Overview

The carbon market is caught between tightening physical fundamentals, elevated geopolitical risk, and increasing policy intervention. Supply-side uncertainty continues to support prices, while political efforts to cap or offset costs may limit the extent of further upside. This creates a highly volatile environment where both bullish supply risks and bearish policy responses remain in play.

The fundamental backdrop for European energy markets is tightening, with storage levels now at 28.55% (March 20). This reinforces concerns around refill capacity ahead of next winter.

While the EU Council has signaled that the ETS framework will remain in place, the door is clearly open for reforms, with discussions around price controls, subsidies, and tax cuts gaining traction.