EU Carbon Analysts See Q4 Price Stuck Near EUR 85/t as ETS Reform Clouds Outlook
Analysts polled by Montel see EU allowances stuck near EUR 85/t in Q4, with ETS reform uncertainty capping gains despite fuel-switching demand support.
Europe's carbon price faces a fourth quarter likely anchored around EUR 85/t, with analysts describing prices as "stuck" and seeing little prospect of a sustained directional move, according to analysts who spoke to Montel during the week of 2026-09-14. The consensus leans modestly higher on fuel-switching dynamics, but ETS reform debates are keeping any upside tightly contained.5
The tension between demand support and supply-side reform risk has defined EUA trading since summer. ICE Endex TTF front-month gas was at €79.54/MWh early on Monday (2026-09-21), expensive enough relative to coal to keep switching economics active and underpin some EUA demand. But the Commission's reform proposals, tabled in July, have established a persistent ceiling that has so far stopped any sustained push above the mid-EUR 80s range.5
The reform anxiety was visible in price action well before the package was finalised. The Dec-26 EUA contract fell 3% on Thursday (2026-07-16), dropping below EUR 80/t, as the market positioned ahead of the European Commission's ETS reform package due the following day, Montel reported. The pre-announcement move showed how exposed prices are to any signal of allowance loosening or industrial accommodation.3
Once the proposals landed, analysts adjusted quickly. Reuters reported on July 31 (2026-07-31) that analysts had cut EU carbon price forecasts for both 2026 and 2027 following the Commission's push for reforms designed to ease the system's burden on European industry. The direction of revisions has been one-way since.4
The groundwork for that shift had been laid months earlier. LSEG cut its carbon price outlook on Thursday (2026-05-21), citing political pressure on the ETS from governments seeking relief for industrial users, Montel reported. The revision preceded the July reform package and reflected a broader shift in the political economy of EU climate policy toward accommodation for struggling manufacturers.2
The specific mechanism weighing on the longer-term price path involves the Market Stability Reserve. A senior Veyt analyst told Montel on Wednesday (2026-05-20) that the adjustment under consideration could cut carbon prices by about 13% over two years. The proposed rule would reduce auction volumes by 24% when surplus allowances exceed 833 million tonnes — a change that, in the Veyt view, risks converting a price support mechanism into a de facto supply cap.1
For traders, the uncertainty is itself part of the problem. The legislative process is still running, leaving the market to price a range of reform outcomes without a fixed endpoint. Outright longs are harder to sustain when the supply rule set can change before December.5
The fuel-switching support is real but bounded. TTF's current level sustains some switching and prevents EUA demand from contracting sharply. The problem is that switching-driven demand has so far proven insufficient to push prices much past EUR 85/t, and the reform cloud makes it difficult to build conviction for a move higher.5
The bearish forecast revisions since July 31 (2026-07-31) reflect a consistent read across independents and named consultancies: reform risk, even if diluted in the final text, delivers more downside than upside over a six-to-twelve month horizon. LSEG's earlier revision in May (2026-05-21) has aged well.4,2
The next material signal for the Dec-26 EUA contract is likely to come from Brussels — specifically, any update to the trilogue schedule or Commission guidance on reform pace. The EUR 80/t level, which briefly gave way on Thursday (2026-07-16), is the floor the market has already tested once this year. Whether Q4 closes near EUR 85/t or several euros short of it may depend on how much legislative clarity arrives before December.3,5