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ESMA

ESMA

European Securities and Markets Authority

Medium Impact

ESMA annual carbon market report highlights financial intermediaries and flags LEI readiness for EU ETS and ETS2

Published

Jul 9, 2026

Topics

EU carbon markets, EU ETS, ETS2, Emission allowances, Legal Entity Identifiers, Union Registry, Market integrity, Commodity derivatives

Executive Summary

ESMA has published its third annual market report on EU carbon markets. The report is not a new binding rule and does not create an immediate filing deadline, but it is relevant for firms trading EU emission allowances, intermediating client activity, or supporting compliance entities’ access to allowances. ESMA reports that investment firms and credit institutions accounted for around 62% of overall trading volumes in 2025, underlining the role of financial intermediaries in liquidity provision, counterparty access and price-risk management. ESMA also notes that EU carbon markets reached €777 billion in 2025, while early-2026 price falls and volatility reflected uncertainty over future EU ETS rules, energy costs and wider market conditions. ESMA found no major concerns on transparency or market integrity. The main forward-looking regulatory signal is ESMA’s recommendation that Legal Entity Identifiers become mandatory for all Union Registry trading accounts, including the upcoming ETS2. Firms should treat this as a horizon-scanning and reference-data readiness item rather than a current mandatory change.

What Changed

newThird annual ESMA EU carbon market report published

Previous

Prior ESMA annual carbon market monitoring existed, but this source is the third annual report and does not amend binding reporting rules.

New

The 2026 ESMA publication provides updated supervisory analysis and states that ESMA will continue monitoring carbon markets.

modifiedFinancial intermediaries identified as central to market functioning

Previous

The source does not state a prior-year percentage benchmark for this metric.

New

Financial intermediaries are presented as a core feature of EU carbon market functioning rather than a peripheral participant group.

modifiedUpdated supervisory view of market conditions

Previous

The source identifies 2024 as the comparison year for average prices and auction revenues but does not provide the full prior-year values.

New

ESMA links early-2026 volatility to expectations about future EU ETS rules, energy costs and broader market conditions.

modifiedMarket integrity assessment remains reassuring

Previous

No new enforcement finding or transparency deficiency is identified in the source.

New

ESMA’s supervisory message is continued resilience, with ongoing monitoring rather than immediate corrective rulemaking.

newLEI mandatory-use recommendation for Union Registry trading accounts

Previous

The Union Registry framework exists, but this ESMA publication says LEI availability remains limited.

New

ESMA recommends mandatory LEIs for all trading accounts; this is a policy recommendation, not a binding obligation created by the news release.

Business Impact

Who is affected

Directly affected

investment firms, credit institutions, brokers, trading venues, clearing participants, compliance entities and other firms trading or intermediating EU emission allowances and related carbon-market instruments.

Indirectly affected

corporate treasury, sustainability, compliance, KYC/reference-data, market-risk, operations, technology and legal teams supporting EU ETS or future ETS2 access.

Jurisdictions

European Union, European Economic Area firms accessing EU carbon markets where applicable through relevant market infrastructure

Business processes

EU ETS and carbon-market trading surveillance, Union Registry account onboarding and reference-data maintenance, Counterparty onboarding and KYC data quality controls, Emission allowance hedging and price-risk management, Regulatory horizon scanning for ETS2 and LEI-related rulemaking, Market-risk monitoring for EUA price volatility and liquidity

Estimated effort

Low

Compliance risk

Medium

Affected Reports

Union Registry account LEI completeness and exception-control reportCarbon-market counterparty onboarding and KYC reference-data checklistEUA trading risk dashboard covering exposure, liquidity and volatility indicatorsEU ETS compliance access and allowance hedging control logRegulatory horizon-scanning tracker for ETS2 and LEI developments
FieldValidation rule
Legal Entity Identifier (LEI)ESMA recommends making LEIs mandatory for all Union Registry trading accounts, including ETS2; this publication does not itself create a binding field requirement.
Union Registry trading account identifier / account ownership dataUse as the control population for checking whether each trading account can be linked to an LEI where available; this is an AI-derived readiness control based on ESMA’s LEI recommendation.

Recommended Actions

7 suggested next steps· derived from source analysis
  1. 1
    AI generatedStep 1 of 7

    classify this publication as a non-binding supervisory market report and policy signal; do not treat it as a new filing obligation or effective-date trigger.

  2. 2
    AI generatedStep 2 of 7

    run a one-time LEI gap analysis across Union Registry trading accounts, trading entities and relevant counterparties, and record ownership for remediation.

  3. 3
    AI generatedStep 3 of 7

    update carbon-market horizon scanning to track any legislative, Commission, registry or ESMA follow-up that could convert the LEI recommendation into a binding requirement.

  4. 4
    AI generatedStep 4 of 7

    ensure ETS2 programme teams include LEI capture and validation in onboarding and account-opening design assumptions.

  5. 5
    AI generatedStep 5 of 7

    review EUA trading-risk dashboards to ensure early-2026-type volatility, liquidity and counterparty concentration indicators are visible to risk committees.

  6. 6
    AI generatedStep 6 of 7

    brief front office, compliance, operations and sustainability teams that ESMA views financial intermediaries as central to market functioning and will continue monitoring the market.

  7. 7
    AI generatedStep 7 of 7

    preserve evidence that no immediate regulatory template, transaction-reporting field or filing destination changed as a result of this ESMA news release.

Timeline

publication

Jul 8, 2026

ESMA published a news release announcing its third annual market report on EU carbon markets.

Sources

AI-generated analysis is based on the following primary sources. Always verify against the official publication.

Related Evidence

Verified source support for this analysis

The evidence agent checks whether the drafted finding is supported by official publications and relevant public source material.

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