International airlines are likely to face billions of dollars in additional costs due to a surge in carbon credit prices, according to forecasts. As a supply shortage looms for the carbon credits airlines must purchase, the outlook points to worsening profitability and growing pressure to raise airfares.
According to the Financial Times on Friday, carbon market data firm MSCI Carbon Markets forecasts that carbon credit prices will reach $100 per ton by 2035. With airlines' demand for carbon credits far outstripping supply, prices could jump nearly eightfold from current levels.
As a result, airlines' cost burdens are expected to rise sharply. MSCI estimated that the total cost the aviation industry will bear from 2024 to 2035 could reach up to $127 billion.
Among individual airlines, Emirates is expected to face the largest burden. Emirates, which has a high proportion of long-haul routes, is projected to bear about $8 billion. This is close to 20% of its 2025 operating revenue. However, if supply increases more than expected and demand slows, the burden could fall to around $2 billion.
The burdens for Qatar Airways and United Airlines were estimated at $6 billion and $5 billion, respectively. Korean Air, along with Turkish Airlines, Singapore Airlines, British Airways, Cathay Pacific, and American Airlines, were also cited as carriers facing heavy credit-purchase burdens.
The International Civil Aviation Organization (ICAO) introduced the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) in 2016. Under the scheme, airlines in participating countries must purchase carbon credits to offset international emissions that exceed 85% of 2019 levels. About 130 countries, including the United Arab Emirates (UAE), the United States, and the United Kingdom, currently participate in the scheme.
Carbon credits are generally issued based on projects that reduce or remove greenhouse gases, such as forest protection or expanding carbon absorption. However, with insufficient projects meeting CORSIA standards, the supply shortage could intensify going forward.
Airlines' cost burdens could grow further in the future, as the European Union (EU) is considering imposing an additional carbon levy on flights departing from within the bloc.
