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ESMA

ESMA

European Securities and Markets Authority

Medium Impact

ESMA 2026 EU Carbon Markets Report: no integrity issues found, but LEI mandate recommended for Union Registry trading accounts

Published

Jul 9, 2026

Topics

EU Emissions Trading System, EU allowances, Carbon markets, Market integrity, MiFID II position reporting, MiFIR transaction reporting, EMIR reporting, Union Registry, Legal Entity Identifier, ETS2

Executive Summary

ESMA published its third annual market report on EU carbon markets under the EU ETS Directive monitoring mandate. The report is analytical and does not itself create new binding obligations for market participants. ESMA concludes that its analysis did not identify any significant issue in the transparency or integrity of EU carbon markets. However, it flags business-relevant developments: the average EUA spot price rose to EUR 74/tCO2 in 2025, auction revenues increased despite slightly lower auctioned volumes, and auction participation remained highly concentrated. Secondary-market trading was broadly stable, with on-venue activity still dominant and OTC transaction counts falling. Derivatives remained central to compliance entities’ EUA sourcing and hedging, with open interest increasing and investment funds building net long positions during 2025. ESMA also repeats and sharpens a policy recommendation: LEIs should be made mandatory in the Union Registry for all trading accounts, including for the upcoming ETS2. Firms should treat the report as a market, data-quality and policy-monitoring signal rather than an immediate rule change.

What Changed

modifiedEUA price and volatility backdrop

Previous

Average EUA spot price was EUR 65/tCO2 in 2024; historical volatility was 2.2%.

New

Average EUA spot price was EUR 74/tCO2 in 2025; spot prices reached EUR 90/tCO2 in January 2026 and declined 29% between January and March 2026 before partially recovering.

modifiedPrimary auction market metrics

Previous

In 2024, 599 million EUAs were auctioned with EUR 38.8 billion of value and a 172% cover ratio.

New

In 2025, 589 million EUAs were auctioned with EUR 43.2 billion of value and a 168% cover ratio; almost 90% of EUAs were acquired by 10 bidders.

modifiedSecondary-market trading mix

Previous

In 2024, on-exchange volumes were 12.6 billion tCO2 and off-exchange volumes were 1.1 billion tCO2.

New

In 2025, total trading reached 13.8 billion tCO2; on-exchange volumes were 12.4 billion tCO2 and off-exchange volumes were 1.4 billion tCO2, while OTC transaction numbers fell by 33%.

modifiedDerivatives positions and market participants

Previous

In 2024, ESMA reported an average of 909 daily EUA derivatives position holders and investment funds holding 7% of positions.

New

In 2025, ESMA reports 917 average daily position holders; investment funds held 9% of positions, while investment firms and credit institutions held 58%.

modifiedUnion Registry LEI policy recommendation

Previous

ESMA’s 2024 and 2025 reports recommended improving LEI availability in the Union Registry.

New

ESMA recommends making LEIs mandatory in the Union Registry for all trading accounts, including for the upcoming ETS2.

Business Impact

Who is affected

Directly affected

EU ETS compliance entities, EUA auction bidders, EUA spot and derivatives market participants, trading venues, investment firms, credit institutions, investment funds and Union Registry trading account holders.

Indirectly affected

corporate treasury, procurement, risk, finance and sustainability teams, compliance service providers, market-data vendors and carbon trading advisers.

Jurisdictions

European Union, European Economic Area EU ETS participants, Third-country entities trading or holding positions in EUA instruments

Business processes

EUA procurement and auction participation, Carbon allowance price-risk management and hedging, Derivative position monitoring and limit oversight, MiFIR, MiFID II and EMIR data-quality controls for EUA instruments, Union Registry account onboarding and LEI reference-data maintenance, ETS2 readiness and policy monitoring

Estimated effort

Medium

Compliance risk

Medium

Affected Reports

Carbon allowance procurement and auction participation dashboardEUA market-risk and hedging governance packEUA derivatives position and limit monitoring controlUnion Registry trading account LEI completeness controlMiFIR, MiFID II and EMIR EUA data-quality exception report
FieldValidation rule

Recommended Actions

7 suggested next steps· derived from source analysis
  1. 1
    Confirmed actionStep 1 of 7

    treat the ESMA report as supervisory market intelligence, not as a binding rule change; no immediate template or filing obligation is created by the report itself.

  2. 2
    AI generatedStep 2 of 7

    review Union Registry trading accounts and identify missing or stale LEIs, prioritising trading accounts and entities expected to participate in ETS2.

  3. 3
    AI generatedStep 3 of 7

    update EUA procurement and hedging assumptions to reflect ESMA’s 2025 price, auction concentration, liquidity and volatility observations.

  4. 4
    AI generatedStep 4 of 7

    strengthen monitoring of EUA derivatives exposure, especially futures, forwards and options, against internal risk appetite and compliance surrender needs.

  5. 5
    AI generatedStep 5 of 7

    reconcile EUA activity across auction, venue, OTC, MiFIR, MiFID II position and EMIR datasets to identify counterparty classification or LEI gaps.

  6. 6
    AI generatedStep 6 of 7

    monitor the forthcoming EU ETS Directive review and Market Stability Reserve revision for potential impacts on future EUA supply and auction volumes.

  7. 7
    AI generatedStep 7 of 7

    brief treasury, sustainability, regulatory change and operations teams on the potential future LEI requirement so onboarding and reference-data owners are aligned.

Timeline

other

Date not specified

Primary ESMA reporting period for the 2026 EU carbon markets report, unless otherwise indicated in the report.

other

Date not specified

ESMA discusses first-quarter 2026 market developments, including a 29% EUA spot-price decline between January and March before partial recovery and a volatility increase to a two-year high.

publication

Apr 10, 2026

The European Commission publication cited by ESMA reported that EU ETS covered emissions continued their downward trend.

publication

Jul 9, 2026

ESMA published the third annual Market Report on EU carbon markets 2026.

other

2026

ESMA notes that the forthcoming EU ETS Directive review and ongoing Market Stability Reserve revision may affect future EUA supply dynamics; no implementation date is set in the report.

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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