Carbon Market Watch — 2026-10-21
EU ETS prices are trading near €88/tonne amid political friction over energy costs, setting the stage for high-value CBAM certificates. The EU Council formally adopted a negotiating position to expand the Carbon Border Adjustment Mechanism (CBAM), a move that triggered a formal trade review by the US Trade Representative (USTR). Meanwhile, voluntary market forecasts project the sector will reach €3 billion in 2026 as integrity standards tighten.
Carbon Market Watch — 2026-10-21
EU ETS Price Update
EU Allowances (EUA) are trading near the €88 per tonne mark in October 2026, maintaining a high-price environment driven by structural supply tightness and energy market volatility.
While prices remain elevated, political pressure is mounting as EU leaders struggle to agree on mechanisms to lower energy prices, with a growing faction arguing that carbon pricing is hurting the bloc's competitiveness.
Compliance Markets Roundup
EU ETS & German BEHG The German National Emissions Trading System (BEHG), covering heat and transport, is currently in its auctioning phase. For 2026, a price corridor applies with a minimum price of €55 and a maximum of €65 per tonne, bridging the gap between national and EU-wide pricing.
California Cap-and-Invest California remains the leading North American compliance market. Following its extension through 2045 and renaming to "cap-and-invest," the program now mandates that covered entities can use qualifying offset credits from CARB-approved projects for up to 6% of their compliance obligation starting in 2026.
Voluntary Carbon Market
Market Growth Projections The voluntary carbon market (VCM) is projected to hit approximately €3 billion in 2026, with forecasts suggesting it could explode to €15 billion by 2035. This growth is fueled by stricter regulations and new integrity standards like the ICVCM’s Core Carbon Principles.
Integrity Standards The role of governance bodies is intensifying. The Integrity Council for the Voluntary Carbon Market (ICVCM) continues to "referee" the market through CCP labeling, while the aviation industry's CORSIA scheme maintains separate eligibility criteria. Registries like Verra and Gold Standard remain the primary issuers of these credits.
Policy & Regulation
EU Council Advances CBAM Expansion On October 19, the Council of the European Union adopted its negotiating position on a broader CBAM framework. This move aims to expand the mechanism beyond basic carbon-intensive materials (like steel and cement) to cover a wider range of goods, signaling the EU's intent to close loopholes in its border carbon tax.
US Trade Representative Review In response to the EU's carbon border moves, the Office of the U.S. Trade Representative (USTR) has issued a request for comments regarding the impact of the EU's CBAM on U.S. producers and exports. This regulatory friction highlights the geopolitical friction caused by unilateral carbon border measures.
Analysis: The Geopolitics of Carbon Borders
The European Union’s decision to expand the Carbon Border Adjustment Mechanism (CBAM) marks a pivotal shift from climate policy to industrial trade policy. By adopting a negotiating position on October 19, the EU Council is signaling that the initial phase of CBAM—covering steel, cement, and aluminium—is merely a pilot for a much wider net. The expansion aims to prevent "carbon leakage," where companies move production to countries with laxer environmental rules, but it also arms the bloc with a potent economic weapon.
The reaction from the United States underscores the diplomatic friction this mechanism generates. The USTR’s request for comments on October 8 is a precursor to potential retaliatory measures or trade disputes. The U.S. has historically resisted EU-style climate measures, viewing them as protectionist. As the EU moves from reporting to charging importers for carbon, the cost of doing business between the two blocs will rise, potentially triggering a broader trade war over green standards.
For global markets, this creates a bifurcated reality. The EU ETS price, hovering near €88, acts as the reference price for these border adjustments. If the EU ETS price remains high while expansion proceeds, the effective tariff on non-EU goods becomes punitive. Conversely, countries like Bangladesh are now being urged to implement their own carbon taxes to keep revenue domestic rather than surrendering it to Brussels via CBAM certificates.
What to Watch Next Week
- CBAM Q3 Certificate Pricing: The EU will release the official Q3 2026 CBAM certificate price. Recent data suggests it could be pegged around €82.32, up 9.4%, which will be the direct cost metric for importers.
- USTR Comment Deadline: The deadline for US producers to submit comments on the impact of EU CBAM is approaching, potentially setting the stage for executive action.
- EU Energy Summit Aftermath: Watch for concrete proposals following the October 15-16 Brussels summit, where leaders failed to agree on a unified approach to lowering energy prices.
This content was collected, curated, and summarized entirely by AI — including how and what to gather. It may contain inaccuracies. Crew does not guarantee the accuracy of any information presented here. Always verify facts on your own before acting on them. Crew assumes no legal liability for any consequences arising from reliance on this content.
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