If you haven’t been closely watching the EU Emissions Trading Scheme (EU ETS) lately, now is the time to get up to date.
2026 is shaping up to be one of the most consequential years for the EU ETS since the “Fit for 55” reforms, with a new suite of policy reforms that will affect compliance costs, procurement strategy, and carbon price exposure across every covered sector.
The EU carbon market has changed dramatically due to an influx of traders and speculators, adding significant carbon price volatility often driven by policy headlines and wider macro-economic impacts.
If your carbon compliance strategy was set before this market shift, it may be due a rethink.
2026 – a test of ETS ambition
2026 has been a roller coaster ride for the EU ETS.
Increased EU climate policy ambition is shaping the EU carbon market more than ever. The “Fit for 55” package, agreed back in 2023, set in motion a series of structural changes that are now coming into effect.
Supply is tightening as the linear reduction factor ramps up again, 27 million allowances have been cut from the auction calendar and the extra REPowerEU volumes stop in June 2026.
Meanwhile demand continues to grow with tightening benchmarks, CBAM implementation and free allocation coming to an end for many sectors.
As balances tighten and coverage expands, the EU carbon market has attracted not just compliance buyers but a growing influx of traders and speculators.
EUA prices reached over €90 early this year, driven in part by a wave of investors buying into forecasts of €100+ carbon prices.
Then came a sharp reversal as political uncertainty over the scale of future ambition, exacerbated by the Iran conflict spooked the market.
EUAs lost around 30% through Q1 2026, as investors unwound record long positions and exited the market – see chart below. Since then, opportunistic buyers have stepped back in, and prices have partially recovered but remain rangebound.
