The past trading week saw a generally more optimistic tone on the European carbon market with EUAs surging by 4% to end Friday’s session at €68,76 versus a close of €66.43 a week earlier, the highest settlement since April 2.

During the same trading session, UK carbon price briefly hit £50 (approximately €58), a level not seen since June 2024, narrowing the gap with its European equivalent to the lowest in 10 months. Since reaching a record low on January 10, UK Allowances (UKAs) have surged 60%, while EU Allowances (EUAs) have declined by around 19% over the same period.

EUA Dec’25 vs. UKA Dec’25

Ahead of the UK-EU summit which is scheduled on May 19th, where linking the carbon trading systems is on the agenda, investment funds continue to increase their net log positions in UKAs. Data from ICE Futures showed that as of 25 April, the bets made by speculators on higher carbon prices in the UK ETS reached 17,4 million tonnes, the highest ever.

A recent analysis made by Herbert Smith Freehills (HSF), a global law firm, found that “linking the schemes is possible outside of the Brexit process and… would not be legally complicated to implement , which means that the benefits of this would be felt sooner by both UK and EU consumers.”

However, there are concerns that too much speculative money invested in UKAs carries substantial risks. “A disappointing or inconclusive outcome to the meeting on May 19 may lead to a steep sell-off, while any agreement to develop a linking proposal may only be the start of a multi-year process,” warns carbon analysts Alessandro Vitelli.

The EU and Switzerland negotiated a similar linking agreement, which has been fully operational since 2020. However, negotiations between parties opened in 2010 and concluded six years later. The legislative process which included approval and ratification ended in 2019.