Ten analysts surveyed by Reuters have slightly increased their price forecasts for the European carbon market this year compared with previous estimates. EU Allowances (EUAs) are now expected to average €92.65, up from €91.11 projected in October and €91.08 in July.

Survey respondents pointed to several factors underpinning the upward trend in carbon prices, including the gradual reduction in allowances allocated for free to industrial companies and the continued tightening of the overall emissions cap. Both developments are expected to support demand while constraining supply in the European carbon market.

“We expect European carbon prices to rise sharply over the next few years from 2027 as annual market balances tighten,” said Haege Fjellheim, head of carbon analysis at Veyt. This view was shared by all respondents, with EUAs forecast to average €107.29 in 2027, slightly higher than the €106.94 estimate published in October.

A recent article published by the Financial Times argues that a significant undersupply of carbon allowances from this year onwards has made EUAs increasingly attractive to speculators, further driving up prices. According to Mark Lewis, “the coming supply crunch made permits a very good investment.”

However, Lewis also cautioned that if permit prices rise too sharply and too quickly, businesses are likely to increase pressure on policymakers to intervene — a development that could weigh on the market and make the €107 level forecast by analysts for 2027 harder to sustain.