Vertis Calls 14% EUA Rally as Tight ETS Balance Pushes Against Bearish Consensus
The carbon brokerage sees the EU ETS supply-demand deficit reasserting itself before year-end, even as reform risk dominates market positioning.
Vertis, the carbon brokerage, said on Thursday (2026-08-06) that Europe's ICE EUA Dec-rolling contract is likely to rise 14% from current traded levels by year-end, citing a lingering supply-demand deficit in the EU Emissions Trading System. The ICE EUA Dec-rolling contract was at €82.77/tCO2 in Monday's (2026-08-10) morning session, putting the implied Vertis target at roughly €94/t.7
The call sits well outside consensus. Aggregate positioning in the EUA market runs approximately 2:1 bearish, with the dominant drivers being uncertainty over the European Commission's ETS reform package and persistently weak eurozone industrial demand. Analysts surveyed by Reuters in July 2025 kept their carbon price forecasts roughly flat, with US tariff concerns and subdued manufacturing output weighing against any sustained recovery.6
The reform risk drew a sharp market response last month. ICE EUA Dec-rolling fell 3% on Thursday (2026-07-16), shedding the EUR 80/t handle as participants repositioned ahead of the Commission's reform package set for release the following day.5
Veyt, the carbon analytics firm, quantified the structural exposure in May. A senior analyst said on Wednesday (2026-05-20) that one mechanism under consideration could cut prices by about 13% over two years. The trigger is mechanical: when total quotas exceed 833 million tonnes, auction volumes are automatically reduced by 24%.1
Energy Aspects added a second supply-side concern on Thursday (2026-05-21), noting that the EU's planned Industrial Decarbonisation Bank and ETS investment booster scheme could put additional allowances into the market from next year. A late-April Reuters report showed analysts had already significantly cut their EUA forecasts for the next couple of years in response to policy reform uncertainty. More supply alongside weak industrial demand forms the core of the bear case.2,4
But the bear case may be underpricing one mechanical input to EUA demand. ICE Endex TTF front-month gas was at €55.50/MWh in Monday's (2026-08-10) session. Elenger's Q1 2026 market overview shows the same contract closed Q4 2025 at €26.73/MWh, breached €33/MWh in January 2026 following cold weather and geopolitical supply disruption, and has continued higher since. Gas at these levels compresses the coal-to-gas switching margin for European power generators. Coal-fired generation carries roughly twice the carbon intensity of gas-fired output, so a generation mix tilting back toward solid fuels lifts compliance demand for ICE EUA Dec-rolling allowances — the near-term balance driver Vertis says the market is discounting.3
The price action since mid-July offers partial support for that view. After the selloff on Thursday (2026-07-16) pushed the Dec-rolling contract below EUR 80/t, it recovered to €82.77/tCO2 by Monday (2026-08-10). Reform risk was real enough to drive a sharp move lower. It was not enough to hold the market there.5,7
The thesis faces two concrete tests. First, the specifics of the Commission's final reform package: a design that preserves or tightens the 833 million tonne auction trigger leaves the supply-deficit argument intact; a structural easing of that ceiling supports the Veyt projection of prices 13% lower over two years. Second, the direction of ICE Endex TTF front-month into autumn — if gas stays at or above current levels through September and October, it narrows the generation switching window and keeps carbon compliance demand elevated into the quarter when annual obligation deadlines concentrate buying. The Dec-rolling contract has recovered from its Thursday (2026-07-16) low. How far it can extend that recovery depends on which of those two factors moves first.1,3,7