EU ETS price outlook softens following European Commission reform proposal
Analysts have lowered their EU ETS price forecasts for 2026 and 2027 after the European Commission unveiled proposed reforms in July designed to reduce the burden on European industry.
The EU Emissions Trading System (EU ETS) remains the European Union’s flagship climate policy, using a cap-and-trade mechanism to reduce greenhouse gas emissions. According to analysts, carbon allowances are now expected to average €79.97 per metric tonne in 2026 and €89.13 per tonne in 2027, down from the April forecasts of €80.61 and €93.29 respectively. The benchmark EU carbon contract is currently trading at around €82 per tonne of CO₂.
EU ETS reform expected to slow the pace of carbon price growth
On 17 July, the European Commission presented a proposal to revise the EU ETS, allowing industries to emit more CO₂ for a longer period while increasing financial support for investments in clean technologies.
“Following the proposed revision of the EU ETS, we still expect prices to increase, but at a slower pace than anticipated before the proposal was announced,” Noemi Zuercher, analyst at Rystad, told Reuters.
Zuercher explained that the main reason behind the lower EU ETS price forecasts for 2026 and 2027 is Brussels’ proposal to adjust the annual reduction rate of the system’s emissions cap. The change would slow the pace at which the supply of carbon allowances is reduced, easing upward pressure on prices.
EU ETS carbon prices expected to exceed €100 per tonne by 2029
Forecasts for 2028 have instead been revised upwards by 2%, reaching €95.37 per tonne. Analysts believe carbon prices will continue to rise over the coming years, although more gradually than previously expected.
According to Yehor Melakh, analyst at Clear Blue, higher price projections from 2028 onwards reflect expectations that allowances allocated to the Investment Booster fund will enter the market more gradually than initially assumed.
The European Commission plans to auction 400 million allowances to finance the investment support mechanism, aiming to raise close to €30 billion for industrial investments in clean technologies.
Current analyst forecasts indicate that EU ETS prices will average €100.43 per tonne in 2029 and €109.11 per tonne in 2030, marking the first time benchmark carbon prices are expected to remain above the €100 threshold.