CORSIA futures open interest rises as EU proposal reshapes aviation credit market
Trading and open interest in futures contracts for CORSIA Phase 1 eligible emissions units accelerated in the days following the European Commission’s EU ETS proposal, according to market data noted in official announcements published on 21 July, reflecting renewed confidence in the aviation compliance carbon market after months of regulatory uncertainty.
The driver of the market movement was the Commission’s confirmation that it would embed CORSIA into EU law as the sole compliance mechanism for international flights departing the European Economic Area through 2028, while not imposing additional eligibility conditions on Phase 1 credits beyond CORSIA’s existing framework. The ICE December 2026 CORSIA Phase 1 contract rose approximately 39% from its 30 June level in the two-and-a-half weeks to 21 July, according to data cited by Base Carbon in its GlobeNewswire press release published on the same date.
Supply of CORSIA-eligible credits remains structurally limited. Data from credit ratings agency Sylvera cited in the Base Carbon release estimates that approximately 40 million Phase 1-tagged credits exist globally, against minimum EU demand alone of 29 million, or roughly 70% of that supply. Industry body IATA has estimated that airlines globally will need between 146 million and 236 million eligible emissions units for the full Phase 1 compliance period covering 2024 to 2026, with credits required to be cancelled by January 2028. Eligible supply is constrained because credits must carry corresponding adjustment authorisations from host governments under Article 6 of the Paris Agreement, a process that requires each country to ensure the reductions are not simultaneously counted towards its own national climate target.
The EU proposal also provides that airlines’ spending on CORSIA credits would be deductible from any obligations incurred under the EU ETS as the trial ETS extension to short and medium-haul routes begins from 2029, and the Commission has signalled a further review of CORSIA’s effectiveness in 2032 that will determine how the two schemes interact thereafter. Market participants noted by Carbon Pulse on 21 July as responding positively to the proposal included investors who had been monitoring the potential for the EU to impose stricter eligibility criteria on Phase 1 credits — a risk that the Commission’s announcement has substantially reduced. This is a market development update to the EU ETS story covered in our previous edition; what is new is the quantified price response and the market depth data disclosed in today’s official announcement by Base Carbon.
