CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) aims to stabilise the net climate impact of international aviation by keeping total emissions at or below baseline levels through a combination of offsetting requirements and sustainable aviation initiatives. However, as the first mandatory phase (2024–2026) begins, a significant challenge has emerged: the need for insurance or guarantees for CORSIA-eligible credits.

While this requirement isn’t directly mandated by ICAO, leading carbon registries like Verra, Gold Standard, and the American Carbon Registry (ACR) have introduced insurance mechanisms to mitigate risks, such as double-claiming and revocation. These evolving standards are creating supply barriers and new complexities for both airlines and project developers.

In this blog, we explore what’s driving these changes, their impact on the market, and what airlines should expect as the 2028 surrender deadline approaches.

The insurance bottleneck explained

CORSIA requires airlines to use high-integrity carbon credits, which must have measures in place to avoid double-counting and comply with strict eligibility criteria. To ensure this, many registries now require projects to have a replacement guarantee, in addition to a corresponding adjustment.

The requirement for these guarantees is directly tied to CORSIA’s overall aim to ensure the credibility of carbon markets and prevent fraud or invalid credits. So, what’s the difference between the two?

Corresponding adjustments ensure that when a credit is used by an airline, the reduction is accounted for in the host country’s national emissions total. This is necessary to avoid double-counting.
Replacement guarantees (insurance) provide a safety net in case a host country revokes a credit’s eligibility, such as if it withdraws its Letter of Authorisation (LoA).

The requirement for a corresponding adjustment is mandatory, regardless of whether insurance is in place. In practice, however, most registries now require both. This is part of a broader effort to safeguard against risks like double-counting, given the uncertainties in the infrastructure around Article 6 of the Paris Agreement, as well as varying political stability across host countries.

Impact on credit supply and project developers

The insurance and guarantee requirements are expected to create a bottleneck in the carbon credit market, especially as supply struggles to meet growing demand. Many projects will take years to meet the necessary criteria for insurance and guarantees, leading to delays in the issuance of eligible credits.

Current supply limitations: Only a handful of projects currently have the necessary guarantees in place, such as KOKO Networks working with MIGA (Multilateral Investment Guarantee Agency).
Impact on airlines: Airlines seeking to secure credits are likely to face challenges finding enough eligible credits, especially with the 2028 deadline approaching.

This will likely push up the price of CORSIA-compliant credits, making it crucial for airlines to act early and secure credits at competitive prices.

The role of insurance providers and intermediaries

Insurance providers and intermediaries are becoming increasingly important in the CORSIA market.

Key players: MIGA, the World Bank’s political risk insurer, is one of the major players providing insurance for CORSIA-compliant projects. In addition, emerging startups are addressing unique risks specific to the voluntary carbon market (VCM).
Challenges: The due diligence processes required for insurance and guarantees can take up to 12 months, adding significant delays to the carbon credit issuance process. There is also limited experience with the specific risks involved in carbon markets, further complicating things for developers and buyers.

Companies like Opna play a key role in connecting insurers, developers, and buyers. By helping airlines secure high-quality, CORSIA-eligible credits and providing risk management, we simplify the compliance process for airlines.

Looking ahead: What airlines and developers can expect

Several key trends are shaping the future of the CORSIA market, and airlines need to stay informed to avoid falling behind.

Standardised insurance products: As the market matures, we expect to see the development of more standardised insurance products, which will help streamline the process for both developers and buyers.
Clearer rules on Article 6: As countries refine their processes for managing corresponding adjustments and revocations, more clarity on how to apply these rules will emerge.

Faster implementation in advanced jurisdictions: Countries with more developed carbon markets, such as Kenya, may issue credits more quickly, while others may take 2-3 years to fully meet the demand for CORSIA-eligible credits.

The insurance bottleneck poses significant challenges for airlines and developers. However, these measures ensure that CORSIA-compliant credits maintain their integrity, offering long-term benefits for the carbon market and climate action. Airlines should start sourcing CORSIA-eligible credits well in advance to avoid price hikes and supply shortages.

Ready to be CORSIA compliant?

At Opna, we are here to help airlines navigate these complexities. We offer access to insured credits, risk hedging strategies, and full compliance support, ensuring airlines can meet their CORSIA obligations with confidence. Get in touch with Opna today to learn more about how we can support your CORSIA carbon credit strategy.