Emission Reduction
- Since 2005
- -37%
- 2030 Target
- -62%
- 2050 Target
- Net Zero
Q1 2026 Market DataQ1 2026 Market Data
EU ETS Market Analysis
Comprehensive analysis of the European Union Emissions Trading System with market data, market mechanisms, and expert insights from EY analysis
Production snapshot · As of 27 August 2026 · Instrument, source and licence not identified by the original
Latest Market Update
REPowerEU plan: €20 billion worth of additional certificates to be auctioned to fund energy independence. CBAM is fully operational since January 1, 2026, expanding market coverage.
Current Market Overview
Price Range
€75-80
per tCO2 (Q1 2026)
+340% since 2018
Market Coverage
40%
of EU emissions
Up from 32% in 2018
Installations
11,500+
covered facilities
Across 27 EU countries
Annual Cap Cut
4.3%
2024-2027
4.4% from 2028+
Progress Toward 2030 Emission Reduction Target
Current Reduction (vs 2005)
37%
2030 Target
62%
Price History & Market Evolution
Market Outlook
EY Analysis: Future Market Dynamics
Price Projections
EY analysis suggests EU carbon prices could reach €120-130/tCO2 by 2030, driven by tightening caps and industrial decarbonization needs.
Bullish Factors
Accelerating cap reductions (4.3-4.4% annually)
Phase-out of free allocations by 2034
Expansion to new sectors (maritime, buildings, transport)
Corporate net-zero commitments driving demand
Risk Factors
Economic recession reducing industrial output
Faster-than-expected renewable energy deployment
Political pressure for market interventions
Technology breakthroughs in carbon capture
Long-term Outlook:
The EU ETS market is expected to continue its growth trajectory as the EU implements its Green Deal agenda. Market volatility will likely persist as the system adjusts to tighter caps, new sectors, and evolving energy markets. Companies should prepare for structurally higher carbon prices and integrate carbon costs into long-term planning and investment decisions.
Historical Milestones
- Pre-2018Under €20/tCO2
Market oversupply kept prices suppressed
- 2020COVID-19 Impact
Temporary drop to €15-20 during lockdowns
- 2021Recovery Surge
Rapid climb to €50+ as economy reopened
- 2022Energy Crisis
Ukraine conflict drove volatility, €80-95 range
- Feb 2023Historic High
Breakthrough above €100/tCO2 for first time
- Q1 2026Q1 2026 Trading Range
€75-80/tCO2 - Up 16% YTD
Sector Coverage & Expansion
Current Sectors (EU ETS 1)
Operational since 2005
Power Generation
Coal, gas, and oil-fired power plants
Manufacturing
Steel, cement, chemicals, paper, glass
Intra-EU Aviation
Flights within European Economic Area
Maritime Shipping
Large vessels (5000+ GT) on EU routes
Active since 2024
New System (EU ETS 2)
Launching in 2027
Separate trading system with initial price cap of €45/tCO2
Buildings
Commercial and residential heating
Road Transport
Fuel for cars and trucks
Small Industry
Industrial heating below ETS 1 thresholds
Key Market Drivers & Influences
Energy Prices
Natural gas prices directly impact carbon demand through fuel switching
Gas-to-Coal Switching
High gas prices increase coal use, driving up EUA demand
Renewable Deployment
Accelerated renewable energy adoption reduces allowance demand
Regulatory Reforms
Policy changes create price uncertainty and speculation
Regulatory Factors
Fit for 55 Package
Comprehensive reform package targeting 55% emission reduction by 2030, including faster cap reductions and expanded coverage.
REPowerEU Plan
€20 billion in additional allowances to fund energy independence, temporarily increasing supply but supporting long-term decarbonization.
CBAM Implementation
Carbon Border Adjustment Mechanism prevents carbon leakage and levels playing field for EU industries.
Market Dynamics
Industrial Activity
Economic growth and industrial production levels directly impact emission levels and allowance demand.
Energy Transition
Rapid renewable deployment reduces fossil fuel use, while weather patterns affect renewable generation and backup needs.
Financial Markets
Increased participation from financial investors adds liquidity but can amplify price volatility during uncertain periods.
Key Performance Indicators
Market Size
- Annual Emissions
- 1.3 Gt CO2
- Allowances in Circulation
- 1.2 billion
- Market Value
- €60-95 billion
- Daily Trading Volume
- 10-30M EUAs
Geographic Coverage
- EU Member States
- 27
- EEA Countries
- +3
- Power Plants
- ~1,000
- Industrial Sites
- ~10,000
Market Mechanisms & Structure
Cap-and-Trade System
The EU ETS operates on a "cap and trade" principle with an overall limit on emissions that decreases annually.
2024-2027 reduction:
4.3% per year
2028+ reduction:
4.4% per year
Market Stability Reserve
The MSR automatically adjusts allowance supply to maintain market balance and prevent price extremes.
Trigger threshold:
833M surplus
Withdrawal rate:
24% of surplus
Free Allocation Phase-Out
Free allowances for energy-intensive industries will be gradually eliminated to incentivize decarbonization.
Phase-out period:
2026-2034
CBAM sectors:
100% by 2034
EU ETS Market Analysis
Comprehensive analysis of the EU Emissions Trading System (EU ETS): current EUA prices, market drivers, sector coverage and the regulatory framework for the European CO2 certificate market.
Current market overview (Q1 2026)
- EUA spot price: ~€78/t CO2 (Q1 2026)
- 2025 annual average: ~€68/t CO2
- ETS-2 launch (buildings, transport, small industry): 2027
- CBAM fully in force since 1 January 2026
Sectors covered by the EU ETS
The EU ETS covers around 40% of total EU greenhouse gas emissions and includes the following sectors:
- Electricity generation & heat — the largest sector, subject to full payment since 2013
- Energy-intensive industry — steel, cement, aluminium, chemicals, glass, paper
- Aviation — intra-European flights included since 2012
- Shipping — gradual inclusion from 2024
Key market drivers
- Linear Reduction Factor (LRF): increase from 2.2% to 4.3% from 2024 — fewer allowances each year
- Market Stability Reserve (MSR): automatic volume adjustment in the event of a surplus
- Fit for 55: EU target of 55% lower emissions by 2030 compared with 1990
- REPowerEU: accelerated shift away from Russian natural gas and more investment in renewables
- CBAM: carbon border adjustment prevents carbon leakage through imports
ETS Phase IV (2021–2030)
In Phase IV, the overall emissions cap falls by 4.3% annually (from 2024), creating structural upward pressure on EUA prices. Free allocation to industry is gradually phased out by 2034, alongside the introduction of CBAM. Analysts expect EUA prices between €100 and €200 by 2030.
→ View CO2 price projections 2024–2035