CORSIA Supply and Demand: Why a Shortfall Is Projected

The structural feature of the CORSIA market is an asymmetry: demand rises on a schedule everyone can read, while supply depends on decisions dozens of governments have not yet made. Every credible analysis of the balance reaches the same qualitative conclusion.

The Demand Side Is Predictable

Three forces push demand up, all of them scheduled rather than speculative.

None of these depends on a decision still to be taken. They are in the scheme's design.

The second is the largest single step. Routes that generate no obligation today, because one end is non-participating, begin to count. For carriers with significant traffic to currently non-participating States, the obligation can multiply rather than merely increase.

The Supply Side Is Not

Supply of CORSIA-eligible units requires all of:

1. A project under an ICAO-approved crediting programme
2. Units in an eligible vintage window
3. A host-State corresponding adjustment

The first two are administrative. The third is sovereign, and it is the bottleneck.

Why the third condition dominates

Authorising a corresponding adjustment means the host State adds those tonnes back into its own national accounting, forgoing them against its Nationally Determined Contribution.

Governments weigh that against investment and revenue, and reach different answers. Some authorise readily. Some authorise selectively by project type. Some attach fees or revenue-sharing conditions. Many have no designated authority or published process at all — which functionally means no, regardless of stated intent.

None of this is forecastable. It depends on how ambitious each NDC is, how much cheap domestic mitigation remains, whether a domestic carbon market is being built, and political judgement about the trade.

See corresponding adjustments.

Why Analyses Keep Projecting a Shortfall

Assessments of CORSIA supply and demand have repeatedly concluded that adjusted supply is likely to lag obligations, particularly as second-phase demand arrives.

The reasoning is consistent across them:

• Most existing credits predate Article 6 mechanics and were designed without authorisation in mind
• The share of global supply carrying an adjustment is, by every estimate, a small minority
• New projects take eighteen months to three years from concept to first issuance
• Authorisation is the least predictable step in that timeline
• Corporate voluntary buyers compete for the same adjusted pool
• Demand's increase is scheduled and known

Whether an actual shortfall materialises depends on how many governments choose to authorise, and how quickly. Nobody can predict that with confidence, and anyone presenting a specific supply forecast as settled should be treated with suspicion.

What an Asymmetric Risk Means in Practice

The risk is not symmetric. Supply could improve faster than expected, in which case prices soften and a buyer who purchased forward has slightly overpaid. Or supply could fall short, in which case a buyer who waited faces high prices, thin availability, and an unmet legal obligation.

Those outcomes are not equally bad. That asymmetry, rather than any price forecast, is the argument for acting early.

What Buyers Should Do

Acquire progressively rather than at the deadline

Every operator in the scheme reaches its purchasing decision in the same window at the end of a compliance period. Buying across the period averages price exposure and avoids competing with the entire sector simultaneously.

The cost is committing before the final number is confirmed — which argues for buying a conservative portion early and reserving the final window for reconciliation.

Contract forward selectively

Forwards secure existence, not merely price. In an illiquid market that is the more valuable property. Allocate authorisation, vintage and delivery risk explicitly in the agreement.

Diversify deliberately

Across programmes, host States, project types and vintages. Concentration in any one is concentration of regulatory risk, and programme approvals have lapsed and vintage windows have moved.

Reduce the obligation itself

Fuel efficiency and qualifying SAF both lower the requirement. A tonne not owed is a tonne you never have to source, at any price and in any market condition. See how SAF reduces your requirement.

Contract for unavailability

What happens if supply cannot be sourced? Silence allocates that risk to you. It is a foreseeable scenario and belongs in the agreement.

What Sellers Should Do

Resolve authorisation first, before anything else. It is the gate. A project that is technically excellent and fully verified may still be unable to supply CORSIA, and discovering that after spending a validation budget is the most expensive avoidable mistake in this market.

Work backwards from the demand ramp. Second-phase demand arrives on a known date. A new project needs eighteen months to three years to first issuance. Developers targeting that demand need to be moving on authorisation now — waiting until demand is visible means arriving after ready supply has been contracted.

Keep a voluntary fallback. Design for eligibility while retaining the option to sell without an adjustment. If authorisation arrives you capture the premium; if it does not, the project still reaches a market. This costs little at design stage and is very hard to retrofit.

Build the documentation package as you go. Buyers reject on documentation gaps as often as on project quality.

Signals Worth Tracking

Capture what these say on the date you rely on them. Published positions change, and a link is not evidence of what a page said on the day.

Where to Go Next

• CORSIA credit pricing — the price consequence
• The CORSIA market — how to transact in it
• Corresponding adjustments — the bottleneck
• CORSIA phases and timeline — the demand schedule

Current positions are published by ICAO.

DSTechnoverse works both sides of this market. Talk to our team or apply as a CORSIA buyer or seller.