To assess the effects of a hypothetical all-encompassing trade war between the US and Europe, Veyt has modelled a possible EUA demand shock if steel, cement, and car manufacturers are no longer able to export to the US. Emissions would be reduced on average by 14 Mt each year in the period 2025-2035. The actual effect on market balance and prices will be limited, due to the Market Stability Reserve coming to the rescue. In this worst-case scenario, we see somewhat lower prices in the years up to 2030, then slightly higher prices between 2032 and 2034.
The quarterly updated price report presents Veyt’s base-case EUA trajectory out to 2035 with our view on supply (availability of EUAs) and demand (GHG emissions covered by the EU ETS). Compared to the previous edition, in January 2025, it incorporates some minor adjustments to fundamental input assumptions (e.g. on fuel forward prices and renewable generation capacity), but it does not consider the possibility of a protracted global recession triggered by President Trump’s trade war with China, and possibly the rest of the world.
Trump’s ‘Liberation Day Address’ on 2 April, followed by Chinese and Europe responses, and his counter-responses, caused, in a matter of days, an unprecedented erosion of global wealth across most asset classes, including energy and emission allowances.
His latest U-turn on 9 April, putting much of the reciprocal tariffs on hold once again, spurred a rebound in European equities and European carbon, but markets remain jittery amid a growing perception that uncertainty will prevail for as long as Donald Trump is in the White House.
A weekly cap of what moved EUA prices and a clear view of the week ahead. We set out the drivers, their directional impact, and what matters next.
Specialising in data, analysis, and insights for all significant low-carbon markets and renewable energy.
