EU Carbon Reform Risk Holds EUA Prices Below EUR 100/t Analyst Target
An analyst sees fundamentals supporting a 20% carbon price surge next year, but EU ETS reform ambiguity is suppressing the upswing.
Europe's benchmark carbon price has the fundamentals to surpass EUR 100 per tonne next year, but political uncertainty surrounding the EU's emissions trading system overhaul is preventing the move from taking shape, an analyst told Montel on Thursday (2026-08-20). The ICE EUA Dec-rolling contract stood at EUR 81.93/tCO2 as of Friday morning (2026-08-21), below the EUR 100/t threshold the analyst described as achievable on fundamentals alone.6
Getting from here to EUR 100/t would require the market to look past a reform process that has already knocked prices lower at each significant policy announcement. On Thursday (2026-07-16), carbon shed 3% in afternoon trading, slipping below EUR 80/t, as participants positioned ahead of the European Commission's ETS reform package due the following day, Montel reported.4
The disclosure event spooked even participants broadly supportive of tighter carbon policy. What drove the sell-off was not the reform's direction but the uncertainty over which supply measures it would contain and when they would take effect.4
Supply expansion is the drag. Energy Aspects warned in May (2026-05-21) that the EU's Industrial Decarbonisation Bank and ETS investment booster scheme could increase the number of allowances circulating in the market from next year, an outcome the consultancy said would likely dampen prices, Montel reported.1
LSEG revised down its price expectations by May (2026-05-21), citing political pressure to soften the carbon market's impact on European industry. Those revisions followed Reuters reporting in late April (2026-04-30) that analysts had already significantly cut their ETS forecasts for the next couple of years, with uncertainty over proposed policy changes and future supply levels the stated reasons.2,3
The pattern held through the previous year. A Reuters survey from July 2025 (2025-07-16) found consensus forecasts holding roughly steady even then, with US tariff concerns and weak industrial output suppressing expectations. The downward drift has been gradual. It has also been broad.5
The Thursday (2026-08-20) analyst view cuts against that drift. The argument for EUR 100/t rests on fundamental drivers not specified further in the Montel report, while treating the reform uncertainty as temporary suppression rather than a hard ceiling on prices.6
Whether that distinction holds matters for positioning. Traders who believe the reform outcome will ultimately be supply-light could justify building length in the ICE EUA Dec-rolling contract near current levels. Those who weight the supply risk from the Industrial Decarbonisation Bank more heavily may regard EUR 80/t as a ceiling rather than a floor. Both readings are live in a market where the reform details are not yet settled.1,6
Higher EUA prices feed through to German and UK wholesale power costs, amplifying the industrial burden that LSEG cited in May (2026-05-21) as the political driver behind its downward price revision. Policymakers trying to soften that burden are effectively capping the rally that carbon market fundamentals would otherwise support.2
The nearest specific test is whenever the Commission publishes ETS reform details with enough supply-side precision for participants to price the implications. Until that document lands, the gap between EUR 81.93/tCO2 and EUR 100/t stays a forecast range, not a trade.6,4