The European carbon market remained notably subdued last week, showing limited reaction to sharp moves across the broader energy complex, even as European gas prices surged to their highest levels since March.

The divergence was particularly evident in the gas market, where the TTF front-month contract climbed to its highest level in August. Prices were supported by weak wind and solar generation across large parts of Europe, while relatively low gas storage levels, reduced French nuclear availability and lower imports from the Middle East added further upside pressure.

Meanwhile, EUAs continued to lag the stronger moves seen in the gas market. In Friday’s trading session, EUA Dec’26 prices briefly climbed to €83.75, marking their highest level in two weeks and August’s second-highest level, before settling at €82.61 and closing the week with a 1% gain.

The upward move in carbon prices on Friday afternoon may have been partly supported by stronger-than-expected Eurozone economic data. According to S&P Global, the Flash Eurozone Composite PMI Output Index rose to 52.1 in August from 52.0 in July, marking its highest level since last November and signalling a continued expansion in business activity, as readings above 50 indicate economic growth.

However, EUAs failed to hold onto their afternoon gains and retreated later in the session as reports emerged that EU member states had begun distributing free allowances for 2026. Carbon Pulse noted that the reversal came as these reports “began to circulate”, weighing on the earlier advance.

Trading activity also remained limited last week, with just 79.7 million allowances changing hands. While this was slightly higher than the 72.4 million allowances traded in the previous week, it remained well below this year’s weekly average, suggesting that the summer holiday mood continues to prevail in the carbon market.

Without stronger market participation, it remains difficult to see EUAs breaking out of the relatively narrow range that has prevailed throughout August. Nevertheless, prices have continued to edge higher at a slow but steady pace and remain above the August opening level of €81.35, suggesting that the underlying trend remains modestly positive despite subdued summer activity.