The European Securities and Markets Authority has published its third annual report on EU carbon markets, covering developments in 2025 and the first quarter of 2026. The report says financial intermediaries remain central to the functioning of the EU Emissions Trading System market, providing liquidity, acting as counterparties to non-financial firms and helping compliance entities access allowances and manage price risk. EU carbon markets reached EUR 777 billion in 2025, while ESMA found no major concerns on market transparency or integrity despite a sharp price correction and higher volatility in early 2026. Average EU emission allowance prices rose 13% year on year to EUR 74 per tonne of CO2-equivalent emissions in 2025, and auction revenues increased 11% to about EUR 43 billion even though auctioned volumes fell 2% to 589 million allowances. Trading activity remained broadly stable at 13.8 billion tonnes of CO2-equivalent emissions exchanged, with investment firms and credit institutions accounting for around 62% of overall trading volumes. In early 2026, allowance prices fell 29% between January and March and volatility reached a two-year high, reflecting differing expectations over the forthcoming review of EU Emissions Trading System rules, energy costs and wider market conditions. ESMA also highlighted limited progress in the availability of Legal Entity Identifiers in the Union Registry and recommended making them mandatory for all trading accounts, including under the upcoming ETS2. ESMA will continue to monitor carbon markets and said it stands ready to support legislators.

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