In early trading on Friday, the European carbon market posted a sharp increase, with the Dec ’26 EUA contract briefly gaining more than €6 and recouping all losses from the week, when all previous sessions had closed lower.

Prices rose in response to Thursday’s EU leaders’ summit. The European Commission president reiterated her support for the EU ETS, stating that the mechanism “has massively reduced gas consumption and because of that, it has reduced our dependency on imports of fossil fuels, and it has reduced our vulnerability.”

However, Ursula von der Leyen admitted the system requires modernisation and greater flexibility, putting forward two measures that “will come in the next days” and will be “temporary, tailored and targeted”: an update to free allocation benchmarks to better address industry concerns, and increased firepower for the Market Stability Reserve to mitigate price volatility.

In the medium term, the Commission plans to review the EU ETS to reflect “a more realistic trajectory [for] free allowances for industries beyond 2034”, while also introducing an ETS “investment booster” worth €30 billion to support decarbonisation projects.

The funding will come from the sale of 400 million allowances, implying an average EUA price of around €75. “Lower-income member states will have guaranteed access to this important financial support,” von der Leyen said.

However, the measures announced yesterday “fall short of the vast reworking called for by 10 member states,” the Financial Times reported this morning. According to media reports, a coalition of EU nations — Austria, Bulgaria, Croatia, Czechia, Greece, Hungary, Italy, Poland, Romania, and Slovakia — demanded, among other things, “to adapt the approach to climate policy to the individual needs of each country.”

Based on the market reaction this morning, traders appear to expect a softer approach to the EU ETS, rather than more radical measures such as excluding gas-fired power plants from the system, as proposed by Italy and Austria, or a potential suspension, as called for by Italy, Slovakia, and the Czech Republic.