Statkraft CEO Backs EU ETS Reform Over System Collapse Risk
Statkraft's CEO endorsed the European Commission's carbon reform as a survivable compromise, while researchers warned the loosened supply path risks persistent EUA oversupply through 2040.
The CEO of Norwegian power producer Statkraft told Montel on Tuesday (2026-07-21) that the European Commission's EU ETS reform package, unveiled the previous Friday (2026-07-17), is preferable to the trading system collapsing. She said she was happy the EC had granted industry "some slack," a qualified endorsement of measures that ease the pace of allowance supply reductions through 2040. The ICE EUA Dec-rolling contract, which had shed 3% on Thursday (2026-07-16) to fall below €80/t as traders positioned ahead of the package's release, had recovered to €82.65/tCO2 by Friday's close (2026-07-25).4,3
The ETS is Europe's primary mechanism for pricing carbon across power generation, heavy industry, and aviation. Structural changes to the allowance supply path feed directly into long-dated hedging decisions for utilities and into the generation economics that set European power prices. The reform fixes those parameters from 2031 through 2040.4
The central change is to the linear reduction factor — the annual percentage by which total allowance supply declines. The EC cut the LRF from 4.4% to 3.7% for 2031-2035, then further to 1.7% for 2036-2040, Montel reported. The pace of that reduction sets the medium- to long-run scarcity of allowances and the structural price floor emitters face when planning investment in lower-carbon plant.4
Statkraft's CEO positioned the company as satisfied the system remains operational. A May 2026 study by research group Oeko Institut, published before the Commission's final text, warned as reported by Montel that the proposed reforms posed a "major risk" of renewed oversupply until 2040, because increased allowance availability could substantially exceed what is needed. The final package unveiled on Friday (2026-07-17) included the LRF slowdown that study assessed, making its warnings applicable to what was actually announced. At €82.65/tCO2, the ICE EUA Dec-rolling price implies the market is not treating oversupply as a near-term central case.2,4,3
The gap between Statkraft's endorsement and the Oeko Institut's warning reflects a real choice in how the EC calibrated the reform. Statkraft's argument is that a politically durable system with diluted supply tightening beats a fractured one. The Oeko Institut's concern is that the conditions the reform creates could replicate the ETS's near-collapse in the early 2010s, when a structural surplus suppressed prices too far to drive meaningful investment in lower-carbon capacity for years. Both interpret the same package; they weigh political survivability against price signal integrity differently.2,4
Spanish utility Iberdrola told Montel in May 2026 (2026-05-20) that the ETS is "key" to Europe's energy independence and industrial decarbonisation, and electrification "the best route" to energy security. That comment predates the reform announcement by nearly two months and reflects support for the system in principle, not an endorsement of the specific supply concessions now in place. It adds to a picture of large European integrated utilities favouring continuity over dismantling, a position Statkraft has now reaffirmed explicitly.1
The Oeko Institut's oversupply scenario challenges the Market Stability Reserve, the mechanism that automatically withdraws allowances from circulation when outstanding volumes exceed a set threshold, to absorb whatever surplus the loosened LRF generates. If MSR withdrawals fall short, carbon prices could stay soft well into the 2030s, eroding the investment signal for industrial emitters facing capital decisions now.2
For carbon traders, how much of the current EUA price reflects genuine acceptance of the new supply regime rather than uncertainty about its downstream effects is not yet clear. The Oeko Institut's warning implies a structural price well below €82.65/tCO2 if surplus builds as modelled through the 2030s. The first concrete read on that divergence will come when compliance data under the reformed LRF schedule begin to show whether the oversupply trajectory is tracking as the study projected.2,3