Last week, the European Securities and Markets Authority (ESMA)—the independent EU authority responsible for safeguarding the stability of the EU financial system—published the third edition of its annual carbon market report, covering developments in the EU carbon market during 2025 and the first quarter of 2026.

Overall, ESMA concluded that its analysis “has not unveiled any significant issue in the transparency and integrity of EU carbon markets,” adding that the market is organised “in a way that facilitates the flow of EUAs from financial intermediaries to non-financial firms with compliance obligations.”

In 2025, investment firms and credit institutions accounted for 62% of overall trading volumes, down from 67% in 2024. Over the same period, the share of trading by compliance entities and other non-financial participants increased from 22% to 25%.

ESMA’s analysis also found that the average spot price of EU Allowances (EUAs) rose to €74/tCO₂ in 2025, up 13% from 2024. Prices climbed steadily throughout the second half of last year, reaching €90/tCO₂ in January 2026, their highest level since the second quarter of 2023.

This upward trend, however, proved short-lived. By March 2026, spot prices had fallen 29% from their January peak to €64/tCO₂, as market participants increasingly factored in the potential impact of the planned review and ongoing revision of the Market Stability Reserve (MSR) on future EUA supply. Over the same period, historical price volatility rose to its highest level in two years, reflecting heightened uncertainty about the market outlook.

ESMA publishes these annual reports as part of its mandate to oversee the integrity and transparency of the EU Emissions Trading System (EU ETS). The reports assess whether the market is functioning efficiently, identify risks such as market abuse or manipulation, evaluate the effectiveness of existing safeguards, and provide evidence-based recommendations to support the European Commission’s policy and regulatory decisions.