ESMA released its third annual market report on EU carbon markets, revealing that financial intermediaries are fundamental to the market’s operation. The European Securities and Markets Authority, the EU’s financial market regulator and supervisor, found that investment firms and credit institutions accounted for approximately 62% of overall trading volumes in 2025, providing essential liquidity and helping compliance entities manage price risk.
- Market size (2025): €777 billion
- Financial firms’ trading share: 62% of overall volumes
- Average price increase: 13% from 2024
- Auction revenue growth: 11% despite volume decrease
- Early 2026 price decline: 29% over three months
The market demonstrated resilience despite significant volatility in early 2026, when prices fell 29% over three months, and volatility reached a two-year high. ESMA attributed the price movements to shifting expectations over future EU ETS rules, energy costs, and broader market conditions. The regulator identified no major concerns regarding transparency or market integrity, confirming the market’s structural soundness amid the fluctuations.
A key area requiring attention is the limited progress on Legal Entity Identifiers (LEIs) in the Union Registry. ESMA recommended making LEIs mandatory for all trading accounts, including those operating under the upcoming ETS2 framework. This standardization would enhance market transparency and tracking capabilities across the EU carbon trading ecosystem.
The regulator stated it will continue monitoring carbon markets and remain prepared to support legislators in their ongoing policy development. The report underscores financial firms’ critical role in maintaining efficient price discovery and liquidity provision within the EU’s emissions trading system.
