Carbon prices in the EU Emissions Trading System (EU ETS) saw a 7% rise in May, bolstered by heightened gas market volatility, renewed discussions on EU-UK ETS integration, and the launch of futures for the upcoming ETS2 market.
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Prices began the month relatively steady but experienced a sharp rally around mid-May. The benchmark December 2025 EU Allowance (EUA) contract climbed from $76.2/t (€67.0/t) to a mid-month peak of $83.5/t (€73.4/t) before settling slightly lower. By 29 May, it traded at $80.71/t (€70.94/t).
Market momentum intensified following a joint announcement on 19 May from the EU and UK, outlining plans to align their carbon markets post-Brexit. The proposed cooperation could lead to exemptions from the Carbon Border Adjustment Mechanism (CBAM) for UK-EU trade and foster deeper policy alignment in sectors like power generation, transport, and heavy industry.
The news triggered a brief surge in UK carbon prices, with the December 2025 UKA contract jumping from $70.88/t (£52.43/t) on 19 May to $74.39/t (£55.00/t) the following day, before receding. Analysts at S&P Global suggest UK carbon prices may average around $67/t (£50/t) in the third quarter.
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Broader market sentiment was also influenced by global trade developments. EUAs spiked to $83.33/t (€73.18/t) on 20 May but softened after signals from the US about potential new trade tariffs, including President Donald Trump’s suggestion of a 50% levy on EU imports.
Another market milestone came on 6 May with the Intercontinental Exchange (ICE) introducing futures for the forthcoming ETS2—an expansion of the EU ETS to cover emissions from buildings and road transport starting in 2027. The first ETS2 contracts traded at $83.67/t (€73.57/t), with further activity expected when trading opens on the European Energy Exchange (EEX) in July.
As regulatory shifts and geopolitical factors continue to shape carbon markets, May’s price movements highlight both the complexity and the growing interconnectivity of compliance frameworks across Europe.
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