Law Firm Outlines Legal Risks for Airlines as CORSIA Enters Next Phase in 2027 Alongside EU ETS
Why It MattersCarbon compliance is spreading from airline emissions desks into route economics, fleet planning, lease terms and financing assumptions, pushing lessors and lenders to price regulatory fragmentation into contracts.
A legal analysis published by law firm Morgan Lewis sets out the regulatory and commercial risks facing aviation businesses as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) moves into its next phase in 2027 and EU carbon regulations continue to evolve. Airlines, aircraft lessors, investors and other participants must manage an increasingly complex set of requirements across CORSIA, the EU Emissions Trading System (EU ETS) and developing international carbon markets.
As CORSIA enters its second phase, participation requirements will expand beyond the voluntary framework that applied during its initial phases, subject to specified exemptions. Airlines are advised to assess covered routes, emissions reporting obligations and changing carbon credit eligibility requirements. Because regional regimes such as the EU ETS impose distinct obligations, separate compliance strategies may be required, and airlines should watch efforts to coordinate the frameworks while preparing for possible regulatory fragmentation and changes to EU requirements.
On carbon credits, the analysis states that credits differ in environmental integrity, regulatory eligibility, ownership rights and delivery risk, and that credits suitable for voluntary commitments may not satisfy CORSIA requirements. Airlines should verify eligibility, registry status and applicable host-country authorizations before buying credits for a given compliance period. Cross-border transactions may involve several legal frameworks, with credits generated in one jurisdiction recorded in a registry elsewhere and sold under contracts governed by another country's law.
The analysis recommends that procurement contracts, whether spot purchases, long-term offtake agreements or project investments, include clear warranties, delivery obligations, replacement mechanisms and enforceable remedies, particularly where future credit issuance or eligibility is uncertain. It adds that carbon market exposure extends beyond airlines' direct compliance duties to route profitability, ticket pricing, fleet planning, lease performance, financing assumptions and investment valuations, so lessors, lenders and investors should address these risks through contractual risk allocation.
It also states that sustainable aviation fuel (SAF), CORSIA-eligible credits, EU ETS allowances and voluntary climate contributions serve different purposes, are not interchangeable and need separate eligibility, attribution and documentation processes. EU consumer protection rules restrict certain offset-based climate claims, while US guidance emphasizes substantiation of environmental representations. The analysis recommends that airlines review customer-facing statements, booking platforms and sustainability disclosures with coordinated oversight from legal and sustainability teams.
