Political pressure on the EU ETS intensified this week as Italy’s Industry Minister Adolfo Urso called for a suspension of the carbon market pending a “profound revision.”
Within the first hour of the headlines, benchmark EUA Dec-26 prices fell below the EUR 70 mark, dropping 4.59% intraday and reaching a low of EUR 69.25. Trading activity picked up sharply, with volumes already exceeding 22 million tonnes at the time of writing. Prices have since stabilised off the lows.
Speaking in Brussels, Urso described the ETS “as currently designed” as an additional tax burden on European companies and said Italy will formally request the European Commission to freeze the system until benchmarks and broader design elements are overhauled, including reconsideration of the free allocation phase-out. The remarks were delivered during a meeting of the “Friends of Industry” group, which includes France, Germany, Spain, Poland and Czechia, ahead of the upcoming Competitiveness Council discussions.
This intervention comes just days after Italy adopted a major domestic power reform. Last week, Italy’s cabinet approved the EUR 3bn “Energy Decree,” which effectively strips carbon costs from wholesale power prices by reimbursing gas-fired power plants for their ETS compliance costs. Because gas plants often set the marginal price in Italy’s power market, this mechanism prevents the pass-through of carbon costs to end consumers. Following the decree, Italian year-ahead power prices fell nearly 15% this month as traders priced in the reform.
In practice, the measure reduces the visible impact of EU carbon prices on Italian electricity bills. Today’s call to suspend the ETS therefore appears consistent with Rome’s broader effort to shield domestic industry from carbon-related costs.
Urso’s call moves beyond earlier demands for adjustment or recalibration and instead openly questions the functioning of the system. He also argued that ETS reform should include mechanisms to support exporting industries and better alignment with CBAM.
This follows a series of escalating interventions across member states, including:
- Czech calls for a EUR 30 carbon price cap
- German Chancellor Merz initially signalling openness to revising or postponing the ETS
- Ongoing debate around slowing the Linear Reduction Factor
- Discussion of potentially mobilising ~370 Mt from the Free Allocation Buffer
At the same time, Commission President Ursula von der Leyen has publicly defended the ETS as a core climate instrument that must be preserved. Meanwhile, French officials signalled that while elements of the system merit discussion, abandoning the ETS altogether is not France’s position.
A formal suspension of the ETS would require EU-level legislative action and remains institutionally unlikely in the near term. However, the political signalling is significant and debate over the future design of the ETS is expected to intensify at the European Council meeting on 19–20 March.
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On the sentiment side, the latest Commitment of Traders data showed that Investment funds reduced their net long position by 13.62 Mt to 68.63 Mt by the end of last week. The reduction in length raised expectations that some investors may look to rebuild positions at current price levels. At the same time, compliance entities are reportedly buying on dips ahead of what are expected to be tighter market balances in 2026.
While fundamentals remain relevant, EUA price movements in recent weeks have been driven predominantly by policy expectations and reform speculation. Today’s development adds to that political risk premium ahead of the benchmark update and the broader 2026 ETS review.
ClearBlue Markets will be following the upcoming developments on possible EU ETS supply reforms closely and publish updates accordingly. Contact us for information about our EU-ETS market intelligence services.