THERE’S a growing disconnect in the aviation carbon market — and it’s starting to look deliberate.
Under CORSIA, airlines need carbon credits backed by host-country approval. But supply is tight, because governments are slow — or unwilling — to issue the necessary authorisations.
So the market found a workaround: sell the credits anyway, and insure the risk.
Developers get paid upfront. If approvals don’t come through, insurers compensate them. Problem solved — at least for the seller.
For buyers, not so much.
The real issue: governments aren’t signing off
The bottleneck isn’t just bureaucracy. It’s politics.
Many countries are reluctant to issue Letters of Authorisation or apply corresponding adjustments because they weren’t fully involved when these projects were set up. Signing off now means giving up emissions reductions they may need for their own climate targets and furthermore they are not involved in the financial proceesds generated by these projects.
That makes the current supply crunch structural — not temporary.
And when countries fix it, the system breaks anyway
Take Zimbabwe.
The country has built a relatively advanced system where carbon credits move through a national registry, and approvals are granted at the point of transfer. It’s exactly the kind of sovereign control the Paris Agreement envisioned.
But here’s the catch.
CORSIA rules, shaped by the International Civil Aviation Organization (ICAO) and its Technical Advisory Body (TAB), don’t recognise credits coming directly from national registries. They have to flow through standard bodies like Gold Standard or Verra.
So even when a country does everything “right,” it can’t plug cleanly into the system.
A real example that makes little sense
In one case, credits issued under Gold Standard were transferred into Zimbabwe’s registry, where they received full authorisation and corresponding adjustments. They were then sent back to the Gold Standard registry for trading.
That should have made them more valuable.
Instead, they lost their CORSIA eligibility, following guidance linked to the Technical Advisory Body (TAB).
So:
• fully authorised credits → no longer eligible
• not-yet-authorised credits → sold with insurance
That’s not just inefficient. It’s upside down.
Insurance shifts the risk — it doesn’t remove it
Insurance-backed credits are booming because they keep the market moving.
But most policies protect developers, not airlines. If approvals fail, sellers get paid. Buyers can still be stuck with non-compliant credits.
At scale, that creates a serious problem. Replacement credits are scarce. Prices could spike. Insurance payouts may not cover the gap.
In other words, the risk is still there — just pushed further down the chain.
Why is everyone going along with it?
If the system looks this inconsistent, why do key players — from the Technical Advisory Body (TAB) to Sylvera, Verra and Gold Standard — broadly support it?
Because the alternative is worse.
If authorised supply doesn’t increase, the market stalls. Airlines can’t comply. The entire scheme starts to wobble.
So instead of fixing the bottleneck, the system is adapting around it — even if that means accepting more complexity, more risk, and more contradiction.
This is starting to look like a confidence trade
To be clear, this isn’t fraud. There are real projects and real emissions reductions.
But the market is increasingly built on:
• approvals that haven’t happened yet
• credits that may or may not qualify
• and insurance that doesn’t fully cover the end user
That’s not a stable foundation. It’s a confidence trade.
And when confidence is doing most of the work, things can unravel quickly.
The bottom line
Right now, the CORSIA market is doing three things at once:
• rejecting credits that meet the spirit of the rules
• accepting credits that don’t yet meet them
• and relying on insurance to bridge the gap
That might keep the system running in the short term.
But it raises a bigger question:
is the market solving its problems — or just postponing them?
