Key findings  

• Prices and volatility: Prices in the EU ETS have declined since the beginning of 2023. This was due to a combination of lower demand for emission allowances from weak industrial activity, falling natural gas prices and decarbonisation of the European energy sector, along with increased supply following the decision to auction additional allowances to finance the REPowerEU plan;
• Auctions: Emission allowance auctions remain significantly concentrated, with 10 participants buying 90% of auctioned volumes, reflecting a preference by most EU ETS operators to source allowances from financial intermediaries; and
• Trading and positions: The vast majority of emission allowance trading in secondary markets takes place through derivatives, reflecting the annual EU ETS compliance cycle where non-financial sector firms hold long positions (for compliance purposes) while banks and investment firms hold short positions.

The report builds on ESMA’s 2022 report on the trading of emission allowances, mandated in the context of rising energy prices and a three-fold increase of emission allowances’ prices in 2021. 

The 2024 EU Carbon Markets report was drafted in line with ESMA’s mandate under the EU ETS Directive that is establishing a system for greenhouse gas emission allowance trading in the EU.