Political Debate Intensifies Over EU Climate Targets

The EU Emissions Trading System (EU ETS) is currently under increased political scrutiny. Concerns regarding the competitiveness of energy-intensive industries, particularly in the context of evolving global trade dynamics, are intensifying discussions around possible revisions to the EU’s ambitious climate targets. Central to these debates are the pace of emissions reductions and the future distribution of allowances under the ETS framework.

Adding further complexity, recent revisions to the EU’s mandatory gas storage thresholds are poised to affect the economics of various power generation fuels. These changes could indirectly influence demand for EU Allowances (EUAs) by altering the cost-effectiveness of different energy sources.

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Diverging Emission Trends Across Sectors Drive Short-Term EUA Price Volatility

A mid-May 2025 analysis by Carbon Pulse revealed that emissions covered under the EU ETS were approximately 10% higher in the first four months of 2025 compared with the same period in 2024. This rise has been largely attributed to increased fossil fuel use in the power sector, likely driven by regional energy demand fluctuations and other market pressures.

In contrast, industrial output—sensitive to global trade policies, tariffs, and economic growth—has shaped overall EUA demand differently. These diverging emissions patterns across key sectors have led to noticeable price volatility, with EUA prices fluctuating between €59 and €81 per tonne in 2025 to date.

This disparity illustrates the EUA market’s sensitivity to broader economic and energy sector developments, and underscores how different drivers can simultaneously exert opposing influences on allowance pricing.

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Long-Term EUA Price Forecasts Point Upward

Despite current market fluctuations, long-term EUA price forecasts indicate a rising trend. Analysts expect that, due to the progressive tightening of the emissions cap under the EU ETS, average EUA prices will exceed €120 per tonne by 2028, with some projections reaching €150 by 2030.

However, these projections are highly dependent on a range of factors, including:

• The rate of renewable energy deployment
• Industrial decarbonisation trends
• Overall EU economic performance

Forecasts are subject to change as new market information emerges and these variables evolve. In the short term, volatility is expected to persist, driven by political decisions, energy price fluctuations (potentially exacerbated by updated gas reserve policies), and macroeconomic dynamics.

Market participants should therefore be prepared for ongoing price swings and consider implementing robust risk management strategies to mitigate exposure.

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Gaining Control in the EU ETS Market

In a market as dynamic and often unpredictable as the EU ETS, real-time information and efficient trading tools are critical.

Our platform provides a comprehensive solution for navigating these complexities:

• Live EUA pricing and seamless trade execution
• Full transaction history and easily accessible trade documentation
• Integrated market insights and analysis to help you understand the forces behind price movements
• Tools to help you respond strategically to volatility and identify trading opportunities

Empower your compliance and trading strategies with a platform designed for clarity, efficiency, and control—helping you stay ahead in the fast-evolving EU carbon market.