CorrectionOur 15 July correction to the 14 July editions itself carried an incorrect figure — August TTF settled at €53.06/MWh on 14 July, not €44.18. The cause was a stale exchange-data feed, now fixed. Read the full account →
EU Carbon Study Shows Near-50% Industrial Emissions Cut, Backs ETS Cap Path
New research validates the EU ETS trajectory toward net zero, but rival proposals to ease the supply cap remain a live risk for ICE EUA Dec pricing.
The EU Emissions Trading System reduced industrial emissions by almost half in three years, with current policies putting the bloc on course for net zero by 2050, a study said on Thursday (2026-07-16), Montel reported. The finding lands as ICE EUA Dec-rolling was priced at €80.43/tCO2, with the bullish case resting squarely on the assumption that the cap trajectory remains intact.5
Confirmation that the ETS is delivering at scale removes one persistent risk that had weighed on long-dated carbon positioning: the possibility that the mechanism would prove ineffective and face political revision. If industrial emissions are already tracking toward 2050 targets, the argument for weakening the Linear Reduction Factor — the annual ratchet that cuts the total supply of allowances — weakens alongside it.5
The revenue picture reinforces the mechanism's political durability. EU ETS receipts reached €43.2bn in 2025, an 11% increase year on year, accounting for 62% of all revenues raised from carbon pricing globally, according to the International Carbon Action Partnership. That scale makes the ETS a structural part of EU fiscal architecture, not just a climate instrument, and gives member states a direct financial interest in maintaining permit prices.1
But the supply side carries its own risk, running in the opposite direction. Carbon Market Watch warned in May (2026-05-18) that a proposal to slow the pace at which the ETS cap declines could add allowances equivalent to three additional years of supply to the market. If that measure advances through the European Commission and Parliament, the scarcity premium embedded in longer-dated EUA contracts would narrow.2
Energy Aspects told Montel in April (2026-04-14) that two new EU instruments — the Industrial Decarbonisation Bank and an ETS investment booster scheme — could release additional allowances from next year, likely dampening prices. The consultancy's bearish policy read does not depend on the cap proposal passing; it points to a separate supply channel that could add volume regardless of the reduction trajectory.4
The contrarian case also points to demand. European gas consumption ran 880 TWh, or 18%, below 2019-2021 levels in both 2023 and 2024, according to Bruegel data, and energy efficiency gains in industry have continued since. If industrial activity continues to structurally reduce its energy footprint, compliance buyers may carry surplus allowances, tempering short-term demand for spot and near-dated EUA contracts even if the longer-dated curve holds firm.3
The study published on Thursday (2026-07-16) validates where the ETS has come from. The cap-loosening proposals now circulating in Brussels carry a concrete supply implication: if the European Commission decides that industrial decarbonisation has progressed far enough to justify easing the ratchet, three years of additional allowances could start repricing the forward curve from next year.2