EUA price forecast: Carbon to double by 2026

Averaging EUR 66/t so far this year amidst an EUR 52/t low and an EUR 76/high, Veyt foresees a step-change to the cost of emitting, starting from next year. We believe European carbon prices are set for a significant increase over the next three years. Our updated forecast sees prices at EUR 95/t for 2025, reaching EUR 160/t in 2027 and climbing by another EUR 100 by 2035.

We expect market participants to increasingly turn their attention to the upcoming shortages in the market – 2027 is set to be a very tight year. Amidst the overall fit for 55 framework that reduces supply of fresh allowances, the market stability reserve continues to eat into the remaining surplus, working on an accelerated pace to account for the additional volumes put on the market to finance the REPowerEU programme.

The near-term forecast is sensitive to policy decisions whether to adjust REPowerEU EUA auction volumes in light of actual carbon prices. We have reassessed some of the key assumptions underlying our last price forecast from July 2024. Most importantly, we no longer believe the Commission will ramp up the REPowerEU volumes next year. This is the main reason for the 2 euros uptick in prices next year compared to our previous forecast.