What is the EU ETS carbon price?

The EU ETS (European Union Emissions Trading System) carbon price is the market price of a European Union Allowance (EUA) — the right to emit one tonne of CO2 (or equivalent greenhouse gas) under the EU's cap-and-trade system. The EU ETS (also called ETS1) covers power plants, industrial facilities (steel, cement, aluminium, refining), and aviation within the EU. Companies covered by the ETS must hold EUAs equal to their annual CO2 emissions; they can buy and sell EUAs on exchanges (ICE, EEX). The EUA price has ranged from under €5/tonne (pre-2018) to over €100/tonne (2023 peak), reflecting the tightening supply cap and strengthening carbon policy.

What is an EUA (European Union Allowance)?

A European Union Allowance (EUA) is a permit that gives the holder the right to emit one tonne of CO2 equivalent under the EU Emissions Trading System. EUAs are issued each year in a declining number (the 'cap') — the EU auctioning the majority to obligated companies. Companies can buy additional EUAs at auction or on secondary markets (ICE EUA futures, EEX spot) if they emit more than they hold, or sell surplus EUAs if they have reduced their emissions. The annual cap reduction rate was increased in 2023 (EU ETS revision) to 4.3% per year through 2027, accelerating the supply tightening that drives higher carbon prices.

How does the EU ETS carbon price affect fuel prices?

The EU ETS1 does not directly cover road transport fuels — petrol and diesel at the pump are not in the ETS1 scope. However, ETS1 affects fuel prices indirectly: refineries (covered by ETS1) face carbon costs on their processing emissions, which feed through into refinery operating costs and product prices. The more significant direct effect on transport fuels will come from ETS2 — a new carbon market starting in 2027 that covers road transport and heating fuels at the distributor level. At an anticipated ETS2 launch price of €45/tonne CO2, ETS2 adds approximately 10–12 ct/litre to petrol and diesel pump prices across the EU.

ETS Carbon Price

The market price of a European Union Allowance (EUA) under the EU Emissions Trading System — the world's largest carbon market and the primary policy instrument driving EU industrial decarbonisation.

Definition

The EU ETS carbon price is the price at which European Union Allowances (EUAs) trade on carbon markets. An EUA is a permit to emit one tonne of CO2 equivalent under the EU Emissions Trading System (EU ETS, also called ETS1). Companies covered by the ETS must surrender EUAs each year equal to their verified CO2 emissions; they can buy or sell EUAs on exchanges to manage their compliance position.

The EU ETS was launched in 2005 and is the world's largest mandatory carbon market. It covers approximately 10,000 power stations and industrial plants across the EU (plus Iceland, Liechtenstein, and Norway), plus intra-European aviation. For the connection to road transport fuels, see our ETS2 and fuel prices analysis. For the carbon tax context, see our carbon tax glossary entry.

EU ETS (ETS1) — scope and covered sectors

Sector	Covered?	Approximate EU ETS1 emissions (MtCO2/year)
Power generation and heat	Yes	~550
Industrial combustion (large plants)	Yes	~350
Steel, cement, aluminium, refining	Yes	~180
Intra-EU aviation (since 2012)	Yes	~30
Shipping (from 2024)	Yes (phased)	~20 (phasing in)
Road transport fuels	No (ETS2 from 2027)	Covered under ETS2
Building heating fuels	No (ETS2 from 2027)	Covered under ETS2
Agriculture	No	Outside ETS scope

EU ETS carbon price history

Period	EUA price range (€/tonne CO2)	Driver
2005–2007 (Phase 1)	€5–30 (collapsed to ~€0)	Over-allocation of free allowances; market crashed
2008–2012 (Phase 2)	€5–30 (avg ~€13)	Financial crisis crushed emissions; over-allocation continued
2013–2017 (Phase 3)	€4–8	Structural surplus; MSR reform delayed; low carbon prices
2018–2020	€12–30	Market Stability Reserve activated; tightening supply signal
2021	€25–50	Post-COVID recovery + energy crisis; gas-to-coal switching
2022	€55–100	Energy crisis peak; Fit for 55 ambition; Russia-Ukraine
2023	€60–105	Peak at €105/tonne in Feb 2023; ETS revision boosted expectation
2024–2026	€45–75	Normalisation; industrial demand weakness; policy uncertainty

The Market Stability Reserve (MSR)
A key mechanism in EU ETS design. The MSR automatically withdraws allowances from auction when the total surplus in the market exceeds a threshold — reducing supply and supporting the carbon price. Introduced in 2019, the MSR transformed the EU ETS from a chronically over-allocated market (prices of €5–8/tonne) into a functioning carbon market with prices of €40–100/tonne. The 2023 ETS revision further strengthened the MSR by increasing the annual cap reduction rate to 4.3%, accelerating supply tightening.

ETS2: extending carbon pricing to road transport and heating

ETS2 is a separate, parallel carbon market established under the EU's 2023 ETS revision (Directive EU 2023/959). It extends carbon pricing to sectors not covered by ETS1:

Scope: Road transport fuels (petrol, diesel) and building heating fuels (natural gas, heating oil)
Point of obligation: Fuel distributors (not individual consumers) must hold ETS2 allowances
Start date: 2027 (delayed from originally planned 2025)
Price link: ETS2 is a separate market from ETS1 — its price will reflect the transport/heating sector supply-demand balance, not ETS1 power/industry prices
Price stability: A mechanism releases additional allowances if ETS2 price exceeds €45/tonne for 3+ consecutive months
Revenue: 25% of ETS2 revenues fund the Social Climate Fund (SCF) for vulnerable households

For the full ETS2 analysis and pump price impact modelling, see our ETS2 and fuel prices analysis.

Frequently asked questions

What is the EU ETS carbon price? The EU ETS carbon price is the market price of a European Union Allowance (EUA) — the right to emit one tonne of CO2 under the EU Emissions Trading System (ETS1). ETS1 covers power plants, industry, and aviation. EUA prices have risen from under €10/tonne (2013–2017) to €45–105/tonne (2022–2026) as the Market Stability Reserve tightened supply and EU climate ambition strengthened under Fit for 55.: The EU ETS carbon price is the market price of a European Union Allowance (EUA) — the right to emit one tonne of CO2 under the EU Emissions Trading System (ETS1). ETS1 covers power plants, industry, and aviation. EUA prices have risen from under €10/tonne (2013–2017) to €45–105/tonne (2022–2026) as the Market Stability Reserve tightened supply and EU climate ambition strengthened under Fit for 55.
What is an EUA (European Union Allowance)? A European Union Allowance (EUA) is a permit to emit one tonne of CO2 equivalent under the EU ETS. Companies covered by the ETS must surrender EUAs each year matching their verified emissions. EUAs are auctioned and traded on ICE and EEX. The annual cap declines (now at 4.3%/year reduction rate), gradually reducing supply and driving higher prices over time to incentivise emission reductions.: A European Union Allowance (EUA) is a permit to emit one tonne of CO2 equivalent under the EU ETS. Companies covered by the ETS must surrender EUAs each year matching their verified emissions. EUAs are auctioned and traded on ICE and EEX. The annual cap declines (now at 4.3%/year reduction rate), gradually reducing supply and driving higher prices over time to incentivise emission reductions.
How does the EU ETS carbon price affect fuel prices? EU ETS1 does not directly cover road transport fuels. It affects fuel indirectly via refinery carbon costs. The more direct impact on transport fuels comes from ETS2 (starting 2027) — a new carbon market for road fuels and building heating. At the expected ETS2 launch price of ~€45/tonne, it adds ~10–12 ct/litre to petrol and diesel across the EU. See our ETS2 analysis for full price impact modelling.: EU ETS1 does not directly cover road transport fuels. It affects fuel indirectly via refinery carbon costs. The more direct impact on transport fuels comes from ETS2 (starting 2027) — a new carbon market for road fuels and building heating. At the expected ETS2 launch price of ~€45/tonne, it adds ~10–12 ct/litre to petrol and diesel across the EU. See our ETS2 analysis for full price impact modelling.