1st October 2025
- Regulatory update
- Q4 commences with balanced prices
- BP predicts world will not hit net zero by 2050
- UK ETS civil penalty update
- What is EU ETS 2?
Regulatory update
UK compliant carbon allowances can fall within the perimeter of UK Financial Services Regulations. Sturgeon Ventures LLP, established in 1998, is authorised and regulated by the Financial Conduct Authority to arrange activity involving Emissions Allowances on behalf of Carlton Carbon Limited. Under a tripartite agreement, Sturgeon will provide market information and handle the arrangement of these transactions in UK carbon allowances. We believe these measures will instil confidence in our clients.
Q4 commences with a balanced price
As we enter Q4 this week, compliant buyers should be reviewing 2025 emissions, along with the volume of UKA held on account, as all 2025 free allocation has been issued. Whilst UK carbon prices have been on the rise this year, they fell back slightly last week by 6.75% from the previous week closing at £54.30, however during 2025 to date the market has risen by 49% from a low of £36.38. The EUA market closed the week down 2% at €75.98. The fall can generally be put down to speculators reducing market length. This week the EU will auction 13.6m allowances with the UK auctioning 2.3m. EU natural gas storage for the winter is over 82% reducing the potential for shortages, however renewable generation will begin to tail off as the short days begin in Q4.
BP predicts world will not hit net zero target by 2050
Global conflicts and trade tariffs are pushing countries to move away from environmental issues to focus on energy security. BP along with other major oil and gas companies have raised its forecast for oil and gas demand, suggesting net zero targets will not be met. The world currently consumes about 100m barrels of oil per day; BP expect this to peak at 103m in 2030, five years later than previously forecast. The outlook comes as the UK government looks at ways to increase North Sea production without breaking manifesto promises not to grant new licences. Oil is forecast to remain the largest source of primary energy for the next two decades at 30% in 2025, with renewables only at 15%.
UK ETS civil penalty update
Hospitals and small emitters don’t need to purchase and surrender allowances but instead are given an annual emissions target, which decreases each year. In lieu of surrendering allowances, the installations must pay a set rate per tonne of CO2 that they emit over their target for that reporting year. £41.84 is the penalty for 2025. In the case of the 2026 price, based upon current carbon price levels this will increase by around 13% to £47.
What is EU ETS 2?
ETS2 is a new emissions trading system based on the ‘cap and trade’ principle, covering greenhouse gas emissions from buildings, road transport, and additional sectors not included in the original EU ETS. Its purpose is to drive emissions reductions in those previously unregulated areas by putting a price on carbon. Emissions are capped and converted into tradable allowances, with the cap decreasing each year to incentivise decarbonisation. The ETS2 has been launched this year, with the first compliance obligations starting in 2027. The UK is not part of this scheme, and any future linking should not include ETS2.
For further in-depth analysis contact: swatson@sturgeonventures.com
Disclaimer:
This newsletter is intended solely for the information of professional clients, including large corporates and public sector bodies such as universities and hospitals, and eligible counterparties. It does not constitute advice nor should it be relied upon in making decisions regarding the UK Emissions Trading Scheme (UK ETS). All content within this communication is provided for informational purposes only and has been prepared in accordance with the principle of fair, clear and not misleading information as required by COBS 4.2. Readers should seek their own professional advice when planning to undertake transactions in the UK ETS. No representation or warranty is given as to the accuracy or completeness of the information provided. The publisher accepts no liability for any loss arising from the use of or reliance on the information contained in this newsletter.
Sturgeon Ventures LLP (FRN: 452811) is authorised and regulated by the Financial Conduct Authority.
