The European Securities and Markets Authority (ESMA) published a market report on EU carbon markets on 9 July 2026, assessing the functioning and risks of the EU Emissions Trading System (EU ETS) and related financial instruments. The report finds that the EU carbon market remained resilient in 2025-2026, with stable trading volumes and increased participation from non-financial entities, but highlights growing concentration of liquidity among a few large players and persistent price volatility driven by policy uncertainty and energy market fluctuations. ESMA warns that these factors could undermine market efficiency and the EU's climate objectives if not addressed through enhanced transparency and oversight.
The report, which covers the period from January 2025 to mid-2026, notes that the average daily trading volume in EU Allowance (EUA) futures and options remained above 2024 levels, while the share of trading conducted on exchanges increased to 92%. However, the top five trading firms accounted for over 60% of total volumes, raising concerns about market concentration and potential manipulation. ESMA also observes that price volatility spiked in early 2026 following the European Commission's announcement of a tighter cap trajectory under the revised EU ETS Directive, with EUA prices fluctuating between €75 and €110 per tonne. The report recommends that national competent authorities and ESMA intensify monitoring of large traders and consider introducing position limits for carbon derivatives to mitigate systemic risk.
The document is addressed to EU policymakers, market participants, and regulators, and is part of ESMA's ongoing risk monitoring mandate under the Markets in Financial Instruments Directive (MiFID II) and the Market Abuse Regulation (MAR). It does not propose new legislation but provides evidence to inform the European Commission's upcoming review of the EU ETS market oversight framework, expected in 2027. The report's findings are likely to influence discussions on the balance between market liquidity and financial stability, with potential implications for compliance costs for industrial emitters and trading firms. ESMA's analysis also underscores the trade-off between allowing market flexibility to support the green transition and ensuring robust safeguards against abuse, a tension that will shape future regulatory debates.