- Airlines face one hundred twenty-seven billion dollars in additional costs due to a massive carbon credit shortage.
- Gulf carriers like Emirates and Qatar Airways have the highest financial exposure due to ultra-long-haul routes.
- Credit prices are projected to reach one hundred dollars per tonne by twenty thirty-five as demand outpaces supply.
(GULF) — Airlines could face up to $127 billion in extra costs from a carbon credit shortage, and long-haul carriers operating through the Gulf sit at the center of the exposure. The Financial Times reported on June 28, 2026, that MSCI Carbon Markets expects credit prices to rise almost eightfold, reaching $100 per tonne by 2035 as airline demand outpaces the supply of eligible offsets.
The cost pressure will eventually reach international ticket prices. The longest routes, where fuel burn and emissions are greatest, carry the highest offset obligations. Gulf carriers built their business models around those exact routes.
The international aviation offset system, the compliance framework airlines use to meet emissions obligations, is where the risk concentrates. Eligible credits are already scarce. As airline traffic grows and the supply of approved credits fails to keep pace, prices climb. Carriers must either absorb the cost or pass it to passengers.
Carbon Credit Shortage: The Cost Breakdown
The $127 billion figure represents the cumulative extra cost if carbon credit prices follow the trajectory MSCI Carbon Markets projects. Credit prices today trade well below the $100-per-tonne forecast for 2035. The eightfold increase reflects a structural supply-demand imbalance, not a temporary market disruption.
Long-haul international flights generate the largest offset obligations because emissions scale with distance and fuel consumption. A 16-hour flight from Dubai to Houston produces roughly ten times the emissions of a two-hour flight within Europe. Under the international aviation offset system, that means ten times the credits required for compliance.
The table below compares how different airline categories are positioned as carbon credit costs rise:
| Airline Category | Carbon Exposure | Route Profile | Likely Cost Pass-Through |
|---|---|---|---|
| Gulf carriers (Emirates, Qatar, Etihad) | Highest | Ultra-long-haul connecting traffic | High fare and surcharge increases |
| European legacy (Lufthansa, Air France-KLM) | Moderate-High | Long-haul plus intra-European (EU ETS covered) | Moderate increases on long-haul sectors |
| US legacy (American, Delta, United) | Moderate | International plus large domestic network (exempt) | Increases concentrated on international routes |
| Low-cost short-haul (Ryanair, easyJet) | Low | Short flights within regional carbon systems | Minimal direct impact on fares |
Which Airlines Face the Greatest Risk
Long-haul carriers dominate the list of most-exposed airlines. Gulf airlines, including Emirates, Qatar Airways, and Etihad, face disproportionate exposure because their networks revolve around ultra-long-haul connecting traffic between continents. A single Dubai-to-Los Angeles sector generates far more offset obligations than a short hop within Europe.
European carriers with significant long-haul networks also carry substantial exposure. Lufthansa, Air France-KLM, and British Airways operate dozens of daily long-haul departures. Their shorter intra-European routes, however, fall under the EU Emissions Trading System. That system operates separately from the international offset framework and already internalizes some carbon costs.
US carriers face a different calculus. Domestic flights, which represent the majority of American, Delta, and United operations, fall outside the international aviation offset system entirely. These airlines bear exposure only on their international networks. Those networks are substantial but represent a smaller share of total operations compared with Gulf carriers.
Low-cost carriers with predominantly short-haul networks carry the least exposure. Ryanair and easyJet generate fewer emissions per trip. Most of their routes operate within regional carbon pricing systems that already cover emissions, so the incremental cost from the international offset system is minimal.
How the Carbon Offset System Creates Scarcity
The international aviation offset system, established under CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation), requires airlines to offset growth in international emissions above a defined baseline. Airlines purchase carbon credits from approved projects to neutralize emissions that cannot be eliminated through operational efficiency or sustainable aviation fuel.
The problem is supply. Eligible credits, those meeting CORSIA’s quality and verification standards, are scarce. The pool of approved projects is small relative to projected airline demand. MSCI Carbon Markets forecasts this gap will widen through 2035, driving the eightfold price increase.
Airlines cannot substitute lower-quality credits. CORSIA’s eligibility criteria exclude credits that lack rigorous verification, fail to demonstrate real emissions reductions, or come from projects with questionable additionality. This quality bar, while necessary for environmental integrity, constrains supply precisely when demand is accelerating.
The Policy Timeline Driving the Shortage
The scarcity reflects a regulatory framework designed to tighten over time. CORSIA began its voluntary phase in 2021, with the mandatory phase starting in 2024. The baseline for measuring emissions growth was set using 2019 traffic levels. Every tonne of growth above pre-pandemic flying requires offsets.
Supply-side constraints compound the problem. The registry of CORSIA-eligible credits grows slowly because each project must pass independent verification and meet strict standards. New project methodologies take years to develop, approve, and implement. Airline traffic growth continues in parallel, widening the gap between available credits and required offsets.
The supply-demand imbalance is structural rather than cyclical. Even if credit generation accelerates, the approval pipeline introduces multi-year delays. By the time new credits reach the market, airline demand will have grown further. This sustains upward pressure on prices through 2035 and beyond.
What This Means for Fares and Award Tickets
The $127 billion cost estimate assumes airlines cannot fully absorb the expense through operational efficiency alone. Some portion will reach passengers through higher base fares, fuel surcharges, or dedicated carbon surcharges. The distribution will not be uniform across carriers or routes.
Long-haul international fares face the most significant pressure. A Gulf carrier flying a 14-hour sector generates substantially more offset obligations per passenger than a European low-cost carrier flying 90 minutes. The cost-per-passenger difference is large enough that airlines will need to reflect it in pricing to maintain margins.
The implications extend beyond base fares for frequent flyers. Fuel surcharges, already a significant component of award ticket taxes and fees, could rise as airlines bundle carbon costs into existing surcharge structures. Passengers redeeming miles for long-haul business class tickets on Emirates or Qatar Airways may face higher out-of-pocket costs even when the mileage requirement stays fixed.
Award pricing itself could shift. Airlines using dynamic award pricing, including Delta and United, may factor rising carbon costs into the cash component of award tickets. Carriers with fixed award charts offer more predictability in the short term. Chart devaluations remain a risk if cost pressures intensify over the next several years.
Choosing Airlines as Carbon Costs Rise
The decision framework for booking international travel now includes carbon cost exposure as a variable. Different airline categories offer different trade-offs for travelers weighing price, miles, and route convenience.
Choose Gulf carriers if you prioritize direct routing between continents and premium cabin service. Their exposure to carbon costs is highest, but their hard product and connectivity remain unmatched. Watch for rising surcharges on award tickets, particularly on ultra-long-haul routes where offset obligations are largest.
Choose European legacy carriers if you fly between major global hubs with connecting traffic. Their exposure is moderate, partially offset by the EU ETS covering intra-European flights. Award availability through Star Alliance and SkyTeam remains strong. Partner redemption options provide flexibility across hundreds of destinations.
Choose US carriers if your travel is predominantly transatlantic or transpacific. Their large domestic networks, exempt from CORSIA, shield a significant portion of operations from international offset costs. Mileage programs remain flexible, with strong partner redemption options through oneworld, SkyTeam, and Star Alliance.
Choose low-cost carriers for short-haul travel within regions already covered by carbon pricing systems. Their exposure is minimal, and point-to-point models keep base fares low. The trade-off is fewer frills, no interline agreements, and limited connectivity for complex itineraries.
Planning Ahead
Carbon credit costs will not hit fares overnight. The price trajectory MSCI Carbon Markets projects runs through 2035, with the steepest increases expected in the back half of that period. Travelers booking flights in 2026 and 2027 will see modest impacts, if any.
The longer-term picture is different. By 2030, as CORSIA’s mandatory phase matures and credit prices climb, long-haul fares could rise meaningfully. Travelers planning frequent international trips over the next decade should monitor surcharge structures on their preferred carriers. Consider locking in award bookings at current rates where possible.
If you are booking a long-haul award ticket on a Gulf carrier for travel in 2027 or beyond, check the current surcharge breakdown before confirming. The cash component of that ticket is more likely to increase than the mileage component. Booking earlier locks in today’s fee structure, and the mileage cost is unlikely to decrease.
