With CORSIA entering its next phase in 2027 and EU carbon regulations continuing to evolve, aviation stakeholders should consider how these frameworks affect contractual arrangements, investment decisions, and environmental claims.
Below we highlight some of the core legal and practical considerations for the industry entering 2027:
- CORSIA’s 2027 transition will expand international aviation compliance obligations. As CORSIA enters its second phase, participation requirements will expand beyond the voluntary framework applicable during its initial phases, subject to specified exemptions. Airlines should assess covered routes, emissions reporting obligations, and changing carbon credit eligibility requirements.
- Aviation businesses must plan for overlapping carbon regulations. While CORSIA provides a global framework for international aviation emissions, regional regimes such as the EU ETS impose distinct obligations that require separate compliance strategies. Airlines should monitor efforts to coordinate these frameworks while preparing for potential regulatory fragmentation and changes to EU requirements.
- Not all carbon credits are created equal, particularly for aviation compliance purposes. Credits differ in environmental integrity, regulatory eligibility, ownership rights, and delivery risk, and credits suitable for voluntary commitments may not satisfy CORSIA requirements. Airlines should verify eligibility, registry status, and applicable host-country authorizations before purchasing credits for a particular compliance period.
- Cross-border carbon credit transactions can involve multiple legal frameworks. Credits generated in one jurisdiction may be recorded in a registry elsewhere and sold under contracts governed by another country’s laws, creating uncertainty around ownership, transferability, and enforceability. Buyers should assess underlying project rights, competing claims, and registry requirements rather than relying solely on contractual protections.
- Carbon credit procurement contracts should account for regulatory changes and delivery risks. Spot purchases, long-term offtake agreements, and project investments present different exposures, particularly where future credit issuance or eligibility remains uncertain. Clear warranties, delivery obligations, replacement mechanisms, and enforceable remedies can help protect buyers when credits fail to meet their intended compliance purpose.
- Carbon market risks extend across the aviation value chain. While airlines bear direct compliance obligations, carbon credit costs and availability can also affect route profitability, ticket pricing, fleet planning, lease performance, financing assumptions, and investment valuations. Lessors, lenders, and investors should consider how these exposures are addressed through contractual risk allocation and transaction due diligence.
- Sustainable aviation fuel (SAF) and carbon credits require distinct accounting and compliance approaches. SAF, CORSIA-eligible credits, EU ETS allowances, and voluntary climate contributions serve different purposes and are not interchangeable. Aviation businesses should coordinate fuel and carbon procurement strategies while maintaining separate eligibility, attribution, and documentation processes.
- Environmental claims create legal exposure beyond regulatory compliance. EU consumer protection rules restrict certain offset-based climate claims, while US guidance emphasizes substantiation of environmental representations. Airlines should review customer-facing statements, booking platforms, and sustainability disclosures to distinguish actual emissions reductions from offsetting activities, with coordinated oversight from legal, sustainability, and marketing teams.
LOOKING AHEAD
As CORSIA enters its next phase and regional carbon regulations continue to develop, aviation stakeholders should prepare for evolving eligibility requirements, overlapping compliance obligations, and the commercial risks associated with carbon credit procurement.
Building flexibility into long-term agreements, strengthening due diligence and documentation, and coordinating carbon procurement, fuel strategies, and environmental communications will be key to managing regulatory uncertainty across the aviation industry.
HOW WE CAN HELP
Morgan Lewis lawyers advise aviation industry participants on the regulatory, commercial, and transactional issues arising in international carbon markets. Drawing on experience across aviation, energy, environmental regulation, and cross-border transactions, our team assists airlines, lessors, investors, and other stakeholders with carbon market compliance, credit procurement and project investments, contractual risk allocation, and evolving emissions and sustainability requirements.
