By Phoebe Thomas, CFC, for Women in Carbon
Carbon insurance is having its moment in the spotlight. A discussion hosted by Women in Carbon late last year brought together expert perspectives on CORSIA’s evolving landscape, including how innovative insurance solutions could help unlock carbon credit supply for compliance airlines.
One question kept resurfacing: how does this market function once it’s forced to operate at scale?
CORSIA is approaching a decisive moment. From 2027, the scheme moves from voluntary participation to mandatory compliance for most countries, placing aviation’s first global carbon market under a level of pressure it hasn’t yet experienced. Airlines operating international routes will need to offset emissions above the 2019/2020 baseline. By 2035, demand could reach as much as 250 million CORSIA Eligible Emissions Units (EEUs).
Supply tells a different story. Eligibility rules set by the ICAO Technical Advisory Body continue to evolve, while Article 6 corresponding adjustment requirements under the Paris Agreement remain unevenly implemented across jurisdictions. At the same time, CORSIA is establishing a new global benchmark for integrity – drawing interest not only from airlines, but also from broader corporates and speculative buyers.
This combination creates friction in the market, at the moment it needs scale to succeed.
The gap
As of late 2025, only 7.14 million CORSIA eligible credits had been issued – an amount that barely dents expected future compliance needs. Analysts forecast that demand in Phase II could reach 1-1.5 billion tonnes, with annual offsetting requirements rising sharply from 62-88 million tonnes in 2027 to 166-257 million tonnes by 2035. Even the most conservative outlooks warn of persistent undersupply through 2027, despite new project pipelines beginning to form.
The underlying issue is that very few projects satisfy CORSIA’s three requirements:
- Insurance or other ‘replacement guarantee’ mechanisms;
- Strict registry and methodology criteria;
- Host‑country corresponding adjustments.
Bottlenecks around Article 6 implementation in host countries further compound the challenge. Under the Paris Agreement, host countries must apply Corresponding Adjustments when credits are transferred internationally to avoid double counting. Yet current approaches to policy frameworks, administrative infrastructure and UNFCCC reporting vary widely across countries. The first expert reviews have revealed “considerable shortcomings” in national Article 6 reporting systems.
For host countries, applying corresponding adjustments is a significant decision. It means effectively “giving up” part of their progress toward their own climate targets, or Nationally Determined Contributions (NDCs). This requires solid national GHG accounting and cross‑ministerial coordination – which many countries are still navigating.
Without mechanisms that accelerate carbon credit supply faster than administrative processes allow, the gap will continue to widen, leaving the market structurally short just as demand begins to climb.
CORSIA’s unique insurance challenge
As the aviation offset scheme moved from pilot to first compliance phase at the start of 2024, the Technical Advisory Board and registries identified insurance as a structural solution to get around the systematic challenge of corresponding adjustment risks.
CORSIA is the first compliance scheme to embed insurance in its eligibility requirements, to address Article 6 corresponding adjustment risk and systemic double‑counting.
Developers seeking CORSIA-eligible labels effectively have two routes:
- Provide evidence the host country applied the corresponding adjustment;
- Promise it will be made via a Letter of Authorisation (LoA), backed by insurance guaranteeing unit replacement if the corresponding adjustment fails to materialise.
This decouples project eligibility from administrative bureaucracy, bridging the gap between project readiness and governmental process, and accelerating supply into the market. Crucially, it allows developers to put out CORSIA credits today without yet having a corresponding adjustment in place yet.
Gold Standard and Verra both approved this structure in 2025 and a small number of insurers – including Artio, CFC and Oka – were among the first to offer policies that support CORSIA eligibility. As the market matures, we can expect additional players to enter, expanding capacity and choice for developers.
What does this mean for the market? Developers can secure CORSIA labels and begin marketing to airlines while host countries complete corresponding adjustment processes at their own pace. Insurance absorbs that uncertainty.
This is not a simple risk to price. Insurers assess risk across more than 40 potential supply jurisdictions, typically across four pillars:
- Project quality: Assumptions, historical performance, and developer experience. For example, in cookstove projects, underwriting capital will be prioritised for projects ‘doing the right thing’; conservative assumptions (such as fraction of non-renewable biomass values; and using updated methodologies where feasible.
- General country risk: Political stability, adverse government action, and policy-reversal risk, assessed through a carbon market lens.
- Article 6 readiness: Evidence of a host country’s ability to apply a corresponding adjustment, including registry systems, UNFCCC reporting and Internationally Transferred Mitigation Outcome (ITMO) tracking.
- LoA quality: Assurance that authorisations are issued by the appropriate Designated National Authority (DNA) and meet Article 6.2/6.4 requirements.
All assessments are country specific. Strong documentation doesn’t compensate for weak Article 6 implementation. Underwriting appetite concentrates on jurisdictions demonstrating operational readiness, not aspirational commitments.
Premium structures are evolving, with costs increasingly shared, embedded, or paid upfront. Developers capable of achieving CORSIA‑eligible pricing can offset initial insurance costs from improved margins. As track records build, economics improve further.
The broader market
Insurance has already demonstrated its ability to unlock capital at scale and speed.
For a sector not typically known for its rapid evolution, many have been surprised by the sophisticated insurance products CORSIA has driven and the new risk-sharing mechanisms they enable.
Unlike CORSIA, which deals in issued credits, the voluntary carbon market has long relied on forward contracting. Developers depend on buyers committing capital years before credits are delivered, requiring buyers to shoulder risk ranging from construction failure and political instability to natural catastrophes and methodology. These risks, combined with the need to trust a developer’s ability to execute, have constrained participation and restricted growth.
Insurance addresses these constraints by providing three critical functions:
- Risk transfer
- Quality signal
- Market acceleration
Take a recent transaction as an example. JP Morgan’s $200 million debt facility with Chestnut Carbon, was contingent on CFC’s insurance, allowing carbon revenues to be treated as bankable project‑finance cash flows. Deals move faster when insurance is built in.
Institutional lenders increasingly view carbon credits through a project‑finance lens and want protection before putting carbon revenue streams on the balance sheet.
The impact extends beyond individual transactions. Insurance strengthens confidence, enhances credibility, and provides the institutional foundations needed for carbon markets to mature and grow at the pace compliance markets now demand.
What does success look like?
- For insurers: Unlocking carbon credit supply creates scalable opportunity for new products as carbon markets expand globally.
- For developers: Insurance enables access to forward capital, institutional lending, and early CORSIA premiums, allowing focus on delivery rather than geopolitical risk.
- For host countries: Monetising carbon credit exports generates revenue for NDCs and market infrastructure, with early movers capturing advantage.
- For airlines: Procurement confidence, security of supply, and simplified compliance.
- For carbon markets: Institutionalisation – enabling capital flow at scale with trust.
- For CORSIA: Proof that compliance schemes can integrate financial innovation to overcome timing mismatches between projects and governments.
Insurance as essential, not optional
Insurance is not an optional add‑on within CORSIA; it is essential market infrastructure. As the first sector‑based carbon market, CORSIA is poised to define how future UN mechanisms address emissions across other industries.
What emerged clearly from the Women in Carbon discussion is that this transition is already underway. Insurance products have been approved. Transactions are closing. The market is on the move.
Getting this right does more than support compliance airlines: it strengthens developers’ ability to build new projects, delivers host countries more predictable revenue, and ultimately accelerates climate‑positive outcomes.
The prize is a carbon market capable of delivering real climate impact at the speed and scale the world needs.
Women in Carbon is an initiative that enables conversations on market challenges by leading women in this space. Follow Women in Carbon on LinkedIn to learn more.
Phoebe Thomas is a Carbon Underwriter at CFC, where she underwrites carbon market risks including CORSIA guarantee insurance. CFC was among the first private insurers approved by Gold Standard and Verra to provide insurance supporting CORSIA credit eligibility.
Any opinions expressed in this commentary reflect the views of the authors and not of Carbon Pulse.
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