Market Snapshot
| Indicator | Value |
|---|---|
| EUA Dec-26 (ICE Endex) | EUR 68.20 |
| YoY Change | +8.4% |
| 2025 Trading Range | EUR 60 – 80 |
| 2026 Total Cap | ~1.35 billion EUAs |
| MSR 2025 Intake | ~276 million allowances |
| Verified Emissions (2024) | ~1.1 billion tCO2e |
| Auction Cover Ratio (2025 avg) | 2.1x |
EUAs Open 2026 at EUR 68
The EUA Dec-26 contract trades at EUR 68.20 on ICE Endex as of 15 January 2026. Prices entered the year in the middle of the 2025 range of EUR 60-80, reflecting roughly 8.4% year-on-year appreciation. The market continues to price in the structural supply tightening of Phase 4.
Natural gas volatility in Q4 2025 briefly pushed EUAs below EUR 60, but the dip did not hold. The EUR 59 level met strong buyer interest and prices recovered above EUR 65 within two weeks. Structural supply constraints make sustained pricing below EUR 60 increasingly implausible.
Forward Curve Structure: Contango Signals
The EUA forward curve is in mild contango — Dec-26 trades approximately EUR 1.5-2 below Dec-27. This structure indicates the market is pricing in tighter supply-demand conditions for subsequent years. However, contango remains at reasonable levels: it reflects carry costs (interest, time value) rather than speculative overpricing.
A notable detail: the Dec-27/Dec-26 spread widened from EUR 0.8 in October 2025 to EUR 1.8 by mid-January. This expansion may be an early signal that the 2027 CBAM definitive phase impact on EUA demand is beginning to be priced.
Phase 4 Tightening: Linear Reduction Factor at 4.3%
Under the Fit for 55 package, the linear reduction factor increased to 4.3%. This translates to the total cap declining by approximately 58 million EUAs per year. The 2026 cap stands at ~1.35 billion EUAs.
The numbers need perspective: the 2019 total cap was ~1.93 billion EUAs. By 2026, the cap has declined by 30%. By 2030, it will reach ~950 million EUAs — an additional 30% decline over six years. On the supply side, the direction is unambiguous: the probability of prices not reflecting this magnitude of supply contraction is low.
On the free allocation side, the annual 4.3% decline from the 2025 baseline continues. For CBAM-exposed sectors (cement, iron & steel, aluminium, fertilisers, electricity), free allocation phases down to zero from 2026 through 2034. This transition boosts auction revenues while raising facility-level compliance costs.
The practical impact for industrial installations: a cement facility receiving 100% free allocation in 2025 will receive approximately 60% by 2030 and zero by 2034. The gap must be covered through auctions or the secondary market — meaning compliance purchasing pressure increases every year.
MSR: 276 Million Allowances Absorbed
The Market Stability Reserve will absorb 275.5 million EUAs from auction volumes in the September 2025 – August 2026 period — the largest annual intake since 2021. The Total Number of Allowances in Circulation (TNAC) stood at 1.148 billion at end-2024, remaining above the MSR intake threshold of 833 million EUAs.
The MSR mechanics bear repeating: as long as TNAC remains above the 833 million threshold, the MSR absorbs 24% of the surplus. At current TNAC levels, this translates to 220-260 million EUAs removed per year. The intake rate will naturally decline as TNAC approaches the threshold — but current projections place this inflection point no earlier than 2027.
Under revised rules effective from 2023, allowances in the reserve exceeding the 400-million cap are permanently cancelled. This mechanism means a portion of the market surplus will never return — structurally reducing the medium-term supply outlook.
Verified Emissions: Decline Continues, But Aviation Changes the Picture
EEA data shows EU ETS verified emissions at ~1.1 billion tCO2e in 2024 — approximately 8% below 2023 levels. Declining industrial output and expanding renewable capacity are the primary drivers.
However, full inclusion of intra-EU aviation emissions from 2025 could add ~30-40 million tCO2e to the total. Aviation free allocation is also declining, meaning airlines will need to purchase more EUAs in the 2026 compliance cycle. European aviation traffic data shows flight numbers reaching 95-97% of 2019 levels in 2025 — the sector has effectively recovered from the pandemic in emissions terms.
From a positioning perspective, aviation-driven demand growth could translate to 25-35 million additional EUAs of annual purchasing. Combined with MSR absorption, this brings total annual supply removal to 280-290 million EUAs.
April 2026: Compliance Surrender and Seasonal Price Effect
Installations and aircraft operators must surrender EUAs covering 2025 verified emissions by 30 April 2026. This deadline generates seasonal buying pressure in the spot market between February and April.
Historical data from the past four years reveals the compliance surrender price impact:
| Year | January Price | Mid-April Price | Change |
|---|---|---|---|
| 2022 | EUR 80 | EUR 87 | +8.8% |
| 2023 | EUR 85 | EUR 95 | +11.8% |
| 2024 | EUR 56 | EUR 63 | +12.5% |
| 2025 | EUR 63 | EUR 68 | +7.9% |
| 2026 (est.) | EUR 68 | EUR 72-75? | +6-10%? |
One offsetting factor exists in 2026: some installations hold surplus allowances due to weak industrial production. These installations may be net sellers during the surrender window. However, rising aviation demand could partially absorb the industrial surplus.
CBAM Transitional Period: Indirect ETS Impact
The CBAM transitional period (October 2023 – December 2025) did not directly affect EUA prices, but the indirect channels are critical:
Free allocation phasedown schedule. The removal of free allocation in CBAM-exposed sectors will structurally increase EUA demand from these sectors. From 2026, cement, iron & steel, aluminium, fertiliser, and hydrogen facilities must purchase progressively more EUAs each year.
CBAM certificate price = EU ETS price. Although CBAM certificate sales have been postponed to February 2027, imports made in 2026 generate financial liability. The first surrender deadline is 30 September 2027. For the 2026 compliance year, certificate prices will reflect the quarterly average of EU ETS auction prices; subsequent years will use weekly averages. This linkage transforms the EU ETS price from a domestic market reference into a global trade reference for carbon costs.
Arbitrage mechanism. Since carbon prices paid in countries of origin can be deducted from CBAM obligations, carbon pricing mechanisms in Turkey and other countries become indirectly linked to the EU ETS price.
Auction Market: Demand Remains Robust
EEX and ICE Endex auctions in 2025 averaged a cover ratio of 2.1x — a healthy indicator of institutional and industrial demand. Several sessions in the second half of 2025 reached 2.4x, particularly during periods when spot prices dropped below EUR 60, indicating clear buy-the-dip appetite.
2026 auction volumes will be approximately 8% lower than 2025 due to MSR absorption. Less volume meeting stronger demand structurally increases the probability of auction prices clearing above secondary market levels.
Signals / What to Watch
- April 2026 compliance surrender: The gap between surrendered EUA volumes and 2025 verified emissions data will reveal the market's net long/short positioning. Surrender volumes exceeding 105% of verified emissions would indicate the market is net short.
- MSR parameter review: The Commission will review MSR parameters in 2026. Any change to the intake rate or threshold directly reshapes the forward curve structure.
- Natural gas prices (TTF): TTF above EUR 30/MWh supports EUA demand through coal-to-gas switching dynamics. TTF below EUR 25 reduces gas plant marginal costs, dampening EUA demand.
- 2025 verified emissions report (April 2026): The EEA's release of 2025 verified emissions data will be the most critical data point of the year for the supply-demand balance. Below-consensus emissions could weigh on prices; above-consensus (with aviation included) would be supportive.
- Speculative positioning: ICE Endex Commitment of Traders data showing changes in fund net positions provides early directional signals. Funds increased net long positions in December 2025 — a bullish tilt heading into the compliance season.
Sources: ICE Endex EUA settlement data (15 January 2026), European Commission auction calendar, EEA Verified Emissions Database 2024, European Commission MSR Report 2025, EEX Auction Results 2025.