European carbon allowances trade at lowest 2025 value; driven by gas, geopolitics

European carbon allowances dropped below Eur70/mtCO2e on March 4, to their lowest values in 2025, with geopolitical events and natural gas driving the bearish move.

EU Allowances for December 2025 were trading at Eur68.24/mtCO2e ($71.91/mtCO2e) at 1346 GMT March 4, down more than 4% on the day, according to Intercontinental Exchange data.

This comes as US President Donald Trump decided to suspend all military aid to Ukraine, while media reports showed that the US may also lift Russian sanctions in a bid to restore ties with Moscow.

Late last week, Trump met his Ukrainian counterpart Volodymyr Zelensky to discuss the war between Russia and Ukraine, leading to a public blowout between the two leaders that rallied EUAs and gas prices early during March 3 trading.

Platts, part of S&P Global Energy, assessed the EUA nearest December 2025 contract at Eur71.58/mtCO2e Feb. 28.

Meanwhile, Dutch TTF gas front-month prices also corrected downwards by nearly 5%, with market sources pointing at geopolitics as the main driver. These events are important to the market due to the ongoing net length from investment funds.

"While speculative positions in both gas and carbon markets are very high, and most other driving factors are clearly known and maybe reflected in the price to some extent, markets want to find out directions from issues," a carbon analyst said.

A Commitment of Traders report showed that as of Feb. 21, investment funds had decreased net long positions by 8.3 million, or 14%. They continued to hold 50 million EUAs in net length. This was the second consecutive week when funds had trimmed their long bets. Market participants will await an update to the COT report March 5, which will reveal any further changes from investors.

"While fundamentals are not very good -- US tariff risk, modest temperature forecast for two weeks -- Trump [is] still showing room to resume the mineral deals with Ukraine and increasing military costs [which] are somewhat bearish points," the analyst said.

The president of the European Commission, Ursula von der Leyen, announced March 4 a plan to commit Eur800 billion in defense investment to rearm Europe after Trump's announcement that the US will suspend military aid.

"Uncertainty is always bearish. If you add geopolitical issues and gas, the picture is gloomy," a carbon trader said.

Analysts at Energy held a bearish view on EUA prices for the coming weeks.

"A widespread selloff in European energy markets, triggered by easing concerns over natural gas reserves, put downward pressure on EUA prices," the analysts said in a report.

Other participants also shared this sentiment, with one source working close to OTC markets saying that market participants have been "holding onto their compliance needs, they expect the price to go down -- [they are] waiting for Eur60/mtCO2e before buying."