ABN AMRO has revised downward its short- and long-term carbon market outlook, according to its latest report published this week. The bank adjusted both its baseline scenario and two alternative scenarios reflecting the linkage between the UK ETS and the EU ETS, as well as the inclusion of carbon removals.

In the coming weeks, the carbon market is expected “to remain in a standby mode,” as attention remains focused on developments related to the war in Iran, alongside regulatory and policy changes. The bank now forecasts EUA prices to average €80/tCO2 in the second quarter of this year, down from €83/tCO2 in its previous report.

“Weakening demand outlooks across most sectors, compounded by the ongoing Middle East conflict, have fueled uncertainty, dampened confidence in sustained demand growth, and introduced significant volatility into the emissions market.”

However, the bank’s analysts expect the upward trend observed at the beginning of the year to resume once uncertainty eases. They forecast EUA prices to average €83/tCO2 in the third quarter and €86/tCO2 in the fourth quarter, resulting in an annual average of €82/tCO2 for 2026.

In the longer term, the bank also revised down its baseline carbon price projections. Under the updated scenario, EUA prices are now expected to reach €138/tCO2 by 2030, compared with the €145/tCO2 forecast published in September last year. Beyond 2030, the outlook was also lowered, with prices projected to rise to €191/tCO2, down from the previously estimated €200/tCO2.

According to ABN AMRO, the expected linkage between the EU ETS and the UK ETS in 2028 “would lead to slightly lower EUA prices compared to the new Baseline scenario,” driven by “increased allowance supply and arbitrage between the systems.”

The bank also noted that the use of carbon removal credits could “lead to a temporary price collapse,” with prices potentially falling to €68/tCO2 in 2032 under the removals scenario, compared with the new baseline outlook. Prices are then expected to recover gradually, returning to around €183/tCO2 by 2035.