EU carbon price forecasts slightly increased at the beginning of the year

According to Reuters, under the EU Emissions Trading System (ETS), producers, energy companies, and airlines are required to purchase allowances for every ton of CO2 they emit.

In a survey of 10 analysts, the average price of EU emission allowances is expected to be EUR 92.65 per metric ton in 2026 and EUR 107.29 in 2027. These figures are slightly higher than the forecasts made in October, which were EUR 91.11 and EUR 106.94, respectively. The market started 2026 with volatility; after reaching approximately EUR 93.80 on January 15—the highest level in about two and a half years—the EU carbon contract is currently trading around EUR 84 per metric ton.

Noemi Zurcher, Senior Data Analyst for Carbon Markets and Policies at Rystad, said, “In the short term, CO2 prices in the EU will continue to be linked to natural gas prices. However, as new industrial players gradually lose free allowances, we will see demand shift toward industrial needs and prices track the costs of decarbonization technologies.” Natural gas prices in Europe have risen by around 40% this year due to declining stock levels and the impact of freezing temperatures in the U.S. on liquefied natural gas production and exports.

The EU is gradually reducing the free emission allowances granted to industries under the ETS, increasingly requiring them to purchase permits to strengthen financial incentives for emission reductions. The overall cap on emissions allowed for sectors under the ETS is also decreasing over time.

Haege Fjellheim, Head of Carbon Analysis at Veyt, stated, “Due to tighter annual market balances, we expect carbon prices in Europe to rise sharply over the next few years, especially from 2027 onward.” The average EUA forecast for 2028 is EUR 110.90 per ton, showing little change compared to the EUR 110.20 per ton forecast from October.