EU carbon prices rise amid volatility sparked by tariffs

European carbon allowances rose during afternoon trading on Friday, after reaching fresh lows earlier during the week ended April 11, as the turmoil surrounding US tariffs added more volatility to an already unstable energy complex.

EU Allowances were trading at Eur65.12/mtCO2e ($73.81/mtCO2e) at 16:34 BST on April 11, up 2% from a week earlier, according to Intercontinental Exchange data.

"We had a week that was quite interesting, with quite strong moves and strong rebounds," a carbon trader said, adding that he remains conservative about short-term prices. "You have to accept the fact that you don't know what will happen for now."

Platts, part of S&P Global Commodity Insights, assessed the EUA nearest December 2025 contract at Eur62.21/mtCO2e on April 10, down 2.5% week over week.

"After the tariff delay, the EU is responding, and the conflict seems to be easing. But there aren't any big drivers for an immediate price spike," a carbon analyst said.

Prices have experienced heightened volatility during 2025, having exceeded Eur80/mtCO2e at the start of the year amid natural gas gains as Russian gas flows via Ukraine were suspended.

Prices then plummeted to Eur60/mtCO2e levels amid further geopolitical concerns related to US tariffs.

On April 10, European Commission Chief Ursula von der Leyen said the EU will put tariff countermeasures on hold for 90 days following the US decision to pause its own tariffs.

Recent events have led many analysts to revise their price forecasts for 2025 downward.

Analysts at Commodity Insights now expect prices to average Eur62/mtCO2e in May, compared with an earlier forecast of around Eur70/mtCO2e.

"The potential for further fluctuations driven by market fundamentals and external factors remains high," they said in a recent note.

Funds cut long bets

EUA prices have steadily dropped since April 1, as tariff news weighed on global markets.

A new year-to-date low was reached on April 9, when Platts assessed the EUA nearest December 2025 contract at Eur61.08/mtCO2e.

This came as the EU confirmed retaliatory tariffs against the US, which were paused shortly after US President Donald Trump decided to instate a 90-day pause on tariffs. The 10% baseline tariff remains in effect on goods from the EU.

Market participants shifted their focus to the price outlook and technicals following the EU's announcement.

"Expectations are based on the wider macro picture," a power analyst said. "Key support would be that Eur60/mt level, which was tested a couple of times this week, but it didn't break."

The first trader added that the Eur60/mtCO2e price level "will be well bid by mandated entities."

"The highest level I can expect is a range similar to early December last year, around Eur67.34-68.86/mtCO2e when funds' net positions were similar to now," the first analyst said.

Investment funds have been trimming their net long positions over previous weeks, with the most recent Commitment of Traders report released by ICE showing funds had reduced positions by 48% over one trading week. Net longs totaled 15.8 million during the week ended April 4, down from 30.3 million EUAs the week prior.

"It looks like a lot of fund money had already exited, so not as much price pressure from stop-outs; the near-term ceiling is probably Eur67/mt as it was providing a floor until recently," said the power analyst.

UKAs retrace losses

UK Allowances retraced some of the previous week's losses. UKAs for December 2025 were trading at GBP44.52/mtCO2e ($58.18/mtCO2e) at 11:44 BST on April 11, up almost 3% from the April 4 settlement price, ICE data showed.

Platts assessed UKAs for the nearest December 2025 at GBP45.04/mtCO2e on April 11.

"Clearly some bidding interest that is not economically driven," a carbon trader said. "Considering the sanctions relief did not impact the UK (10% tariff to 10% tariff), and it affected the EU (20% tariff to 10% tariff), it just goes to show that the market is not working on an economic basis alone."

A key EU-UK summit scheduled for May 19 will focus, among other topics, on the linkage of the emission trading systems.

Prices for UK allowances have been rising sharply after consecutive announcements of linkage considerations.

The spread between the EUA and UKA December 2025 contracts has been narrowing week over week. Platts assessed the spread at Eur11.60/mtCO2e on April 10, narrowing from Eur12.91/mtCO2e on April 3.