A strong rally in the second half of 2025 lifted the average price to €75/t, up 12% from 2024. Traded volumes decreased 5%. Turnover reached €845 billion, a 8% increase. The EUA actions generated €43 billion, 11% more than in 2024. Some 56% of that was allocated to the member states’ governments, with the rest shared among various instruments, including the new Social Climate Fund. Looking at the emissions covered under ETS1, we see that industrial plants’ output of GHG dropped 3.2%, while power sector emissions were flat. Among the fossil fuels, gas emissions were up, hard coal and lignite were down.
Veyt’s assessment of transactions in the EU emission trading system (EU ETS) in 2025 points to a market value of €845 billion. The average price of the emission allowances (EUAs) that changed hands last year was €75/t, 12% higher than in 2024. Traded volume, on the other hand, dropped 5%. This was partly due to a slight contraction in futures trading (the dominant segment), partly due to a sharp drop in spot transaction volumes. Altogether, the market value rose 8% year-on-year, after a sideways trend in 2024. See Figure 1 and Table 1.
The price of European emission allowances (EUAs) rebounded after a weak performance in 2024. The reference EUA futures contract settled the first day of trading in 2025 at €75/t. The contract first rallied on the back of increased coal burn (the winds were weak and gas was expensive last January). Carbon then spent the late winter and early spring on a downward trend, partly tracking falling gas prices, partly from fear of aggressive US tariffs on European exports, and generally gloomy economic prospects. See Figure 2.
Then, from a year-low at €60/t in early April, carbon rebounded in May, before getting stuck in a range around €70-75 defined by technical resistance and support levels. Eventually, the rally picked up again in September, when the markets started dispelling the worst fears of economic meltdown. It was further bolstered in December by the prospect of the Christmas period auction hiatus and the looming supply reductions in 2026. The front-year futures contract closed the year just below €90.
The recent rally also reflects an anticipation that the annual supply-demand balance will get increasingly tight. While it has been known for a long time that from 2026 onwards the annual issuance (the cap) will shrink faster than the drop in emissions, it seems traders needed to get closer to the actual situation before fully pricing this in.
Overall, some 11.2 bn EUAs changed hands in 2025, down 4.8% year-on-year. Futures trading represents a full 89% of this volume, of which the lion’s share was in the December 2025 contract. Most of the futures trading takes place on ICE Endex, and the rest is cleared on EEX.
ICE is also the dominant platform for spot trading, which makes up another 6% of the total volume.
EEX houses the platforms for the EU common auctions, the German auction, and the Polish auction, which together represent the remaining 5% of the 2025 traded volume.
The spot volumes shrank 26% in 2025, futures decreased 3%, while auction volumes contracted 1.4%. See Table 1.
The sharp and (apart from 2024) steady rise in EUA prices since 2019 has been accompanied by a growing interest in European carbon as an investment opportunity. This triggered a discussion to what extent financial investors are setting the carbon price.
To assess how non-compliance trading is affecting the market, ICE and EEX publish weekly overviews of holdings broken down by type of trader. If we look at 2025, we see that investment funds (‘IF’) built net-length in January, reduced it in March, and have increased it steadily since late August, to reach an all-time high of 116 Mt on 24 December. See Figure 3.
The curves also illustrate the relatively close correlation between investment funds’ net long positions and the price of EUAs.
Overall, a total of 591 million EUAs were auctioned in 2025. Tightening cap reduced the auction volumes compared to 2024, but due mainly to the 50 m units added for the SCF, the net reduction was only 8 million.
Due to generally higher prices, the 2025 auctions generated €43.2 billion, which was 11% more than in 2024. Figure 4 shows how the auction proceeds were distributed.
Some €24 billion (56%) went to the member states’ governments. Due to the price rally over the last six years, the EUA auctions have become an important source of funding to help finance the green transition. The money is used to support and subsidise the deployment of renewable energy, electrification of sectors currently using fossil fuels, grids and storage, energy efficiency, and other zero and low-emission solutions.
A designated share of the auction volume is reserved for the Modernisation Fund, which supports energy system upgrades and energy efficiency improvement in 13 lower-income member states. Some €6.5 billion (15%) was raised for this purpose in 2025.
Another 15% went to the REPowerEU programme to accelerate Europe’s switch from Russian fossil fuels to renewable energy sources. The Innovation Fund that supports new cleantech received €2.6 billion (6%).
The last 8% went to the Social Climate Fund, a new recipient in 2025 that will support electrification of road transport and heating of buildings and help minimise the fuel cost increase households will face from the upcoming ETS2 for these two sectors.
The SCF is set to raise €86 billion, most of which will come from selling ETS2 allowances (EUA2s) once those auctions start in 2027. As for now, the sale of 50 m ETS1 allowances (EUAs) that were auctioned in 2025 has raised the first €3.7 billion.
We assess the 2025 GHG emissions from the entities regulated under ETS1 to have been 1,144 Mt in 2025, a 1.7% decrease from the 1,164 Mt emitted in 2024. This reflects a 19 Mt drop in industry and smaller changes in emissions from power generation, aviation, and maritime. See Figure 5.
Looking ahead into 2026, we expect demand from industry to remain flat, power to drop, and maritime to increase, due to the coverage obligation jumping from 70% to 100%.
We estimate overall electricity generation in the EU ETS countries to have reached 2,714 TWh in 2025, marginally down from the 2,723 TWh generated in 2024 (based on the data from Entso-e).
Breaking down generation by type of fuel, in Figure 6a, we see gas-based generation up 38 TWh (10%) to 424 TWh. High gas prices in the first months of the year meant gas was largely priced out at the expense of coal, at a time of weak winds in Central Europe.
Then, easing gas prices changed the fuel switching levels and brought in considerably more gas in the fuel mix in the second half of the year. Coal was pushed out of the mix, especially in the last quarter of the year. Throughout the year, lignite and hard coal went down 10 TWh (7%) and 6 TWh (6%), respectively.
Solar generation rose 42 TWh (17%) mainly because of a steady deployment of more PV panels. Wind generation decreased 18 TWh (4%), reflecting weaker winds and a very modest build of new turbines.
Hydro-based production dropped 10% to 461 TWh, due to very dry conditions in the Alps. Europe’s nuclear plants generated 617 TWh, a marginal decrease of 3 TWh from 2024 levels.
In terms of emissions, the shift between fuels means the power sector’s output of CO2 (i.e. emissions from power generation reported in Entso-e) rose in the first half of the year, when coal consumption was high, and dropped sharply in the second half, when renewables and gas both increased their shares. In total, throughout the year, power sector emissions inched down 0.7% from 427 to 424 Mt, see Figure 6b.
Gas emissions increased 11%, whereas lignite and hard coal dropped 6% and 5%, respectively.
Veyt estimates industry-sector emissions at 563 Mt in 2025, representing a 3% decline year-on-year. This continues the downward trend observed in recent years, albeit at a more moderate pace than during the peak of the energy crisis.
Having compared production for the first three quarters of 2025 to the preceding years, we see that metals, one of the biggest industry segments, was down 1% from 2024, mainly due to slightly lower steel outputs, likely as a response to the continued malaise in the EU automotive sector. Overall, most industrial sectors have managed to keep production levels broadly stable relative to 2023, despite weak demand conditions and persistent structural challenges. The main exception remains the chemicals sector, whose loss of competitiveness after losing access to structurally cheap Russian gas makes it continue to underperform. While gas prices have eased from their 2022 highs, relative energy costs remain elevated compared with key global competitors.
Pulp and paper production was also down by around 1% year-on-year, while oil and gas-related industrial activity showed a similar modest decline. When translating production trends into emissions, most sectors track output changes closely. However, incremental emissions-intensity improvements, particularly in metals, result in emissions falling slightly faster than production alone would imply. See Figure 7.
In summary, Veyt’s analysis points to a 3% reduction in industrial emissions in 2025, broadly in line with the direction of recent trends, driven by subdued activity in energy-intensive sectors and modest efficiency gains rather than large-scale structural change.
Overall, we expect verified emissions from shipping emissions included in the EU ETS scope to be around 89 million tonnes for 2025, slightly lower than the 92 Mt reported for 2024. This is mainly due to Fuel EU Maritime starting in 2025, mandating the uptake of biofuels, as well as technical and operational energy efficiency gains.
The risk of missile attacks on vessels passing through the Red Sea due to the Gaza war persisted into 2025 and led many shipowners to continue rerouting traffic between Asia and Europe from the Suez Canal to the much longer journey around the Cape of Good Hope. The increased voyage distance requires a higher speed to meet contractual obligations, which in turn raises fuel consumption and greenhouse gas emissions, especially for container ships.
Tariffs and changes in trade policies and port fees affected shipping massively in 2025, with frequently changing tariffs, especially in the US. Although this led to changes in the scheduling of shipments, the total amount of traffic, especially to and from Asia, did not change overall emissions as much as many thought it would.
Although we assess maritime emissions overall to have decreased slightly in 2025, the segment of transporting liquefied natural gas (LNG) to Europe saw an increase, as demand for waterborne gas rebounded strongly due to low prices and the decision to phase out Russian pipeline supplies.
For the maritime transport that is subject to ETS, the 89 Mt let out in 2025 is less than the 2024 emissions, but a change in coverage obligations (from 40% to 70%) meant that shipping companies are required to surrender some 62.5 million EUAs for their 2025 compliance, well above the sector’s demand for EUAs in 2024.
Note that from 2026 onwards, shipping companies need to surrender EUAs not only for CO2 but also for methane (CH4) and nitrogen dioxide (N2O) that fall within the scope of the EU ETS. This, together with the increase to 100% compliance obligation, will boost the 2026 demand and prevent a like-for-like comparison between 2025 and 2026.
Overall, we expect EU ETS-covered emissions from aviation to be around 63 Mt in 2025, up 2.4% from 61.5 Mt in 2024. Given the sector’s limited size compared to industry and power generation, this appears modest in the big picture, but in relative terms, it is the only sector with clear growth.
For every month of 2025, traffic and emissions for flights departing from covered airports rose compared to the previous year. 2025 marks the second year during which flights to/from outermost regions are required to surrender EUAs to account for their emissions.
SAF is ‘zero-rated’ under the EU ETS, meaning that aviation operators are not required to surrender allowances derived from burning this type of fuel. We estimate that 1.3 Mt worth of surrender obligation was saved due to SAF blending in 2025.
The EU ETS also provides for support to SAF uptake via free allocation. In 2025, the European Commission allocated roughly 1.3 million allowances to support airlines in bridging the price differential between purchasing SAF and conventional jet fuel.
Textbox 2. Methodology
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