EU tweaks carbon market to curb price spikes ahead of review

In March 2025, the European Union proposed a change to its Emissions Trading System (ETS) to reduce price volatility. The plan allows more carbon allowances to be released if high demand causes price spikes, by keeping all unsold permits in a buffer instead of invalidating them. This prepares for future supply tightness as the number of allowances gradually decreases.

Under pressure from industry over high energy costs—exacerbated by the Iran war—the EU is reviewing its climate policies. Commission President Ursula von der Leyen has promised a "more realistic" emissions trajectory and to extend free emission allowances beyond 2034. Critics argue the current ETS contributes to expensive energy bills.

The ETS, established in 2005, requires heavy polluters to buy limited permits. For years, supply exceeded demand, creating a surplus. The proposed tweak aims to give the EU flexibility to respond to market shifts. A full review is due later in 2025.

Nigerians should note that EU carbon policies often set global precedents, potentially affecting trade terms, climate finance, and sectors like oil and gas or renewable energy investments linked to European markets.

SOURCE: https://www.channelstv.com/2026/04/01/eu-makes-first-move-towards-easing-carbon-scheme/