EU Carbon
ICE Endex
A commodity conjured entirely from legislation: the right to emit one tonne of carbon dioxide in Europe.
Top Producers
EUA supply by channel, 2024
Top Consumers
verified ETS emissions by sector, 2024
Main Uses
verified EU ETS emissions by covered sector, 2024
First close above 100 EUR/t
February 2023
Mid-2010s doldrums price
roughly 5 EUR/t
2013-2017
Contract size
1,000 EUAs (1,000 t CO2e), ICE Endex
Cap reduction rate
4.3 percent per year
2024-2027
2030 target for covered sectors
62 percent below 2005 emissions
An EU Allowance is the right to emit one tonne of carbon dioxide equivalent under the EU Emissions Trading System, the cap-and-trade scheme covering European power generation, heavy industry, intra-European aviation, and, since 2024, maritime shipping. The EU sets a cap that shrinks every year, auctions most allowances, grants some free to trade-exposed industries, and lets the market discover the price. Covered installations surrender one allowance per tonne emitted; the December futures contract on ICE Endex, 1,000 EUAs per lot, is where the price is made.
The market's history is a lesson in design. Phase 1 allowances crashed to essentially zero in 2007 because they could not be banked into the next phase and had been over-allocated. The 2008 financial crisis then left a surplus that pinned prices near 5 EUR/t for most of the 2010s, and the scheme was widely dismissed. The Market Stability Reserve, agreed in 2015 and operating from January 2019, fixed it by automatically withdrawing surplus allowances from auctions. Prices rose from under 10 EUR/t in 2017 to above 100 EUR/t in February 2023, and EUAs became a genuine cost driver: at 80 EUR/t, carbon adds roughly 30 EUR/MWh to coal-fired electricity, which is precisely the coal-to-gas switching pressure the scheme intends.
The 2026 frontier is the border. The Carbon Border Adjustment Mechanism, after a transitional reporting phase that began in October 2023, starts imposing financial obligations in 2026 on the embedded emissions of imported iron, steel, cement, aluminium, fertilizer, electricity, and hydrogen, with the free allocation that protected EU producers phasing out in parallel through 2034. A second trading system, ETS2, extends carbon pricing to buildings and road transport fuels from 2027. Carbon is no longer a niche compliance market; it is a structural input cost for European energy and industry, and the template for schemes in the UK, China, and beyond.
How It Trades
| Venue | ICE Endex (the dominant futures venue); EEX (primary auctions and futures) |
| Benchmark contract | ICE EUA futures, December expiry, the liquidity point of each year |
| Contract size | 1,000 EUAs (1,000 tonnes of CO2 equivalent) per lot |
| Price terms | EUR per tonne of CO2 equivalent |
| Settlement | Physical delivery of allowances into the Union Registry at expiry; compliance entities must surrender allowances against each year's verified emissions by September 30 of the following year |
| Typical curve | Gentle contango that roughly reflects the cost of carry, concentrated in December maturities; open interest rolls from one December to the next, and compliance deadlines create seasonal demand into the spring surrender window. |
| Liquidity | The most liquid carbon market in the world by a wide margin, with daily futures volumes routinely in the tens of millions of tonnes; UK ETS, California, and Chinese allowances trade in parallel but far smaller markets. |
Where It Trades
approximate share of global traded volume, 2025
Supply and Demand
Top producers
- EU member state auctions on the EEX platform (the primary supply channel)
- Free allocation to trade-exposed industrial sectors (phasing down for CBAM sectors from 2026)
- The Market Stability Reserve, which withholds or releases allowances by rule
Supply is a policy function, not a geological one: the cap declines 4.3 percent per year from 2024 to 2027 and 4.4 percent thereafter under the Fit for 55 reform, pointing the covered sectors at a 62 percent emission cut from 2005 levels by 2030.
Top consumers
- Power generators (the largest compliance buyers, hedging fuel burn years ahead)
- Industrial emitters: steel, cement, chemicals, refining, aluminium
- Airlines (intra-European flights) and, since 2024, shipping companies
- Financial participants: banks, hedge funds, and commodity trading houses
Major uses
- Compliance surrender against verified annual emissions
- Hedging future power and industrial production costs
- Speculative and relative-value trading against gas, coal, and power
Utilities hedging forward power sales create steady structural demand for the December contracts two and three years out.
What Moves the Price
- EU policy decisions: cap trajectory, MSR parameters, CBAM implementation, ETS2 timing
- Gas versus coal economics, since the switching price between them is where carbon bites the power sector
- European industrial output, which sets compliance demand
- Weather and renewables: cold, still winters raise fossil generation and allowance demand
- TTF gas prices, the single most correlated market
- Auction supply timing and any politically driven frontloading or withholding of volumes
- Speculative positioning, visible in weekly commitment-of-traders data
Moments That Made the Market
2005
The EU ETS launches in January 2005 as the world's first large cap-and-trade carbon market.
2007
Phase 1 allowances collapse to essentially zero: over-allocated and unbankable into Phase 2.
2013
Post-crisis surplus pins prices near 5 EUR/t; the scheme is widely written off.
2015
The Market Stability Reserve is agreed, the reform that ultimately fixes the surplus.
2019
The MSR begins operating in January 2019; prices reach roughly 25 EUR/t by year-end from under 10 EUR/t in 2017.
2023
EUA futures trade above 100 EUR/t for the first time in February 2023; CBAM transitional reporting begins in October 2023.
2024
Maritime shipping enters the ETS; the tightened Fit for 55 cap trajectory takes effect.
2026
CBAM's definitive regime begins: importers pay for embedded carbon as free allocation starts phasing out.
What Changed Since the 2010 Handbook Era
- In 2010 carbon traded near 15 EUR/t and was sliding toward irrelevance; the MSR reform took it above 100 EUR/t by February 2023.
- Coverage expanded from power and industry to aviation and, from 2024, maritime shipping, with buildings and road fuels following under ETS2 in 2027.
- CBAM turned an internal European cost into a border-adjusted one, exporting the carbon price to trading partners from 2026.
- Carbon became the decisive variable in the European coal-versus-gas merit order rather than a rounding error.
- The EU model became a template: the UK runs its own ETS after Brexit, and China operates the world's largest scheme by tonnage.