EU analysts have lowered their forecasts for European carbon prices due to uncertainty over proposed policy changes and future supply levels.
Carbon prices in the EU Emissions Trading System (ETS) play a central role in the bloc’s climate strategy, as companies must purchase permits to cover their greenhouse-gas emissions.
Policy reforms reshape market expectations
According to a survey of 10 analysts, EU allowances are forecast to average 80.61 euros ($94.24) per metric ton in 2026 and 93.29 in 2027, down from the 92.65 euros and 107.29 euros respectively for forecasts made in January.
The market has had a volatile start to 2026, with the benchmark EU carbon contract currently trading around 74 euros/ton, some 15% lower than the beginning of the year.
The analysts said uncertainty over policy measures has weighed on the market. “EUA price dynamics in 2026 will be mainly shaped by policy-driven supply changes,” said Yehor Melakh, analyst at ClearBlue Markets.
“While the market remains fundamentally short in 2026, this tightness is being partially offset by the ongoing unwind of speculative positions and rising expectations of regulatory intervention,” he said.
Uncertainties and energy shock
The European Commission proposed to modify the ETS earlier this month, after pressure from governments including Italy to amend the system to help curb soaring energy prices triggered by the Iran war.
Separately, the Commission is expected to propose a broader overhaul of the ETS, to align it with the bloc’s 2040 climate goal.
That proposal is due on July 15. Along with political risk, Serafino Capoferri, global carbon strategist at Macquarie Group, said economic damage due to the conflict in Iran could impact permit demand.
“The main downside risk remains demand destruction in the event of a prolonged energy shock that curtails industrial activity, reducing both power-sector emissions and direct industrial emissions,” he said.
Show Comments