Feb 23, 2026
EU carbon prices bounce back as compliance buyers take advantage of the lower prices.
European carbon prices saw an increase during the week ending Feb. 20, recovering from a nine-month low early in the trading week as market participants with compliance obligations began to buy.
EU Allowances reached Eur73.56/mtCO2e ($86.57/mtCO2e) at 1144 GMT, according to the Intercontinental Exchange, marking a 4% rise from the Feb. 13 closing price.
This uptick follows a significant decline of over Eur20/mt in recent weeks driven by remarks from European officials regarding the EU Emission Trading System, with countries like Germany, Belgium, and Italy advocating for reforms.
An Asia-based trader noted, "I think the market players see the price as low, prompting them to enter."
Interest in weekly auctions rose compared to the previous week, with the bid-to-cover ratio increasing from 1.79 to 1.85 across five auctions, adding 10.8 million allowances to the market, up from 9.2 million last week, excluding bi-weekly Polish volumes.
Total revenues reached Eur747.5 million, an increase from Eur698.3 million the week prior, bringing the total closer to the targeted Eur20 billion necessary for REPowerEU plans.
Price fluctuations have been observed since EUA prices peaked at over Eur90/mtCO2e at the year's start, with many analysts predicting further increases, potentially approaching Eur100/mtCO2e by 2026.
However, political interventions have caused sharp price declines, encouraging compliance players to enter the market, according to multiple market participants and intermediaries.
The EU plans to review its compliance market in the third quarter of this year, discussing aspects such as free allocation, the Market Stability Reserve, and sectoral expansions.
Analysts at S&P Global Energy Horizons noted that recent developments indicate a transition to a more "competitiveness-focused carbon market," which could significantly affect EUA prices.
Danylo Babkov, a carbon analyst at Horizons, mentioned, "Even minor policy relaxations could pressure EUA prices downward in the short term by reducing scarcity expectations—especially if more supply buffers are introduced or tight timelines are delayed."
He added that positions in the market started to unwind quickly after political discussions about potential reforms or delays regarding the EU ETS.
Critics of carbon pricing have recently raised concerns about declining industrial competitiveness due to high climate costs and have called for softer regulations for European manufacturers.
As sentiment shifted, financial players reduced their investments in the market due to declining political support for higher prices.
This week's Commitment of Traders report from ICE indicated a decrease in positions held by financial players, specifically investment funds, which totaled 11.6 million EUAs—down 12.3% to 82.4 million in net long positions, the lowest since late September 2025.
A UK-based carbon trader remarked, "Given the price decrease, the COT figures are not low enough. To return to pre-September levels, we need to drop another Eur15. Most positions are currently losing."
While other categories of participants saw minor adjustments, compliance buyers increased long positions by 2 million EUAs, or 3.7%, bringing their total to 56.4 million.
UK Allowances also experienced weekly gains, paralleling the increase in EUAs, although the spread between the two markets remains wider compared to earlier this year.
At 1146 GMT, UKAs were trading at GBP47.20/mtCO2e ($63.57/mtCO2e), reflecting a 3.7% rise from the Feb. 13 settlement.
Platts recorded the spread to EUA equivalents at GBP18.36/mtCO2e on Feb. 19, an increase of 6.1% from the previous week's close.
Despite recent bearish sentiment, funds active in the UK carbon market raised their long bets to 20.9 million allowances, a 9.5% increase or 1.8 million from the week prior.
This trend may indicate long-term bullish expectations regarding future connections with the EU ETS among financial players in UKAs and those engaged in both carbon markets.
EU Allowances reached Eur73.56/mtCO2e ($86.57/mtCO2e) at 1144 GMT, according to the Intercontinental Exchange, marking a 4% rise from the Feb. 13 closing price.
This uptick follows a significant decline of over Eur20/mt in recent weeks driven by remarks from European officials regarding the EU Emission Trading System, with countries like Germany, Belgium, and Italy advocating for reforms.
An Asia-based trader noted, "I think the market players see the price as low, prompting them to enter."
Interest in weekly auctions rose compared to the previous week, with the bid-to-cover ratio increasing from 1.79 to 1.85 across five auctions, adding 10.8 million allowances to the market, up from 9.2 million last week, excluding bi-weekly Polish volumes.
Total revenues reached Eur747.5 million, an increase from Eur698.3 million the week prior, bringing the total closer to the targeted Eur20 billion necessary for REPowerEU plans.
Price fluctuations have been observed since EUA prices peaked at over Eur90/mtCO2e at the year's start, with many analysts predicting further increases, potentially approaching Eur100/mtCO2e by 2026.
However, political interventions have caused sharp price declines, encouraging compliance players to enter the market, according to multiple market participants and intermediaries.
The EU plans to review its compliance market in the third quarter of this year, discussing aspects such as free allocation, the Market Stability Reserve, and sectoral expansions.
Analysts at S&P Global Energy Horizons noted that recent developments indicate a transition to a more "competitiveness-focused carbon market," which could significantly affect EUA prices.
Danylo Babkov, a carbon analyst at Horizons, mentioned, "Even minor policy relaxations could pressure EUA prices downward in the short term by reducing scarcity expectations—especially if more supply buffers are introduced or tight timelines are delayed."
He added that positions in the market started to unwind quickly after political discussions about potential reforms or delays regarding the EU ETS.
Critics of carbon pricing have recently raised concerns about declining industrial competitiveness due to high climate costs and have called for softer regulations for European manufacturers.
As sentiment shifted, financial players reduced their investments in the market due to declining political support for higher prices.
This week's Commitment of Traders report from ICE indicated a decrease in positions held by financial players, specifically investment funds, which totaled 11.6 million EUAs—down 12.3% to 82.4 million in net long positions, the lowest since late September 2025.
A UK-based carbon trader remarked, "Given the price decrease, the COT figures are not low enough. To return to pre-September levels, we need to drop another Eur15. Most positions are currently losing."
While other categories of participants saw minor adjustments, compliance buyers increased long positions by 2 million EUAs, or 3.7%, bringing their total to 56.4 million.
UK Allowances also experienced weekly gains, paralleling the increase in EUAs, although the spread between the two markets remains wider compared to earlier this year.
At 1146 GMT, UKAs were trading at GBP47.20/mtCO2e ($63.57/mtCO2e), reflecting a 3.7% rise from the Feb. 13 settlement.
Platts recorded the spread to EUA equivalents at GBP18.36/mtCO2e on Feb. 19, an increase of 6.1% from the previous week's close.
Despite recent bearish sentiment, funds active in the UK carbon market raised their long bets to 20.9 million allowances, a 9.5% increase or 1.8 million from the week prior.
This trend may indicate long-term bullish expectations regarding future connections with the EU ETS among financial players in UKAs and those engaged in both carbon markets.