imperfect and its baseline is weaker than designed. What it is, however, is the main international mechanism currently operating for international aviation's CO2 emissions growth. Whether it achieves even its limited objective across Phase 2 will depend on compliance rates, the pace of LoA issuance, SAF deployment, and political will across ICAO's membership.

What this means for UK aviation and UK readers

The United Kingdom volunteered to participate in CORSIA from the pilot phase and remains a Phase 1 participant. Aircraft operators administered in the UK and international carriers based in the UK operating covered international routes between the UK and other participating states are subject to CORSIA offsetting obligations now, subject to the detailed operator, route and exemption rules.

The interaction between CORSIA and the UK ETS is a live policy question heading into Phase 2. UK ETS aviation guidance describes full-scope flights as flights departing from or arriving in an aerodrome in the UK, Gibraltar, the EEA or Switzerland, subject to exclusions. CORSIA uses a separate international state-pair framework. That means operators need to check the treatment of each route rather than assuming one scheme replaces the other.

For UK readers tracking listed airline stocks, aviation infrastructure or transition risk, CORSIA Phase 2 compliance costs are a material factor to understand. Phase 1 credit demand is already material. Phase 2 is expected to be substantially larger. The investment point is not that CORSIA determines whether an airline is good or bad. It is that aviation carbon costs, eligible credit supply and SAF availability are becoming part of the sector's risk profile.

For the parallel question of how CORSIA relates to the EU ETS for flights departing from the European Union, see CORSIA vs the EU ETS.

Those are open questions. What is not open is that CORSIA matters: to airlines managing compliance obligations, to carbon credit markets navigating demand, and to the broader architecture of international climate policy where international aviation has, for too long, sat outside any binding framework at all.

What to watch next

Useful source links

• ICAO: CORSIA overview and scheme documents
• ICAO: CORSIA and the pandemic baseline decisions
• ICAO: CORSIA newsletters and implementation updates
• IATA: CORSIA fact sheet (December 2025)
• IATA: CORSIA programme page
• IATA: Airlines to purchase first CORSIA offset credits (September 2025)
• IATA: CORSIA credit market capacity statement at the 2025 UN climate conference
• Abatable: Airlines to offset 58 MtCO2 for 2024 emissions (November 2025)
• GreenAir News: ICAO releases SGF for CORSIA Phase 1 (February 2026)
• Fastmarkets: CORSIA demand and supply outlook (March 2026)
• Oeko-Institut: Key issues for first CORSIA review
• International Institute for Sustainable Development: CORSIA baseline adjustment, blessing or curse?
• Aviation legal analysis: CORSIA baseline update and impact analysis
• Sylvera: Decoding CORSIA Phase 1 (November 2025)
• International Council on Clean Transportation: pandemic impact on CORSIA's baseline
• IPCC Sixth Assessment Report Working Group I Chapter 6: short-lived climate forcers
• UK Government: CORSIA, how to comply
• UK Government: UK ETS for aviation, how to comply
• IATA: Sustainable Aviation Fuel