The European carbon market is experiencing a significant decline: in February 2025, the price of the EUA contract for December 2026 dropped below €70 per ton. According to the ICE exchange, as of February 16, it stood at €69.2/t, whereas it exceeded the €90/t mark in January.
This is reported by Finway
Political Factors Affect Prices
Experts note that in February, the carbon market in Europe faced pressure from both energy and political and geopolitical factors. While previously the dynamics of natural gas prices played a key role, significant influence now comes from events in the Middle East and political statements within the EU. This led to waves of long position closures by investment funds.
A particularly sharp decline was observed following the statement by German Chancellor Friedrich Merz at an industrial forum in Antwerp on February 12 regarding the possibility of reviewing or postponing the European Emissions Trading System (ETS). As a result, the EUA price fell from €78/t to €72.5/t, and by the end of the week, it had dropped to €70.7/t.
“Many market participants, Carbon Pulse noted, reported that political comments did not add certainty regarding either the short-term or long-term prospects of the ETS.”
Reactions from European Leaders and Possible Reforms
After the meeting of EU leaders in Belgium, Merz changed his position, emphasizing the effectiveness of the emissions trading system. French President Emmanuel Macron also supported the ETS, highlighting its importance for the European Union’s environmental policy.
At the same time, Member of the European Parliament Peter Liese informed journalists that within the next review of the EU ETS, details of which will be announced in the third quarter, there is a consideration to slow down the phase-out of free quotas for industry starting in 2029.
The discussion regarding the future of the ETS continues. Czech Prime Minister Andrej Babiš called for a review of the system to lower energy resource prices. Meanwhile, the president of the Italian steel producers’ association Federacciai, Antonio Gozzi, proposed limiting participation in the ETS market to industrial operators and public enterprises, excluding financial intermediaries, whom he believes contribute to speculation in the carbon permit market.