26th November 2025
- Carbon remains strong as markets sell off
- Brief assessment of COP 30
- Industrial power demand critical to electrification
- UK ETS continues expansion
Carbon remains strong as markets sell off
Both the UK and EU carbon markets have remained in a bullish cycle despite energy markets falling, with gas prices down to an 18-month low despite consumption rising, forecasts for milder weather into December and renewed peace talks between Russia and Ukraine. UK carbon closed last week up by 1.4% at £57.77, while the larger EU market slightly fell by 0.6% to close at €80.41. We may see some weakness this week with five EU auctions set to sell 13.6m EUA and a UK auction on Wednesday selling 2.23m UKA. However, prices are expected to remain neutral, with a potential to fall if peace talks progress and improve gas flows expectations.
Brief assessment of COP30
Ten years after the Paris Agreement set a target to limit global warming below 1.5C, world leaders at COP30 in Brazil failed over the last two weeks to fulfil promises. Implementation of a plan to accelerate the phase-out of fossil fuels responsible for 75% of global warming together with the protections of nature failed, despite a committed and science-aligned Brazilian Presidency. Within the next 5-10 years we are likely to breach 1.5C. The world needs a credible plan to start phasing out fossil fuels in an accelerated and orderly way.
Industrial power demand critical to electrification
Greater electrification through incentivising industry is important to reduce emissions and support competitiveness. Industrial electricity demand increased by only 1% during 2024, creating negative prices, from oversupply and reducing the business case for new investment. In addition to electrification, large predictable loads can help to optimise grid planning with demand, avoiding overbuilding, and consuming power when overall demand is low.
UK ETS continues expansion
The UK Emissions Trading Scheme (UK ETS) came into effect on 1st January 2021. This operates on a ‘cap and trade’ principle where a cap is set on the total amount of emissions that can be emitted by sectors, with installation operators surrendering allowances to cover emissions. The cap is reduced over time, so emissions must fall. Aviation is covered on UK and flights to Gibraltar together with flights departing the UK to European Economic area states. Maritime emissions will enter the scheme on the 1st July 2026 to include UK domestic journeys, and emissions while in UK ports. Waste incineration will also enter the scheme from 2028 following a two-year monitoring and reporting period.
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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.
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