Europe’s carbon market recently fell sharply, with benchmark EU carbon prices falling sharply after several major EU leaders called for a revision of the bloc’s Emissions Trading System (ETS), according to a report by Reuters.
On February 12, the benchmark EU carbon contract dropped by about seven percent to €73.08/mt of carbon dioxide, after earlier touching €72.18/mt, its lowest level since August. The decline followed comments from German Chancellor Friedrich Merz, who said the EU should be open to revising or postponing parts of the ETS framework.
Speaking at a gathering with industry executives in Antwerp, Merz said policymakers should be “very open” to revising or delaying the system, amid growing industrial concerns over high carbon costs. The ETS is the EU’s central climate policy tool, requiring power producers and industrial companies to buy emission allowances and gradually reducing the total number of permits available over time.
European leaders push for intervention
Other European leaders echoed similar concerns during a summit on competitiveness held on February 12 in Antwerp. Italian Prime Minister Giorgia Meloni called for a thorough review of the ETS and urged policymakers to curb what she described as financial speculation in the carbon market.
Czech Prime Minister Andrej Babiš reiterated his earlier proposal to cap the carbon price at €30/mt, arguing that such a move would be necessary to provide immediate relief to industry.
Carbon prices were already declining in recent weeks, partly due to expectations of political intervention in the market, where allowance prices typically fluctuate in line with supply-demand fundamentals and energy prices.
Commission defends ETS as reform review approaches
However, the European Commission has defended the ETS, as SteelOrbis reported previously. European Commission President Ursula von der Leyen recently stated that the system demonstrates how decarbonization and industrial competitiveness can progress in parallel.
She also criticized member states for underusing ETS revenues, noting that less than five percent of these funds are currently directed toward industrial decarbonization.
The EU is preparing a formal review of the ETS, expected in the third quarter of the current year. The review is primarily intended to align the system with the bloc’s new 2040 climate target, rather than to introduce short-term price caps or emergency interventions.