In a Tuesday note, the analysts from Citi Bank reiterated its positive outlook on EUAs for the year ahead, emphasizing that “structural deficits… will persist in the coming years.” According to the report, the European carbon price is expected to reach €95 by February.

The assumption was first presented in the bank’s quarterly market outlook published in June. The subsequent October report maintained the same price forecast, citing tightening EU ETS balances and additional support from speculative trading activity.

“Large deficits support a bullish outlook in the near term, particularly if this winter again brings limited wind and solar generation in Europe,” Citi Bank stated. The negative balance is attributed to a combination of reduced free allowance allocations and increased demand driven by the gradual introduction of new measures such as the Carbon Border Adjustment Mechanism (CBAM).

The bank projects the EUA shortfall to be around 60 million allowances this year, rising to 150 million next year, peaking at 200 million in 2027, and then easing to approximately 80 million in 2028.

Meanwhile, a separate report released in October by consulting firm ICIS forecasts a similar trend, with the annual shortfall reaching about 158 million allowances in 2026 and increasing slightly to around 166 million in 2027.

However, analysts at Citi Bank noted that “the recent strong price performance has renewed investor concerns that the EU might intervene to limit further increases,” while adding that “the risks of regulatory intervention are overstated.”