Market Snapshot: Q1 2026 Supply Tightening Deepens
Approximately 184 million EUAs were auctioned across EEX and ICE Endex platforms in Q1 2026 — roughly an 8% decline from ~200 million in Q1 2025. The EUA Dec-26 futures contract traded in the EUR 68-73 range through the quarter, sitting at approximately EUR 72 as of early March. The EEX 2026 auction calendar was restructured to Monday/Tuesday/Thursday sessions starting January 8.
Two structural drivers underpin this contraction: the Market Stability Reserve's record intake, and the maritime sector's transition to 100% coverage in 2026. The maritime adjustment alone represents a -52 million EUA reduction versus the original 2026 auction calendar.
Auction Calendar and Volume Analysis
EEX restructured its 2026 auction calendar to three days per week (Monday, Tuesday, Thursday), commencing January 8. Aviation EUA (EUAA) auctions continue twice monthly. ICE Endex maintained weekly German allowance (DEUA) auctions.
January 2026 total auction volume was ~64 million EUA, February ~60 million, and the first week of March ~20 million EUA. In Q1 2025, total volume was ~200 million EUA (Source: EEX Auction Results).
Cover-to-bid ratios remain strong. Ratios held at 1.9-2.3x throughout Q1 2026 — above the 1.8-2.2x range seen in Q1 2025, indicating robust institutional and industrial bidding even as supply contracted further. A single session in mid-February hit 2.5x — reflecting positioning ahead of the April surrender deadline.
MSR Mechanics: A Record Intake Period
The Market Stability Reserve is the EU ETS's primary supply regulation mechanism. When TNAC exceeds the 833 million threshold, the MSR withdraws 24% of excess allowances from the market by reducing auction volumes.
End-2024 TNAC stands at 1,148,049,585 allowances as officially published by the European Commission. This level sits 38% above the 833 million threshold. Consequently, the MSR intake for the September 2025-August 2026 period was set at 275,531,900 allowances — the largest intake since 2021.
Additionally, 271 million allowances were invalidated from the MSR in January 2025. This invalidation means those allowances are permanently removed from the system — they cannot return to circulation. Together, these two mechanisms (record intake + permanent invalidation) cement structural supply tightening in the EUA market.
The linear reduction factor stands at 4.3% per year in Phase 4 — raised from the previous 2.2% under the Fit for 55 package. This rate ensures the total allocation cap contracts rapidly each year.
Four-Year Comparison: Supply Trend
| Period | Auction Volume | Change (YoY) | EUA Price Range |
|---|---|---|---|
| Q1 2023 | ~260M EUA | — | EUR 85-100 |
| Q1 2024 | ~230M EUA | -11.5% | EUR 55-65 |
| Q1 2025 | ~200M EUA | -13.0% | EUR 68-72 |
| Q1 2026 | ~184M EUA | -8.0% | EUR 68-73 |
Across four quarters from 2023 to 2026, Q1 auction volume has contracted by approximately 29%. The cumulative MSR effect is stark: progressively fewer allowances reach the market each year.
Price dynamics do not mirror supply tightening one-for-one — in 2024, EU economic slowdown and energy price normalization pulled EUA prices to the EUR 55-65 range. In 2025, prices fluctuated in the EUR 60-80 range; a 45-week low of EUR 67.55 was hit in March 2025 before recovering through the year. In 2026, the combination of record MSR intake, maritime full coverage, and the 4.3% linear reduction factor is supporting prices in the EUR 68-73 band.
Demand Side: Maritime Full Coverage and Aviation
Maritime sector — 100% coverage in 2026. EU ETS maritime coverage has phased in progressively: 40% in 2024, 70% in 2025, and 100% in 2026. The transition to full coverage structurally increases the sector's EUA demand. This phase-in was reflected in a -52 million EUA adjustment to the original 2026 auction calendar.
Aviation sector — full coverage from 2026. Aviation operators are now fully covered under the EU ETS from 2026, following the 2024-2025 phase-in period. Surrender obligations for 2025 emissions come due in April 2026. The phased reduction of free allocation rates continues to increase the sector's open position.
Industrial hedge positions. With 7 weeks until the April 30, 2026 surrender deadline, energy-intensive industrials face mounting pressure to close hedge positions. Steel, cement, and refinery operators are seeking buying opportunities on short-term price dips. The accelerating free allocation phasedown in CBAM sectors is increasing industrial buyers' medium-term EUA requirements.
Positioning Data: Open Interest and Participant Dynamics
The compliance season build-up is reflected in participant positioning:
- Compliance entities (installations, airlines, and now maritime operators) hold the majority of long positions, concentrated in the Dec-26 contract. The addition of maritime operators at 100% coverage represents new structural demand that was not present in prior years at this scale.
- Investment funds have maintained net long positions through Q1 2026. The managed money positioning reflects confidence in the supply-tightening thesis supported by record MSR intake and maritime full coverage.
- Power sector positioning remains mixed — generators with long gas exposure maintain EUA longs as a fuel-switching hedge, while those with predominantly renewable portfolios are reducing positions.
The key risk from a positioning perspective remains the same as in prior years: if industrial production data surprises to the downside (meaning lower-than-expected compliance demand), concentrated long positioning could trigger a rapid unwind. However, the structural supply contraction — now reinforced by 271 million invalidated allowances and 275.5 million in MSR intake — provides a firmer floor than in previous years.
Price Action: Support and Resistance
EUA Dec-26 traded in the EUR 68-73 range through Q1 2026, sitting at approximately EUR 72 as of early March — a notable recovery from the 45-week low of EUR 67.55 hit in March 2025.
EUR 68 has established itself as medium-term support, while EUR 73-75 represents the next resistance zone. The convergence of compliance-season demand pressures and the April 30 surrender deadline should support seasonal upside that could push prices through the EUR 73 resistance.
The supply-side picture provides robust structural price support: declining auction volumes (MSR-driven, now at record intake), maritime full coverage adding new demand, aviation full coverage, the 4.3% annual linear reduction factor, and the accelerating CBAM-linked free allocation phasedown collectively create a tightening floor beneath the market. The January 2025 invalidation of 271 million allowances permanently removed supply that can never return to circulation.
Downside risks remain real: EU industrial production contraction could reduce compliance demand below expectations, and a sharp decline in TTF natural gas prices could trigger coal-to-gas reverse switching, dampening EUA demand at the margin. However, both risks are cyclical, not structural — and the structural supply contraction ultimately dominates the medium-term outlook. The 2025 trading range of EUR 60-80 illustrates the interplay between these structural and cyclical forces.
Signals and What to Watch
- April 30, 2026: EUA surrender deadline for 2025 verified emissions. Compliance buying is expected to intensify.
- Q2 2026 auction calendar: The European Commission's Q2 auction volume allocation will be published in late March. Continued MSR-driven contraction will be scrutinized.
- ETS2 preparations: ETS2 covering buildings and road transport becomes fully operational in 2027. Preparatory work during 2026 will be monitored.
- Natural gas prices: TTF price movements indirectly impact EUA demand through coal-to-gas switching dynamics. A sharp rise in gas prices carries the risk of reverse switching to coal and reduced EUA demand.
- Turkey TR-ETS pilot phase: The 2026-2027 pilot phase has commenced. Once TR-ETS becomes operational, Turkish exporters can deduct domestic carbon costs from CBAM certificate obligations.
Sources: EEX Auction Results (Q1 2026), European Commission MSR Data, EC TNAC Publication, Trading Economics