On Friday, the European carbon market failed to fully rebound from early losses, despite a sharp morning rally of nearly 10%. By the end of the session, the EUA Dec’26 contract settled at €67.66, posting a 6.30% daily gain—the strongest increase since early May 2024.

On a weekly basis, however, carbon prices slipped by another 1.85%. So far this year, EUAs have declined in 8 out of 12 weeks, with Friday’s settlement now standing 27% below the multi-year peak of €92.24 reached in mid-January.

The market responded positively after the European Commission defended the EU ETS against calls from several member states to suspend the system, with Italy being the most outspoken, mainly due to concerns over high energy prices and industrial competitiveness.

“In the medium term, I expect the next review of the ETS to address issues relevant to Italy, such as the extension of free allowances for energy-intensive industries or the volatility of ETS prices,” said Ursula von der Leyen at the end of the European Council summit.

“From last week’s EU Council meeting, the key takeaway is a clear shift in tone. We are moving away from drama (“pause of the EU ETS”) toward a pragmatic recalibration,” according to analysts at BBVA.

On Monday morning, however, EUAs resumed their downward trajectory as market participants continued to digest last week’s political rhetoric. Following an initial relief rally, traders are now awaiting greater clarity on the upcoming reform, which could potentially increase the supply of allowances in the market.

Persistent uncertainty surrounding the future design of the EU ETS is likely to further amplify price volatility, with market participants expected to actively adjust positions in response to evolving political signals.