On June 15, the climate change expert committee voted through the much-anticipated draft EU ETS benchmarks for the 2026-2030 period. This followed the public consultation in April and May, and paves the way for Commission adoption by the end of June, likely followed by the start of free allocation by national ETS authorities from late July.
EUA price edged up to near EUR 80 on Monday morning, buoyed by the anticipation of a relief rally following the benchmarks vote and positive sentiment across broader financial market on the U.S.-Iran de-escalation. Further support came from the power market fundamentals on the back of warmer temperatures and concerns over prolonged French nuclear outages.
The relief rally is likely stemming from reduced concern that member states would push for a broader watering down of the 2026-2030 benchmarks in order to ease pressure on industrial competitiveness. The final approval of the draft 2026-2030 benchmarks has experienced heavy debates since last December, when it was originally scheduled to be finalized by the end of January and to reflect the tighter benchmarks agreed upon in the 2023 ETS review. This compromise is the result following the March 19 council’s four measures to address industry concerns, as well as negotiations with member states.
On the other hand, EUA price will take some support from the confirmation the EU ETS balances remain tight despite the slight loosening of the 2026 benchmarks in the latest version, compared with earlier drafts.
The compromised version has opted for the lower range of the benchmark decline, added free allocation for indirect emissions, and will put forward a proposal on sector-specific fallback benchmarks in the July 15 package. This new approach regarding ‘exchangeability of fuel and electricity’ to address industry concerns is estimated to result in a total value of EUR 4 billion in free allocation for the 2026-2030 period.
In terms of EUA market impacts, the progress in the 2026 free allocation will underpin the sentiment in the next months leading up to the compliance deadline by the end of September. In the next steps following this vote and the adoption of benchmarks, it remains to be seen how quickly the national ETS authorities are able to update the formulas in the system, and finalize the calculations and handing out of allowances. We expect the lion’s share of the 2026 allocation to arrive at installations’ EUTL accounts by the end of August or early September. As of June 15, the surrender rate for 2025 compliance stood at 25% of total obligations and a total of more than 3000 installations have surrendered allowances.
Our next update for clients, incorporating companies' 2025 financial reporting and EUA strategy disclosures, will be released at the end of June, alongside the Quarterly report updating the long-term EU ETS supply demand and price forecasts.