Carbon Market Watch — 2026-04-04

Market Prices & Trading

The EU ETS continues to trade under the shadow of the European Commission's April 1 emergency reform proposal, which aims to increase the availability of permits to dampen price volatility. The move — a concession to heavy lobbying from Italy, Poland, and Austria — has introduced fresh uncertainty about the medium-term price floor for European Union Allowances (EUAs).

According to ESG Today (published April 3), the Commission's proposed adjustment targets the EU ETS's Market Stability Reserve (MSR), aiming to make more allowances available in the short term to curb soaring energy bills tied to the ongoing Iran war-driven energy crisis. The proposal stops short of a structural dismantling of the market but signals the EU's willingness to intervene under pressure.

An analysis published April 3–4 by Serrari Group notes that the targeted ETS adjustments are "now stabilising carbon prices" after weeks of volatility, framing the reform as a deliberate tool to prevent runaway price spikes rather than a retreat from climate ambition.

Energy Connects also reported April 1 that the Commission's carbon market concessions are designed to "limit the impact of emissions costs on soaring energy bills, while stopping short of" a full suspension or price cap — a line Brussels has consistently held despite pressure from some member states.

Note: Real-time EUA spot prices were not available in the research window for this edition. Readers should verify current prices directly via ICAP's Allowance Price Explorer or live carbon pricing dashboards.

2 sources

esgtoday.com

esgtoday.com

serrarigroup.com

serrarigroup.com

Policy & Regulation

UK Conservatives pledge to scrap carbon taxes on business. In a significant political development published April 2 by the BBC, UK Conservative leader Kemi Badenoch announced a pledge to fully eliminate carbon taxes on British businesses, saying they have made doing business in Britain "much, much harder than it needs to be." The pledge — made by an opposition party — raises questions about the future direction of the UK Emissions Trading System (UK ETS) if a change of government were to occur, and adds to a broader trend of political pushback against carbon pricing mechanisms across Europe.

Climate trade agreement proposed as CBAM alternative. A commentary published April 3 in Table.Briefings argues that as oil-producing nations harden their stance against global climate policy, countries pursuing energy transitions have a "particularly strong additional incentive to join forces." Author Jakob Schlandt of HIC Consulting makes a case for a new climate trade agreement as a potentially more durable mechanism than expanding the EU's Carbon Border Adjustment Mechanism (CBAM), which entered its compliance phase in January 2026.

EU Council CBAM Working Party convened April 1. The EU Council's Ad Hoc Working Party on CBAM met on April 1, 2026, per the Council of the EU's meeting calendar — signalling that technical-level discussions on CBAM implementation continue in parallel with the ETS reform debate.

Voluntary & Offset Markets

No breaking voluntary carbon market news (Verra, Gold Standard, CORSIA, or corporate offset activity) was published after 2026-04-02 in the available research results for this edition.

Recent background context (for reference only, not new): Gold Standard and Verra have been approved to supply credits for CORSIA's Second Phase (2027–2029), per December 2025 reporting. The voluntary carbon market is projected to reach approximately €3 billion in 2026, growing to €15 billion by 2035, driven by tightening integrity standards including ICVCM's Core Carbon Principles.

We will continue monitoring for fresh voluntary market developments.

Analysis: What This Means

The EU Commission's emergency ETS intervention has achieved its immediate political goal — price stabilisation — but has introduced a new layer of unpredictability into Europe's flagship carbon market. By signalling a willingness to adjust permit supply in response to geopolitical energy shocks (in this case, the Iran war-driven price surge), Brussels risks eroding the long-term investment signal that the ETS is supposed to provide. Heavy industry, power generators, and clean energy investors all require confidence that carbon prices will follow a credible upward trajectory; any perception that the Commission will intervene whenever prices bite too hard undermines that trajectory.

The UK Conservative pledge to scrap carbon taxes entirely — while currently an opposition position — illustrates the broader political vulnerability of carbon pricing in an era of high energy costs and populist pressure. With energy bills elevated across Europe, governments face a structural tension: carbon pricing is designed to make fossil fuels more expensive, but that effect is acutely painful in a pre-existing energy crisis. How the EU and UK navigate this tension in the coming months will likely define the credibility of European carbon markets for the rest of the decade.

What to Watch Next

• EU ETS legislative process: The Commission's emergency MSR adjustment proposal must now proceed through the EU Parliament and Council. Watch for the timeline and any amendments that could further loosen or tighten permit supply.
• UK ETS political debate: Monitor whether Badenoch's carbon tax pledge gains traction in UK public debate, and whether the current Labour government responds with a defence of the UK ETS framework.
• CBAM implementation pressure: With the CBAM compliance phase now active and the Council working party meeting, watch for any further simplifications or delays announced for importers of cement, steel, aluminium, fertilisers, electricity, and hydrogen.
• EUA price direction: Following the stabilisation noted by analysts, watch whether EUA prices find a new trading range or resume the volatility seen in March 2026 as markets digest the reform proposal's details.