In the last few days, EU Allowances (EUAs) have been testing the psychological €90 per EUA threshold, a level we have not seen since January 2026.
This peak back in January triggered significant concerns from industry and led to political interventions that spooked the market into a 30% drop over the following 2 months.
With this in mind, it is a surprise to many that we have not yet seen more headline objections, especially as EU policymakers are in the middle of time pressured negotiations on the EU ETS Review file.
The rules they agree now will shape market ambition, and ultimately price, for years to come so any intervention would have lasting consequences.
(Source: ICE)
In January, investor net long position sat at a record 125m as speculators bought into the rhetoric that EUAs would break €100.
As of last week, this same data point stood at a mere 35m net long.
The energy complex and particularly European Gas is also in a very different space and adding its own inflationary pressures.
In a pre-Iran war world back in January, TTF was sitting below €30 per MWh, last Friday (30 Oct) it settled over €100, the highest since Jan 2022.
The end of 2025 compliance on 30 Sept saw benchmark EUAs settle at €85.
Many analysts felt that EUAs would struggle to see further gains given the sensitivity of a €90 EUA price which was expected to generate political noise, especially in tandem with high energy prices.
Much of the attention in the last 12 months has been on speculator behaviour and policy. However, this move feels much more fundamentally driven, especially given the low investor positions and apparent apathy to the political impact of a €90 price.
EUA prices have been rising along with energy prices. As the conflict in the Middle East rumbles on and oil and gas continuing to hit new multi-year highs, coal fired generation has come back into the mix in a big way. Reports back in August showed that coal-fired power generation across the EU increased 45% year-on-year.
This increased output would have likely been sustained in recent months. Added to this, the recent calmer weather brings additional demands on thermal generation as wind power drops.
Power generators don’t wait until year end to hedge their EU ETS exposure. They price coal, power and carbon in real time through clean dark spreads, driving additional short-term EU carbon demand in what has become a less liquid market since the drop in investor interest.
Despite the higher energy prices, the industrial picture appears a little more positive this time, suggesting companies may be better prepared to cope.
The outlook for European industrial growth is weak-to-moderate overall, but highly divergent by sector.
There are some suggestions that industry has been able to absorb some of the energy price inflation and maintain better product margins, helped by exports bans and import tariffs, as well as support from CBAM which means embedded carbon costs in imports need to be factored in.
Member states and the EU have also significantly increased their compensation approaches for carbon and energy costs, which may be helping.
In December 2025, the EU increased the maximum share of indirect ETS costs that can be compensated from 75% to 80% and added 20 additional sectors and two new subsectors
One of the main uncertainties remains policy. Will EU officials hold their course on ambition and market mechanisms (such as the MSR) or will pressure build to make adjustments and compromises?
The EC have an extremely ambitious timeline – targeting an agreement by the end of Q1 2027 which could cause some nervousness if negotiations hit roadblocks and this timeline slips
The combination of this policy review, and the ongoing energy crisis, is drawing political attention to the ETS, but as yet not sufficiently to counter the current fundamental pressures.