Last week, European carbon prices showed strong resilience against a sharp sell-off in energy markets, edging down just 0.1% even as the TTF front-month contract fell 9.5%, highlighting a clear decoupling between carbon and natural gas.

Despite the approaching compliance deadline, EUAs traded within a narrow €2.37 range throughout the week. Trading activity also remained subdued, with 111.88 million allowances changing hands, 16.8% below the previous week’s volume and well below this year’s weekly average.

Auction results offered little support either. Friday’s auction cleared at €85.50, a substantial €0.77 discount to the secondary market at the time, while the cover ratio stood at just 1.30, well below this year’s daily average of 1.65. Both the weak clearing price and low cover ratio pointed to reduced buying interest.

However, prices found support from delays in the 2026 free allocation process. The latest European Commission update, published on Thursday, showed little progress in distribution over the previous two weeks, with only 77% of allowances allocated.

This is particularly relevant ahead of the compliance deadline, as it is common practice for eligible installations to use free allowances received in the current year to help meet their surrender obligations for emissions from the previous year. Consequently, installations that had not yet received their 2026 allocation had to make up the shortfall through purchases in the secondary market, providing additional support to EUA prices.

As the surrender deadline approaches, late compliance buying is expected to gradually fade as a key market driver. Attention is therefore likely to shift toward the political debate surrounding EU ETS reform, alongside developments in energy markets, which should play a more prominent role in shaping carbon price direction.