The EU ETS Revision: Did the EU just save CORSIA?

The European Commission has unveiled its position on CORSIA, as part of a large set of proposed reforms to the EU ETS (COM(2026) 616). On balance this is very good news for CORSIA - one of the biggest clouds hanging over it has just lifted, bringing in glorious sunshine and clarity for the market. (Ok maybe that’s exaggerating a little, but only slightly).

For many months now the European Commission’s review, formally due by 1 July but postponed to 17 July, was expected to be highly damaging to CORSIA, most notably by proposing to expand the scope of the EU ETS to cover all flights leaving Europe from 2029. This would have likely sparked an ugly trade war, in which CORSIA was expected to be collateral damage. 

Given this context the striking thing about the announcements isn't that the EU criticised the international aviation scheme — it's how delicately it chose to respond, with a scalpel rather than a bazooka. This significantly enhances the chances of CORSIA being a success. For anyone invested in the future of international carbon markets, that is a very big deal.

What was announced in the EU ETS for CORSIA

The position on CORSIA in the proposal was informed by a very detailed Impact Assessment (see parts 1 and 3). The IA concludes that CORSIA has not met the environmental goals the EU set for it — and yet the proposals pull their punches, steering clear of the more aggressive options that had been floated. 

In terms of CORSIA the key elements of the proposal are for the EU to

1. add an EU carbon price to flights heading from Europe to any airport within 5,000km of “geographical centre of the Union”, which seems to mean Frankfurt airport (and hence covers all of Northern Africa, West Africa and the Middle East) from 2029; and
2. implement CORSIA fully into EU law through to 2035, when the scheme is due to end;
3. produce another review of its environmental effectiveness by 1 July 2032;
4. bring aviation emissions from private jets and smaller airlines into scope - the former in particular being irrelevant from a global emissions perspective but politically highly salient.

The key point above is point 1, which is both narrower (given the US, China, Brazil and other key aviation centres are all beyond the 5,000km radius) and later (2029 vs 2027) than previously suggested. While the countries most affected by this decision - countries outside the EU but within the radius which receive substantial European tourism, so places like Morocco, Egypt and the UAE - are likely to be unhappy with this decision, this was clearly seen as a much safer option than triggering the US. 

Add to this the confirmation on Tuesday (14 July) that the EU will drop, as “a good will gesture”, the proposal of additional eligibility requirements for Phase 1 credits, and the overall picture is one of much boosted confidence in CORSIA's current design.

What it means for CORSIA and carbon markets

Put these pieces together and the direction of travel is clear: the EU has chosen partnership over confrontation. That matters for three reasons.

(i) It shores up demand. Embedding CORSIA in EU law to 2035, extending unit cancellation, and — apparently — not layering on extra Phase 1 credit conditions all point the same way. Markets take their cues from signals like these, and the signal here is that the world's most demanding climate regulator is prepared to rely on CORSIA rather than replace it. With the exception of a very large cheque, little steadies a market more than a credible buyer committing to stay in it. We’ve already seen rising confidence translate directly into prices, with the ICE Futures contract gaining 19% in the last week, and 32% on the low of a fortnight ago. It will rise further following this news.

(ii) It preserves the multilateral bargain. CORSIA only works if major economies stay at the table. Had the EU walked away — or effectively de-rated the scheme by piling on unilateral conditions — it would have handed every reluctant state a ready-made excuse to do the same. By keeping faith with CORSIA while holding it to account through the 2032 review, the EU has kept the pressure on without pulling the rug out.

(iii) It sharpens the incentive to raise ambition. The off-ramp is the clever part. The EU has said, in effect: get CORSIA above 70% coverage and genuinely strengthened, and we'll step back. That's a concrete prize for the countries and airlines who want to keep the ETS out of long-haul international flying — and a far more productive lever than a threat with no way to satisfy it.

None of this means CORSIA is home and dry. The Commission's own assessment is a reminder that the scheme still isn't doing what the EU hoped, and the 2032 review will be a real test, not a rubber stamp. But the choice made here is a choice to fix the international system rather than fragment it — and that's the right instinct.

Next steps and timelines

This is a big step and provides a lot of much-needed clarity, but it’s not the final word. What the Commission has published is a proposal. It now enters negotiation between the Commission, the Member States in Council, and the European Parliament — the EU's trilogue process — and any of the details above could shift before the text is final. That typically takes around a year, and often longer, though the hope is that it will be wrapped up by the end of 2026. The timing here will be key.

We will continue to track all the movements in supply, demand, enforcement and pricing in our Article 6 and CORSIA Hub.

See our recent CORSIA analysis in our CORSIA Countdown Report, download here.