🧠 Calquify Intelligence
The EU ETS price collapse from approximately €100/tCO2 (February 2023) to approximately €40-45/tCO2 (early 2024) and partial recovery to approximately €55-65 (Q3 2025) reflects the dominance of short-term industrial demand fluctuations over the long-term structural tightening — the Phase 4 Linear Reduction Factor (4.3%/year) will inexorably reduce supply, but weak European industrial output has suppressed emission volumes and demand for allowances
EU ETS price drivers 2023-2025: February 2023 price peak (€100): caused by combination of high gas prices driving gas-to-coal switching (increasing power sector emissions); strong industrial demand (delayed post-COVID); tight Phase 4 allowance supply (LRF 4.3% from 2024); financial investor speculation. Decline to €40-45 (Q1-Q2 2024): Eurozone industrial output fell significantly (Germany -6% manufacturing 2023-2024); energy transition reduced power sector emissions (renewables up 20% in EU in 2023); gas price normalisation (gas-to-coal switching reversed); Market Stability Reserve (MSR) created uncertainty. Partial recovery to €55-65 (Q3 2025): industrial production modestly recovering; Phase 4 LRF reducing cap by 4.3%/year creating long-term scarcity; CBAM approaching full implementation. Structural outlook: EU ETS supply will decline approximately 4.3%/year regardless of price — the long-run fundamental is bullish; but short-term demand fluctuations (industrial cycles, weather-dependent energy demand) create significant price volatility.
Source: EEX EUA spot price 2022-2025; European Commission EU ETS Annual Report 2024; Refinitiv carbon market analysis; Redshaw Advisors EU ETS commentary
CBAM (Carbon Border Adjustment Mechanism) — fully implemented from 2026 — represents a structural demand boost for EU ETS allowances and will effectively extend EU carbon pricing to approximately €100bn+ of imports from steel, cement, aluminium, fertiliser, electricity, and hydrogen sectors from countries without equivalent carbon pricing
CBAM implementation timeline: transitional period 2023-2025 (importers report embedded carbon in imports; no financial payment required yet); full implementation January 2026 (importers must purchase CBAM certificates equal to embedded carbon × EU ETS price, minus any carbon price already paid in origin country). Covered sectors (Phase 1): steel, cement, aluminium, fertilisers, electricity, hydrogen. Expansion planned for 2027+: chemicals, polymers, organic chemicals. CBAM value at €60/tCO2: approximately 40% of global steel exports to EU; approximately 60% of EU cement imports; significant proportion from Turkey, Russia (where applicable), China, India, Egypt. Demand effect: CBAM gives EU industrial companies competitive relief (they already pay ETS; now importers pay equivalent) — potentially reducing the demand for EU industrial companies to reduce production (historically one way to avoid ETS costs). Supply effect: CBAM revenue goes to EU budget (estimated €5-14bn/year); used to fund climate investments. Net ETS price effect: debated — CBAM may reduce ETS demand (EU industries face less competitive disadvantage, maintain output, use more allowances) or support ETS price (general carbon pricing credibility increases). Most analysts estimate CBAM is mildly ETS price supportive.
Source: European Commission CBAM implementing regulation; DG TAXUD CBAM FAQ; Wood Mackenzie EU ETS CBAM impact analysis; Carbon Pulse CBAM tracker
EU ETS carbon credits have generated approximately +15% annualised returns from 2013-2023 (one of the best-performing commodity-like assets in Europe) but retail investor access is extremely limited, complex, and high-risk — the market is dominated by industrial companies, energy utilities, and financial traders, with retail investor participation mainly via EUA ETCs
EU ETS EUA performance: 2013 price approximately €5/tCO2 (post-financial crisis collapse); 2023 peak approximately €100/tCO2 (approximately 20× in 10 years = +35% CAGR from 2013 trough); approximately +15% CAGR from 2016 base (approximately €5-8/tCO2). Market participants: industrial companies (Arcelor Mittal, Thyssenkrupp, Repsol — mandatory participants buying/selling to comply); energy utilities (EDF, RWE, Enel — significant EUA trading operations); commodity trading houses (Vitol, Glencore, Gunvor — speculative positioning); financial institutions (DB, BNP carbon desks); compliance consultancies. Retail access: (1) SparkChange Physical Carbon EUA ETC (PC Carbon, LSE/Xetra, 0.89% TER) — holds physical EUAs in regulated registry; gives retail investors EUA price exposure; (2) iShares Global Clean Energy ETF and similar — indirect exposure via clean energy companies, not EUAs directly; (3) EEX Carbon Futures (CME cleared) — institutional access only; €500k+ collateral. Retail ETC risk: extremely high price volatility (±30-50% in a year); no yield/income; regulatory risk (EU ETS rules can change at legislative level); very different risk profile from equities or bonds.
Source: EEX EUA price history 2013-2025; SparkChange Physical Carbon ETC prospectus; ICAP EU ETS participants; Bloomberg EUA return data
EU ETS Carbon Price (EUA) Annual Average 2018-Q3 2025 (€/tCO2)
EEX + Bloomberg
📋 Reference Data
EU ETS Carbon Price History — EUA Spot Price (€/tCO2e)
EEX + Bloomberg EUA spot
| Period | EUA Price (€/tCO2e) | Key Driver | Direction | Notes |
|---|---|---|---|---|
| Q3 2025 | ~€55–65 | CBAM anticipation; industrial recovery; Phase 4 LRF | Partial recovery | Target range for 2025-2026 based on analysts consensus |
| 2024 average | ~€55 | Eurozone industrial slowdown; renewable growth; oversupply | Lower than 2023 | Germany manufacturing -6%; power sector emissions fell |
| Feb 2023 (ATH) | ~€100 | Post-gas-crisis; Phase 4 tightening; financial speculation | Peak | All-time high; unprecedented; energy crisis premium |
| 2023 average | ~€85 | Volatile; post-peak decline; industrial uncertainty | High | Year of high prices despite eventual decline |
| 2022 average | ~€80 | Russia-Ukraine energy crisis; coal switching; supply shock | Very high | Energy emergency; coal back temporarily raised emissions |
| 2021 average | ~€50 | Recovery; Phase 4 begun; reform momentum; tighter supply | Recovering | Post-COVID bounce; LRF reform confirmed |
| 2020 average | ~€25 | COVID demand collapse; lockdowns; industrial shutdown | Low | Industrial output fell; ETS demand fell |
| 2019 average | ~€25 | Phase 4 reform confidence; improving | Recovering | Market stability reserve starting to work |
| 2018 average | ~€15 | Phase 4 reform confirmed; MSR effectiveness | Rising | Long period of recovery beginning |
| 2013 average | ~€5 | Post-GFC oversupply; Phase 3 failure; political weakness | Bottom | Near-collapse of ETS; oversupply was approximately 2bn allowances |
ⓘ EU ETS was created in 2005; Phase 1 (2005-2007) and Phase 2 (2008-2012) were oversupplied causing near-zero prices. Phase 3 (2013-2020) reforms (MSR, backloading) gradually restored scarcity. Phase 4 (2021-2030) with 4.3% LRF from 2024 is structurally more effective. The market stability reserve (MSR): automatically withdraws allowances from the market when total surplus exceeds 833 million allowances — a price-stabilising mechanism. The 2022-2023 price spike reflected the extraordinary energy crisis (EU temporarily burning more coal to replace Russian gas) combined with tight Phase 4 supply — prices have since normalised as renewables replaced coal in the power mix.
Global Carbon Market Comparison — Q3 2025
ICAP Emissions Trading Worldwide 2025
| ETS System | Price (Q3 2025) | Coverage (% economy) | Market Size (est) | Phase/Status | Notes |
|---|---|---|---|---|---|
| EU ETS | ~€55–65/tCO2 | ~40% of EU GHG | ~€50bn/yr auctions | Phase 4 (2021-2030); most mature | Largest, most liquid; CBAM from 2026 |
| UK ETS | ~£35–50/tCO2 | ~25% of UK GHG | ~£5bn/yr | Post-Brexit; separate from EU; linking discussed | Post-Brexit gap to EU ETS; potential linking 2025-2026 |
| California CAP | ~$30–40/tCO2 | ~75% of CA GHG | ~$4bn/yr | Phase 5 (2021-2030) | Linked with Quebec; US regional ETS |
| China ETS (national) | ~€10–15/tCO2 equiv | Power sector only | ~$1bn/yr | Phase 3 (2024-2026) | Largest by volume (tonnes) but lowest price; nascent |
| RGGI (US Northeast) | ~$15–20/tCO2 | Power sector; 12 states | ~$1bn/yr | Active; smaller | US regional; lower price; power only |
| Australia Safeguard Mechanism | ~AUD 30/tCO2 | Large emitters >100kt | ~AUD 2bn | Reformed 2023-24 | New mechanism; developing; Australian ACCUs |
| Voluntary Carbon Markets (global) | ~$5–50/tCO2 (variable) | Voluntary | ~$2bn (deflated from $2bn peak) | Growing; high variance | VERRA, Gold Standard; very different from compliance markets |
ⓘ Prices are approximate mid-market. EU ETS at €55-65 is approximately 3-5× the price of China's ETS (approximately €10-15 equivalent) — creating a potential competitive advantage for Chinese industry at higher emission levels, which is partly what CBAM is designed to address. UK ETS post-Brexit trades at a discount to EU ETS (approximately £35-50 versus €55-65) — UK industrial lobby successfully pushed for separate ETS to maintain competitiveness; government is exploring EU-UK ETS linking as part of broader UK-EU trade relationship reset (2025 UK-EU reset negotiations). Voluntary Carbon Markets (VCM): a separate, unregulated market where companies purchase offsets for voluntary sustainability claims; suffered credibility crises in 2023-2024 after investigative journalism revealed some rainforest offset projects were ineffective.
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🔬 Methodology & Sources
EU ETS Carbon Pricing
EU ETS (Emissions Trading System): the world's largest carbon market. Covers approximately 10,000 industrial installations and airlines across EU, Norway, Iceland, Liechtenstein. Works by setting a 'cap' on total CO2 emissions; allowances (EUAs — EU Allowances) distributed/auctioned; companies must surrender one EUA per tonne CO2 emitted. EUA spot price = market clearing price for one tonne of CO2 emission right. Phase 4 (2021-2030): linear reduction factor (LRF) of 4.3%/year from 2024 (accelerated from 2.2%); minimum auction price; market stability reserve (MSR) absorbs excess allowances. CBAM (Carbon Border Adjustment Mechanism) full implementation 2026 — imports from non-ETS countries pay carbon cost.
Formula
EUA_price = supply / demand_clearing | Carbon_cost = EUA_price × annual_emissions | CBAM_cost = (EU_ETS_price - exporter_home_carbon_price) × embedded_carbon
CitationEuropean Commission EU ETS market data; EEX spot price statistics; ICAP Emissions Trading Worldwide 2025.
❓ Frequently Asked Questions
The EU ETS (Emissions Trading System) is the world's largest carbon market. It sets a 'cap' on total CO2 emissions from approximately 10,000 industrial installations and airlines across the EU, Norway, Iceland, and Liechtenstein. How it works: the EU issues a limited number of emission allowances (EUAs — EU Allowances); each EUA gives the holder the right to emit one tonne of CO2 (or equivalent greenhouse gas); companies must surrender one EUA for every tonne they emit per year; allowances are auctioned or allocated free; companies with surplus allowances can sell them; companies that need more must buy them. The price (approximately €55-65/tCO2 in Q3 2025) is set by supply and demand in this market — not by the government. The cap is reduced each year (Phase 4: -4.3%/year from 2024), creating increasing scarcity and upward price pressure over time.
EU ETS price peaked at approximately €100/tCO2 in February 2023 and fell to approximately €40-45 by early 2024, recovering to approximately €55-65 by Q3 2025. The decline was driven by: (1) Eurozone industrial recession — German manufacturing output fell approximately 6% in 2023-2024; less industrial activity = lower emissions = lower demand for allowances; (2) Renewable energy surge — EU solar installation reached record levels; wind power also grew; replacing fossil fuel electricity generation reduced power sector emissions significantly; (3) REPowerEU gas supply diversification — EU secured LNG supplies rapidly post-Russia sanctions; gas-to-coal emergency switching reversed; (4) Market stability reserve — automatically withdrew excess allowances, but the fundamental demand weakness overwhelmed supply-side support. Partial recovery in 2025: modest industrial production recovery; CBAM approach creating anticipatory buying; Phase 4 LRF reducing supply 4.3%/year.
Retail investment in EU ETS carbon credits is possible but complex and high-risk. Main options: (1) SparkChange Physical Carbon EUA ETC (PC Carbon; LSE listed; 0.89% TER) — holds actual EUAs in the EU registry; gives retail investors direct EUA price exposure via a standardised exchange-traded product; (2) WisdomTree Carbon ETP — tracks EUA futures prices; UCITS-compliant; accessible via standard broker; (3) Indirect exposure via clean energy ETFs (iShares Global Clean Energy, Xtrackers MSCI World Climate) — not direct EUA exposure but companies that benefit from higher carbon prices. Direct EUA futures trading: institutional only (EEX, ICE Futures Europe); requires collateral accounts and commodity trading expertise. Risk assessment for retail investors: EU ETS is extremely volatile (±30-50% annually); driven by industrial cycles, political decisions, and weather; generates no income (no yield); regulatory risk (EU legislative changes can alter prices rapidly). Only suitable for sophisticated investors with high risk tolerance.
CBAM (Carbon Border Adjustment Mechanism) is the EU's carbon tariff on imports, fully implemented from 2026. It requires importers of carbon-intensive goods (steel, cement, aluminium, fertilisers, electricity, hydrogen) to pay a carbon price equivalent to what EU producers pay under the EU ETS — minus any carbon price already paid in the country of origin. Purpose: prevents 'carbon leakage' (EU companies moving production to countries without carbon pricing to avoid ETS costs). Effect on carbon prices: CBAM extends the EU ETS carbon price to approximately €100bn+ of annual imports — providing an indirect demand signal that supports ETS prices. The mechanism also increases EU importers' costs, potentially reducing imports and maintaining EU industrial production levels (supporting domestic ETS demand). EU revenues: estimated €5-14bn/year from CBAM certificates, directed to EU budget for climate investments.
Following Brexit, the UK created its own separate ETS from January 2021. Key differences: price: UK ETS approximately £35-50/tCO2 (Q3 2025) versus EU ETS €55-65 — the UK price has persistently traded below EU equivalent; coverage: UK ETS covers power generation, heavy industry, and aviation from UK airports; it does not yet cover maritime (EU ETS began maritime coverage in 2024) or road transport/buildings (EU ETS 2 from 2027); auction proceeds: go to UK Treasury (Chancellor); carbon price support: UK has a floor price mechanism but different from EU's MSR. Potential linking: the 2025 UK-EU reset negotiations included discussions about linking UK and EU ETS — which would harmonise prices and create a unified carbon market. A linked market would likely lift UK ETS prices toward EU levels and increase confidence in both markets' long-term price trajectory. Any linking agreement would require UK adopting EU ETS registry systems and alignment on cap-setting methodology.
Sources & References
Data sourced from official institutional publications. Results are for informational purposes only. Last reviewed Jan 2026.
Data Disclaimer
EU ETS carbon credit prices are market-determined and highly volatile. Carbon credit investing involves regulatory risk, liquidity risk, and price volatility. EU ETS regulations are subject to political change. This is not investment advice.
EU ETS carbon credit prices are market-determined and highly volatile. Carbon credit investing involves regulatory risk, liquidity risk, and price volatility. EU ETS regulations are subject to political change. This is not investment advice.