Q1 2026 Environmental Markets Report

Key Numbers — Q1 2026

Executive Summary

• EUA prices closed at ~EUR 72 at end of March 2026; prices ranged EUR 60-80 throughout 2025. Recovery from the 45-week low of EUR 67.55 in March 2025 continues.
• MSR intake for September 2025 – August 2026 stands at 275.5 million allowances, the highest since 2021. On January 1, 2025, 271 million allowances were permanently invalidated. TNAC at 1.148 billion — intake continues.
• 2026 auction supply is ~8% lower than 2025. The linear reduction factor of 4.3% accelerates the annual cap reduction.
• Maritime reaches 100% coverage from 2026 (phased 40% in 2024, 70% in 2025). Aviation also fully covered from 2026.
• VCM retirements hit 182 million tonnes in 2024 — a record. H1 2025 retirements reached 95 million, a half-year record. CCP-labeled credits surpassed 40 million.
• The CBAM definitive phase launched on January 1, 2026 but certificate sales were postponed to February 2027. First surrender deadline: September 30, 2027.
• Turkey's Climate Law was adopted on July 2, 2025; the TR-ETS pilot phase is active in 2026-2027.
• Globally, 80 carbon pricing instruments are active, covering ~28% of emissions, with annual revenue exceeding USD 100 billion.

EU ETS: Q1 2026 Status

Price and Market Structure

EUA prices closed at ~EUR 72 at end of March 2026. Throughout 2025, prices ranged between EUR 60-80, with a 45-week low of EUR 67.55 in March 2025 followed by recovery through the rest of the year. The all-time high remains EUR 105.73 (February 2023). Twelve-month forward prices trade at ~EUR 78-79.

The carbon VIX (historical average implied volatility) stands at 54% annualized. EUA options volume exceeded 2 billion contracts per year in 2021-22 — evidence of the EU ETS maturing into a sophisticated financial market.

MSR and Supply Structure

The MSR will absorb 275.5 million allowances in the September 2025 – August 2026 period — the largest intake since 2021. The TNAC (Total Number of Allowances in Circulation) stood at 1,148,049,585 at end-2024, well above the 833 million threshold. On January 1, 2025, 271 million allowances were permanently invalidated from the MSR.

2026 auction supply is ~8% lower than 2025. Despite maritime full inclusion, a 52 million EUA adjustment was made (for maritime non-CO2 gases phase-in). The linear reduction factor in Phase 4 is 4.3% (up from 2.2% under Fit for 55) — the annual cap contraction is accelerating.

The EEX 2026 auction schedule runs Monday/Tuesday/Thursday, starting January 8.

Scope Expansion: Maritime and Aviation

The maritime sector reached 100% coverage in 2026 (phased: 40% in 2024, 70% in 2025, 100% in 2026). This structurally broadens the EU ETS demand base.

Aviation is also fully covered from 2026 (phased transition completed in 2024-2025). The combined full inclusion of maritime and aviation creates permanent upward demand pressure on EUAs.

April 2026 Compliance Surrender

The April 30, 2026 deadline approaches — installations, airlines, and maritime operators must surrender EUAs covering 2025 verified emissions. This is the first year maritime operators surrender at 100% coverage, creating additional demand. Historical data shows 3-5% seasonal price appreciation during the compliance window.

ETS2 Outlook

ETS2 covering buildings and road transport becomes fully operational in 2027. The 2026 preparation period is underway.

CBAM (Carbon Border Adjustment Mechanism)

Definitive Phase Launched

The CBAM definitive phase officially launched on January 1, 2026 — financial obligations now apply. However, under the EU simplification package, certificate sales were postponed from January 2026 to February 2027. The first surrender deadline is September 30, 2027 (for 2026 imports).

Certificate pricing in the first year will be based on quarterly averages of 2026 EU ETS auction prices; subsequent years will shift to weekly averages. Importers must hold certificates covering 50% of embedded emissions from year-to-date imports on a quarterly basis.

Scope and Impact

CBAM covers 303 goods across six sectors: electricity, hydrogen, cement, fertilizers, aluminum, and iron & steel. Covered trade value: USD 132 billion (3% of EU imports). Covered emissions: 171 MtCO2e (0.31% of global GHG emissions).

Estimated annual revenue: EUR 14.7 billion at EUR 80/tCO2e. OECD 2025 analysis projects ETS+CBAM to reduce global emissions by 0.54%. The carbon leakage ratio without CBAM is 0.19 tonnes leaked per tonne avoided in the EU; with CBAM this becomes -0.12 tonnes (net reduction outside the EU as well).

Turkey and CBAM

Turkey is positioned for modest value-added gains in CBAM sectors — owing to relatively low emission intensity and the upcoming TR-ETS. Once the TR-ETS is operational, the Turkish carbon price can be deducted from CBAM certificate costs. As free allocation phases out, CBAM's impact will intensify.

Voluntary Carbon Markets

Volumes: Record Retirements

The voluntary carbon market showed strong momentum in 2024-2025:

Retirements of 182 million tonnes in 2024 set a record. The H1 2025 half-year record of 95 million tonnes followed — demand-side momentum is building.

Prices: The Quality Premium Deepens

The standout trend: high-quality ARR (afforestation/reforestation) credits at BBB+ rose from USD 14 in January 2025 to USD 24 in September 2025 — a 71% increase in nine months. This underscores the strength of quality-driven demand.

The vintage premium reached 217% in 2024 (up from 53% in 2023). The removal-over-reduction premium hit 381% (up from 245% in 2023). Price stratification is structural and accelerating.

ICVCM / CCP Labeling

Of 147 methodologies assessed by the ICVCM, ~38 have been approved; 22 found non-compliant; 51 still under assessment. CCP-labeled credits exceeded 40 million as of January 2025.

Methodologies rejected by the ICVCM account for ~40% of historical supply. Renewable energy listings declined >40% following ICVCM rejection. In contrast, landfill gas credits saw +300% transaction growth after CCP approval, with a 35% price increase from H1 to H2 2024.

Registry Market Shares

Market concentration is declining — Verra's share fell from 39.2% to 28.1%. ACR and BioCarbon Standard are on the rise.

CORSIA and Article 6

CORSIA Phase 1 (2024-2026) demand estimate: 102-148 million tons. The IATA fixed-price offering in early 2025 was USD 21.70/tCO2e. CORSIA-eligible credits comprised 33.3% of Q3 2025 issuances.

Under Article 6, approximately 100 bilateral agreements are now in place (20 new in 2024). Switzerland's average price for 2022-2030 delivery stands at 29 CHF/tCO2e (>USD 30). Singapore's February 2025 tender ranged from USD 18 to >USD 40/tCO2e.

Energy Attribute Certificates

I-REC Turkey

I-REC Turkey prices stand at ~USD 0.40-0.50/MWh. The global I-REC market is experiencing significant growth in emerging markets. The launch of the CBAM definitive phase and supply chain pressure are supporting energy attribute certificate demand in Turkey.

YEK-G (Turkey)

Operated by EXIST (EPİAŞ) since June 2021, YEK-G certificates trade at TRY 5-60/MWh. They serve as the domestic guarantee of origin for corporate Scope 2 claims. CSRD and EU Taxonomy requirements are driving increased YEK-G and I-REC demand for Turkish exporters.

EU Guarantees of Origin (GO)

EU Guarantees of Origin trade on a mature exchange. CSRD/EU Taxonomy requirements mandate GOs for credible Scope 2 reporting — corporate demand is structurally increasing.

Compliance Carbon Markets and Global Carbon Pricing

Global Overview

Eighty carbon taxes and ETSs are active worldwide (net +5 over 12 months). Approximately 28% of global GHG emissions are now covered by carbon pricing (up from 24%, driven by China ETS expansion). 2024 revenue exceeded USD 100 billion for the second consecutive year. The average implemented carbon price stands at ~USD 19/tCO2e. Over 70% of global emissions remain unpriced.

China ETS Expansion

China ETS expanded to include industrial sectors, adding approximately 3 GtCO2e of coverage. This is the single largest carbon market expansion and the primary driver of the global coverage increase from 24% to 28%.

TR-ETS: Turkey Emissions Trading System

Turkey's Climate Law was adopted on July 2, 2025 by the Grand National Assembly, published in the Official Gazette on July 9. The draft implementing regulation was published July 22, 2025; stakeholder comments closed August 4, 2025.

TR-ETS has a direct linkage to CBAM: the carbon price paid in Turkey can be deducted from CBAM certificate costs. IPA III technical assistance for EU ETS transposition commenced in 2025.

Other Notable Developments

• Brazil: Approved ETS framework law in December 2024.
• British Columbia: Cancelled carbon tax on March 31, 2025.
• Denmark: First agricultural carbon tax starting 2030 (~USD 40, rising to USD 100+/tCO2e by 2035).
• UK CBAM: Announced to commence January 2027.

Q2 2026 Outlook

EU ETS

The April 30, 2026 compliance surrender deadline will support EUA spot demand in Q2's opening weeks. Maritime operators surrendering at 100% coverage for the first time and full aviation inclusion will raise total surrender volumes. The MSR's 275.5M allowance intake continues to tighten the supply side. Auction supply being 8% lower than 2025 provides price support.

CBAM

Although certificate sales have been postponed to February 2027, importers are continuing embedded emissions calculations for 2026 imports. Initial quarterly holding obligations will crystallize in Q2. The first application data from the CBAM definitive phase will emerge in Q2-Q3.

Voluntary Carbon

If 2025 retirement trends (95M in H1, record) carry into 2026, annual retirements exceeding 200M are possible. ICVCM CCP assessment expansion will deepen price stratification. Price appreciation in ARR and removal credits will continue.

TR-ETS

The pilot phase launched in 2026. MRV (Monitoring, Reporting, Verification) infrastructure buildout and identification of covered installations are the primary agenda items for Q2-Q3. The Carbon Market Board's first operational decisions are expected.

Compliance Carbon (Global)

The impact of China's ETS expansion will be reflected in 2026 pricing. Brazil ETS details are expected to crystallize. UK CBAM (January 2027) preparations may affect UKA prices.

Signals / What to Watch — Q2 2026

• April 30, 2026: EU ETS 2025 compliance surrender deadline. Maritime at 100% coverage for the first full-year surrender. Surrender volumes will reveal the demand impact of maritime and aviation full inclusion.
• Q2 2026: CBAM definitive phase initial application data — importer compliance rates and quality of embedded emissions declarations.
• Q2 2026: TR-ETS pilot phase initial operational steps — coverage list and MRV timeline.
• Q2 2026: ICVCM CCP assessment continuation — approved methodology count may surpass 50.
• Q2-Q3 2026: China ETS first full-year data under expanded scope — industrial sector pricing impact.
• February 2027: First CBAM certificate sales — market pricing expectations will begin forming in Q2 2026.
• September 2027: First CBAM surrender deadline — for 2026 imports. This date is already shaping market structure.
• January 2027: UK CBAM launch — potential upside pressure on UKA prices.

Sources: Trading Economics EUA data, European Commission official MSR announcements, EEX auction calendars, OECD 2025 CBAM analysis, World Bank State and Trends of Carbon Pricing 2025, Ecosystem Marketplace SOVCM 2025, Sylvera Q2/Q3 2025, ICAP Emissions Trading Worldwide Status Report 2025, I-REC Standard, EXIST (EPİAŞ) YEK-G data, Jones Day Insights March 2026, NBER w32937.