Statkraft endorses EU ETS reform as preferable to system failure
The Norwegian utility's qualified backing of the EC's reduced linear reduction factor reflects how major carbon market participants have already absorbed looser supply expectations.
Statkraft's chief executive told Montel on Tuesday (2026-07-21) that she was satisfied the European Commission had granted industry "some slack" on allowance supply cuts, describing the outcome as preferable to the EU ETS collapsing altogether. The comments came four days after the Commission unveiled its reform package on Friday (2026-07-17).4
The endorsement sets a low bar. Reform over collapse is not an enthusiastic reception, and the framing suggests major market participants have recalibrated downward what a functional carbon system needs to deliver.4
The central change lowers the linear reduction factor — the annual rate at which the EU emissions cap tightens — from 4.4% to 3.7% for 2031-2035, then further to 1.7% for 2036-2040.4 Reuters reported on 30 April (2026-04-30) that analysts had already significantly cut EU carbon price forecasts for the following two years, citing uncertainty over proposed policy changes and future supply levels. The Commission's Friday (2026-07-17) announcement resolved some of that uncertainty, but in the direction the more bearish forecasts had assumed.3
ICE EUA Dec-rolling was at €83.13 per tonne of CO2 as of Wednesday (2026-07-23) evening. That level reflects immediate supply-demand dynamics more than the 2031-2040 reform schedule, but the contract does embed medium-term scarcity expectations, and the parliamentary timeline will determine how quickly those need to be reset.4,3
Reducing the LRF to 3.7% through 2035 means more allowances will remain in circulation over that period than the previous trajectory prescribed. The further step to 1.7% for 2036-2040 extends that loosening by another five years. A study flagged by Montel in May 2026 warned that the reform package carried a "major risk" of renewed oversupply in the EU ETS, a scenario that would pressure prices along the curve and weaken the economic penalty on carbon-intensive generation.1,4
The mechanism linking ICE EUA Dec-rolling prices to European generation economics runs through the coal-to-gas switching level: when carbon costs fall, coal becomes cheaper to dispatch relative to gas, compressing margins for gas-exposed producers in the European power stack. For Statkraft and other power generators with European market exposure, the EUA trajectory is an operational input, not a peripheral regulatory matter.4
German economists had pressed that same point before the announcement. Four energy economists, reported by Montel on Thursday (2026-06-25), said Germany should not loosen domestic climate targets and should instead concentrate on securing constructive ETS reform. Their argument was that working within the European system would serve industrial competitiveness better than national carve-outs.2
The LRF numbers in the EC proposal must still pass through the European Parliament and Council. Past reform cycles have seen both tightening amendments and further dilution during the legislative stage. If parliamentary pressure pushes the 1.7% rate lower still for 2036-2040, the oversupply scenario flagged in May 2026 grows more plausible. If environmental blocs succeed in restoring something closer to the original 4.4% trajectory, ICE EUA Dec-rolling would need to price in materially sharper scarcity than current levels reflect.4,1
Statkraft's public position defines the floor of institutional tolerance for the current proposal. The ceiling is still being negotiated in Brussels — and how far parliamentary ambition diverges from the Commission's starting numbers will set the ICE EUA Dec-rolling price path for the rest of the decade.4,3