Prices for spot credits tagged for approval under the first phase of the Carbon Offsetting and Reduction Scheme for International Aviation rebounded this week to a two-month high, driven by increased confidence from policy signals from the European Commission. Market participants welcomed the commission's decision to scrap its proposed additional requirements on phase 1 credits, and were mostly relieved at a weaker-than-expected scope expansion outcome from the EU's emissions trading system (ETS) review on Friday.
Trading activity has been rising notably in the past couple of weeks, with prices climbing day-by-day as market participants were crowding to offer credits into two requests for proposals for Japanese airlines. But this week the largest rise in prices for spot CP1-tagged credits since Argus started assessing in November 2025 was recorded, after some much-awaited regulatory clarity calmed anxieties for European airlines and elsewhere in the world.
Two important developments in the EU drove renewed confidence in the scheme this week, after a long period of the market doubting whether Corsia Phase 1 has a future in the bloc.
No additional eligibility criteria
On Wednesday, minutes from a meeting of the commission's working group revealed that the bloc's executive body will propose to scrap the previously proposed additional eligibility criteria requirements for CP1 compliance for European Economic Area (EEA)-based airlines.
The previously floated requirements would have excluded about 90pc of the currently tagged credits for Corsia Phase 1 for EEA-based airlines. The commission had at the time proposed operators should not use units issued under high forest, low deforestation methodologies — activities credited based on existing carbon stocks — and credits issued by projects whose fraction of non-renewable biomass is above the host country value, as adopted in Table 3 of version 3.0 of TOOL33 of the Clean Development Mechanism.
But the committee said this would be the "only" proposed change, meaning the other requirements discussed in the draft note would remain — including restricting eligible credits in phase 2 to only those certified under the UN's Paris Agreement Crediting Mechanism (Pacm).
Two-tiered pricing had emerged previously for so-called EEA-compliant units. A methane reduction project from Uzbekistan was the only one available on the spot markets, having issued about 1.5mn credits for which the bid-offer spread was most recently seen this week at $11-14.50/t CO2e. Some trades were said to have been concluded in the months since the concept note came out in the $14-16/t CO2e range. Discussions and trading activity had also emerged around forward offtake contracts for EEA-based credits, but sources said it was likely only intermediaries that had the financial structures to take on this risk concluded some of these.
"We had anticipated a bifurcated market if the EU maintained additional criteria. I think that the decision to stick with overarching international standards will have great repercussions for the maturity of the carbon market in general," Marex environmental products trader Rosie Burton said in a statement today.
More intermediaries were seeing renewed interest in the market this week. One source had received demand for 200,000-300,000 credits on a guaranteed structure basis from an intermediary, a prospect buyer seeking to resume previous negotiations.
The expectation of a secondary act that would determine additional eligibility criteria for CP1-tagged credits used by EEA-based operators was one of the main obstacles holding back demand from these airlines.
Corsia Phase 1 implementation had already been integrated in the EU ETS delegated regulation, meaning Friday's EU ETS review would not have affected airlines' obligation to comply.
Stop-the-clock expanded to 2032
More global demand is expected to be unlocked in the coming weeks after the commission proposed extending the scope of the ETS to cover flights landing in countries within 5,000km from Frankfurt airport from 2029, while still allowing airlines to deduct costs incurred from Corsia to avoid double-charging.
The market has also found some relief from another extension of the stop-the-clock provision preventing full extension to departing flights until a 2032 review. By the end of 2032 the UN's International Civil Aviation Organisation (Icao) review of Corsia is due. While Icao plans these every three years since 2022, this is due to be a potentially more consequential assessment, because the body will decide whether to expand Corsia beyond 2035. As it stands, phase 2 runs between 2027 to 2035, with surrender deadlines every 3 years — in 2031, 2034 and 2037.
The commission also proposed to include compliance with Corsia Phase 2 in the EU ETS regulation from 2026 to 2035, meaning airlines will have to comply with Corsia obligations regardless of any another potential change to the ETS scope in 2031.
This cements EU's determination to "support multilateralism" and will likely be encouraging for other jurisdictions throughout the world to go ahead and transpose Corsia implementation — including penalties for non-compliance — into their national legislation. Lack of such affirmation by countries has kept potential airline demand for CP1-tagged credits at bay so far.
Some market sources have welcomed this initial proposal because it was less aggressive than expected in terms of scope expansion, and because it creates a path forward for Corsia in the EU and across the world.
"In proposing that longer-haul flights continue under CORSIA until at least 2032, rather than folding all departing flights into the extended ETS, we believe the commission has just removed the single biggest remaining barrier between carbon credit supply and demand: policy uncertainty," project developer Burn commercial director Douglas Greenwell told Argus.
"That has been reinforced by this week's clarity around which credits are expected to qualify, giving buyers a set pool to plan their purchases against. Airlines now have the final permission they were waiting for to buy, and project developers who have already done the hard work on quality are ready to meet that need," Greenwell added.
Other market stakeholders, however, saw this as a "compromise" that will only serve to impose more regulatory burden on airlines.
"Applying the ETS to flights travelling up to 5,000km from Frankfurt, capturing major international hubs such as Dubai, risks creating fragmented rules for comparable routes - one regime applying outside the radius and one inside. These carbon costs are likely to be reflected in higher ticket prices and air cargo rates," developer and intermediary South Pole chief executive Nadia Kaddouri said.
Icao — the Corsia ruling body — also expressed "concern" with the commission's proposal, claiming it would fragment aviation decarbonisation efforts and jeopardise the effective implementation of Corsia.
Trade body International Air Transport Association (Iata) echoed similar criticisms, saying it was watching further details on how increasing sustainable aviation fuels (SAF) allowances and a SAF book-and-claim system could be implemented.
The commission decided to expand the scope of its ETS to extra-EEA aviation emissions after its due assessment of the environmental integrity of Corsia found that the scheme did not meet the commission's requirements, namely that it has not been strengthened and it covered less than 70pc of international aviation emissions.
Prices may rise above $20/t CO2e: Marex
Overall this week's developments have brought a sense of revival to the market, after a long and drawn out period where some participants' financial wills were tested by a shaky outlook at best.
Corsia — like other compliance schemes that embrace offsetting — has been seen as a lifeline to the voluntary carbon credit market, with many developers of clean cookstove projects redirecting efforts to the scheme. But at lows of $9.30/t CO2e for CP1-tagged hit earlier this month, it made little sense for developers and intermediaries alike to invest on Corsia or participate in the market.
With the newly announced EU proposals, the market now expects upside to hit, as fundamentals-wise the scheme is still structurally undersupplied, with only about 38mn credits available of the projected 170mn-180mn airline demand.
Marex's Burton expects prices to rise to "around mid-$20s", she said in a statement. Such levels were last seen in late 2025 and very early 2026.
"Increased trading activity in Asia, together with the EU's sign-off, will bolster the market globally," Burton said. Noting that while supply remained small, airlines were "much more likely to lift volumes at a faster rate than credits appear in the market," supporting prices.
