Analysts lower EU carbon price forecasts for 2026, 2027 on market reform proposals

By Susanna Twidale

LONDON, July 31 (Reuters) - Analysts have cut their forecasts for prices in the European Union's carbon market for 2026 and 2027, after the European Commission proposed reforms designed to ease the pressure on industry of carbon prices.

The EU's Emissions Trading System (ETS) is Europe's main tool for curbing emissions. Under it, manufacturers, power companies and airlines need to buy a CO2 allowance for every ton of CO2 they emit.

According to a survey of nine analysts, EU allowances are forecast to average  €79.97 per metric ton in 2026 and €89.13 in 2027, down from forecasts made in April of €80.61 and €93.29 respectively.

On July 17, the European Commission proposed an overhaul of the EU's Emissions Trading System, allowing industries to emit CO2 longer while offering more financial support to invest in clean technologies.

“After the proposed EU ETS review, we will still see prices increase, but at a slower pace than what we could have expected ahead of it,” said Rystad analyst Noemi Zuercher.

She said the main reason for the lower price forecasts was the proposed change to the annual rate at which the ETS emissions cap falls, which will decrease the supply of allowances at a slower rate than previously expected.

The benchmark EU carbon contract is currently trading around €82/ton.

The forecast for prices in 2028 increased 2% to  €95.37/ton.

“From 2028 onward, the forecasts are higher than the June figures because we now expect 'investment booster' allowances to enter the market more gradually than previously assumed,” said Yehor Melakh, carbon market analyst at Clear Blue.

The Commission plans to sell 400 million EUAs for an investor booster fund to raise around  €30 billion which will help fund industrial investment in clean technology. 

The forecasts for 2029 and 2030 were €100.43/ton and  €109.11/ton respectively, the first time participants have been surveyed for these time periods.

(Reporting By Susanna Twidale; Editing by David Holmes)