Statkraft backs EU ETS reform as supply revision clouds EUA price path
The Norwegian generator's endorsement of EC carbon changes comes as a slower allowance reduction schedule compounds analyst warnings of oversupply through 2040.
Statkraft's chief executive told Montel on Tuesday (2026-07-21) that EU Emissions Trading System reform was preferable to the system's collapse, describing herself as "happy" the European Commission had granted industry "some slack." The statement, made six days after the EC published its reform package on Friday (2026-07-17), signals that at least one large power producer with carbon obligations views a weaker system as more tolerable than regulatory breakdown.6
The EC package materially slows the pace at which allowances are withdrawn from the market. The reform adjusts the linear reduction factor — the annual rate at which cap supply declines — from 4.4% to 3.7% for 2031-2035, then further to 1.7% for 2036-2040, both rates below the trajectory set under current rules.6 More allowances will remain available over that window than previously scheduled, and that supply profile now sits atop an accumulation of bearish signals that analysts had been flagging since spring.
Reuters reported on 30 April (2026-04-30) that analysts had significantly cut their EUA price forecasts for the next several years, citing uncertainty over proposed policy changes and future supply levels.4 That round of revisions preceded the EC's formal announcement, suggesting the market was already partially pricing a looser regime — though the degree to which the published reform lands in line with or beyond those expectations will determine the residual price impact.
The free allocation mechanism compounds the supply concern. Analysts told Montel on 16 June (2026-06-16) that updating the benchmarks for free allowance allocations to industry through 2030 was likely to loosen EU ETS market balance and pressure prices.3 The EC's revised linear reduction factor for post-2030 supply now stacks on top of that near-term loosening, widening the window over which supply could run ahead of demand.
Research group Oeko Institut flagged what it called a "major risk" of renewed EU ETS oversupply in May (2026-05-21), warning the problem could persist until 2040 if proposed reforms substantially increased allowance availability beyond what the decarbonisation trajectory requires.2 Carbon Market Watch put one dimension of that risk in concrete terms on 18 May (2026-05-18): a proposal to slow the pace at which ETS cap supply falls could add allowances to the market for an additional three years beyond current expectations.1
ICE EUA Dec-rolling at €83.13/tCO2 as of Thursday (2026-07-23) does not obviously reflect a market priced for persistent oversupply through the next decade. EU industrial output has remained subdued, keeping near-term EUA demand from the sectors the ETS was designed to constrain below levels that would support a tighter balance. Analysts were keeping forecasts roughly steady as of mid-2025, with US tariff uncertainty and weak industrial activity cited as reasons to hold rather than move directionally.5
The Statkraft position reflects a calculation familiar to large utilities: a functional but reformed ETS, even one with a slower reduction path, creates more predictable operating conditions than a system that fractures under political pressure. For the allowance price itself, the calculus runs differently. A slower reduction factor means the structural tightening that underpins long-run EUA price support arrives later than the current trajectory implies, extending the period over which supply can absorb demand without running into the scarcity that drives prices higher.
Where the medium-term risk concentrates is in the interaction between the revised reduction schedule and whatever free allocation benchmark revision emerges from the committee process.3 Analysts in June (2026-06-16) were already treating the benchmark update as a source of supply pressure through 2030; the post-2030 linear reduction factor revision now extends that logic into the following decade. If both mechanisms move in the same direction, the cumulative supply effect would be larger than either taken alone.
The immediate question for EUA positioning is whether the benchmark revision for free allocations, due from the national government committee, confirms or softens the bearish supply signals already in the market.3 Statkraft's pragmatic endorsement of the reform tells traders something about how large emitters are adjusting their compliance strategies — but it is the allowance inventory data as the 2031 window approaches, not the political framing, that will determine whether €83.13 holds.