2nd February 2026
- Carbon allowance price is in free fall
- US exit climate agreement for second time
- Compliance deadline approaches
Carbon allowance price in free fall
Last week European carbon prices ended January with their steepest monthly decline in eleven months, with UK allowances tracking the downturn. The weakness reflects ongoing competitive issues across the EU and UK economies, alongside a normalisation of LNG shipments from the US. The UK carbon price closed the week at £61.65, a fall of over 9% on the week. As the market heads back toward the £50 levels, compliant buyers will be tempted to buy leading up to compliance in April, which may steady the price in the coming weeks.
US exit Paris climate agreement for second time
The United States, the world’s richest country, has officially exited the Paris climate agreement for the second time. The move will likely slow global momentum towards climate change and cause issues for poorer nations transitioning from fossil fuels. The US is the only country to have withdrawn from the pact, placing it alongside Iran, Libya and Yemen as the only countries not party to the agreement. Other countries, including China, may now follow the US’s lack of climate ambition and slow down progress. Despite this, investment in low-carbon energy continues, far outpacing spending on fossil fuels. Renewable energy sources accounted for more than 90% of new power generation capacity last year and, in much of the world, are now the cheapest source of new electricity.
Compliance deadline approaches
The Environment Agency has issued its January 2026 newsletter reminding operators of their requirements to have a minimum of two active Authorised Representatives (ARs) to perform the surrender of allowances, unless the account has been changed to allow one AR. It is the operator’s responsibility to ensure they have sufficient allowances to be able to surrender the correct volume equal to the verified emissions for 2025 by 23:59 on Thursday the 30th of April 2026. Allowances can be surrendered in one or several transactions at any time up to the deadline above. Failure to surrender sufficient allowances by the time and date above will result in a mandatory civil penalty of £100 (plus inflation) for each allowance not surrendered, with the requirement to surrender the remaining.
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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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