Macquarie Group, an Australia-based global financial services company, expects the carbon price in the EU Emissions Trading System (EU ETS) to reach €100 next year and rise further to €127 by 2028, driven by a tightening supply outlook.

According to Serafino Capoferri, a director at Macquarie, supply in 2026 is expected to fall by 224 million allowances due to a decrease in free allocations, reduced auction supply, and a decline in additional volumes linked to the RePowerEU plan. In this context, the projected deficit would mirror the shortages experienced in 2021 and 2022.

“Free allocation supply should fall by around 104 million tonnes year-on-year to 447 million tonnes in 2026, while primary auction supply should drop by 91 million tonnes year-on-year to 432 million tonnes,” Capoferri said, as quoted by Montel News.

An analyst at Energy Aspects also warned of an impending supply squeeze in the EU ETS, noting that the market will shift “from being more or less balanced in 2024 and 2025 to being very, very short from 2026 onwards.”

In fact, there is strong consensus among analysts that carbon prices will rise by 2030 in anticipation of increasing scarcity. According to the State of the EU ETS Report published this week, “although there is variation between forecasts, all of them reach at least €120 per tonne before 2030 and show a general upward trend.”

On the other hand, as the Financial Times noted in an article published five years ago, “in more than a dozen interviews with hedge funds, banks, and investors active in the sector, not one said that they believed prices would fall significantly.”