CORSIA Carbon Credits Slide Below $10 as Jet Fuel Costs Undercut Post-War Recovery

CORSIA Carbon Credits Slide Below $10 as Jet Fuel Costs Undercut Post-War Recovery Two consecutive weeks of double-digit losses in aviation offset prices expose a structural conflict between rising jet fuel costs and hoped-for Middle East demand recovery. Benchmark ICE futures for CORSIA-eligible carbon credits slipped below $10 per tonne during the week of May 25 (2026-05-25), capping a bruising two-week selloff that has left aviation offset markets well short of any meaningful post-war recovery.⁶ The move follows an even sharper drop during the week of May 18 (2026-05-18), when Phase 1 CORSIA-eligible credit prices fell more than 15% as uncertainty around the international aviation offsetting scheme combined with persistent pressure from high jet fuel costs to drain demand from the market. That decline established the trajectory; last week's (week of 2026-05-25) further drop of more than 12% week-on-week confirmed it.^5,6 The jet fuel cost problem is the more immediate drag. European spot premiums for jet fuel dipped to their lowest level since the start of the US-Iran conflict, with Argus assessing the premium over ICE gasoil futures at $99 per metric tonne. For airlines already absorbing elevated fuel bills, spending additional capital on voluntary carbon offsets is a hard sell. Demand for CORSIA credits is discretionary in the short run; jet fuel is not.² That framing matters because the optimism that briefly supported CORSIA prices earlier this year was premised on a specific scenario: that a ceasefire or diplomatic resolution in the Middle East would allow airlines to rebuild capacity and push demand for offsets higher as flight hours recovered. Market executives cited by Carbon Pulse have expressed hope for exactly that kind of resurgent demand. But the price action tells a different story.⁶ The broader oil complex has added its own complication. ICE Brent crude front-month was trading around $106 per barrel and WTI crude near $99 per barrel as of late May, both significantly elevated against pre-conflict levels. Higher crude directly feeds into jet fuel crack margins, keeping airline operating costs elevated even as geopolitical risk premiums in crude itself fluctuate.¹ The US-Iran negotiation track has done little to stabilize either crude or aviation fuel markets. Oil prices were heading for a 7% weekly loss during the week of May 8 (2026-05-08) as traders struggled to price conflicting signals from diplomatic contacts and continued attacks in the region, Oilprice.com reported. That kind of whipsaw makes it difficult for airlines to hedge fuel exposure confidently, let alone commit to discretionary offset purchases.² Meanwhile, the EU review of CORSIA's design and compliance mechanics adds a layer of regulatory uncertainty that is suppressing any latent buying interest from European carriers. If the review results in changes to eligible credit categories or Phase 1 obligations, the current crop of CORSIA units could face a thinner future market. Buyers have reason to wait.⁵ The Economist noted that Middle East hostilities may bring lasting change to the airline business, with Western carriers positioning to regain passengers previously routed through the region. A structural shift in flight patterns could eventually alter the geographic distribution of offset demand. But that is a medium-term thesis, not a near-term bid.⁴ The UK's exposure adds one more variable. Ryanair's chief flagged the UK as Europe's most vulnerable market to jet fuel supply disruption, according to FT reporting from May 19 (2026-05-19). Any tightening of jet fuel availability in the Atlantic basin would hit UK-based carriers disproportionately, complicating their offset purchasing decisions further.³ For now, the path back above $10 per tonne for CORSIA benchmark ICE futures depends on two things resolving in the same direction simultaneously: jet fuel costs easing enough to restore airline margin comfort, and some credible signal that the EU review will not retroactively undermine Phase 1 credit eligibility. Neither is visible on the horizon. The next Carbon Pulse weekly assessment, due after the week of June 1 (2026-06-01), will show whether the floor is holding or whether sellers have further to push.^6,5