Last week ended with a modest uptrend on the European carbon market, with EUA Dec’25 closing the day at €70,99, just €0,39 above the previous settlement. However, carbon recorded its third consecutive daily gain on Friday, up around 3,5% from a week earlier, “the first weekly rise since January” as stated by Carbon Pulse.

The trading week was once again highly volatile as market participants grappled with uncertainty over U.S. trade policy, the Russia-Ukraine peace deal and mixed signals from weather forecasts. Furthermore, with option expiry approaching next week, heightened volatility is here to stay.

We expect the carbon market to continue to watch closely the developments around the peace talks and Trump’s trade war, mainly the 25% tariffs on EU steel and aluminum. Regarding the impact on emissions, the new U.S. tariffs could result in lower EU emissions, according to analysts.

“Tariffs can affect trade flows, production levels and economic activity, which in turn influence emissions,” explained Danylo Babkov, a carbon analyst at S&P Global Commodity Insights, adding that “new tariffs could reduce EU emissions by 1.45 million-24.66 million mt/year, resulting in a cumulative decline of 90.31 million mt over several years. ”

Also, the end of “the war in Ukraine has raised speculation that pipeline flows from Russia could return to the continent” reports Bloomberg this morning. Increased Russian flows would push gas prices down which in turn would lead to a decrease in carbon prices as well. Meanwhile, the cold snap and low wind output in Central Europe is set to end this week, a bearish signal for both gas and carbon prices. 

Furthermore, a draft proposal seen by Reuters suggests that some EU countries are pushing for more flexibility on gas storage, modifying the target of 90% of capacity by November 1 to be reached anytime between October 1 and December 1. “The current belief is that a fixed date allows for price manipulation of the market and is pushing prices higher and this ‘flexibility’ around dates will help ease that situation,” explained Auxillione in a note this morning.