According to BloombergNEF (BNEF), prices for European carbon allowances would average €65 in 2024, a downward revision from the forecast made earlier in February when carbon prices were expected to average €71 this year.

This prediction “reflects ample supply and lower emissions,” explained BNEF referring to the volume of allowances auctioned in order to reach the €20 billion needed for REPowerEU funding target. Furthermore, higher renewables and slow recovery for energy-intensive industries would continue to suppress emissions and have a bearish effect on carbon prices.

The carbon prices have been positively correlated to gas for quite a while. Still, the EUA’s high dependence on gas is noted by BNEF as a risk because “it will keep the carbon market sensitive to geopolitical events.” Another uncertainty that can be turned into risk in the near term is the exact volume of allowances to be auctioned by August 2026.

However, BNEF expects prices to increase to an average of €80 in 2025 before almost doubling to €150 by the end of the decade amid bullish factors such as fully phased-in maritime emissions, fully phased-out free allocation for aviation and gradual reduced free allocation due to the implementation of the Carbon Border Adjustment Mechanism. 

In this context, carbon prices are expected to average €95 between 2021-2030, below the forecast of €104 made in the previous outlook. Furthermore, “by the middle of the next decade, if policy parameters stay the same in Phase 5 of the EU Emissions Trading System, prices could hit €194/t in 2035,” says the report.