European carbon allowances traded within a narrow €1 range during Friday’s session. The benchmark contract ultimately settled at €79.20, up just 0.20% on the day, as traders remained cautious ahead of the weekend while awaiting greater regulatory clarity.

Market activity was notably subdued, with total trading volume reaching just 13.2 million allowances, the lowest daily turnover in seven weeks, underscoring the lack of strong directional conviction among market participants.

Compared with the previous week, the benchmark contract settled 1.73% lower. Although prices steadied during the final two trading sessions, the market failed to recover the sharp losses incurred on Tuesday and Wednesday. The weekly trading range widened to €3.64, compared with the previous week, reflecting heightened volatility following the mid-week developments.

The selloff on Wednesday was triggered by media reports citing an EU official, who said that additional carbon allowance supply could enter the market as early as 2027. According to Bloomberg, the proposed ETS Investment Booster would run for three years, with eligible companies receiving allowances on a first-come, first-served basis.

Also notable was the carbon market’s muted response to the renewed escalation of tensions between the United States and Iran. While the geopolitical developments briefly pushed European natural gas prices above €50/MWh for the first time in a month, with front-month TTF futures ending the week around 8% higher, EU carbon allowances showed little inclination to follow the rally in the broader energy complex.

The lack of a meaningful upside reaction suggests that concerns over a potential increase in carbon allowance supply continued to outweigh supportive signals from the gas market, leaving EUA prices largely detached from broader energy market dynamics and increasingly driven by headlines surrounding the future design of the EU ETS.

“We have now reached the week when the European Commission, at least according to its published timetable, is expected to unveil its proposal for the reform of the EU ETS. The market is therefore likely to remain cautious until the details are released,” Mind Energy said in a market note on Monday morning.