The first trading of ETS2 rights took place on Tuesday, May 6, 2025. The future contract for delivery in December 2028 can be traded through ICE. The contract is trading around EUR 78/ton. Market liquidity is currently marginal, but this will increase further ahead of the system's entry into force in 2027.
The market for ETS2 is subject to a number of distinctive factors. For example, unlike the regular EU ETS, no free allowances are allocated. In addition, the emissions cap decreases relatively quickly. Moreover, the demand for ETS2 products responds to price changes to a relatively small extent. These factors are expected to create a tight market and contribute to upward price pressure.
At the same time, the European Commission introduced a mechanism that aims to counterbalance (too) large price increases. This 'soft price cap' has three scenarios, where additional emission allowances are added to the market. But market participants can anticipate these aligned scenarios which means that there may be technical resistance levels in the market around the relevant prices. This risks undermining the functioning of the soft price cap.
Finally, the Social Climate Fund should reduce costs for financially vulnerable groups. In doing so, the fund serves as a shock absorber for potentially significant cost increases in energy bills and gasoline and diesel prices for citizens. The question is whether politicians will succeed in shaping this system in such a way that citizens are sufficiently reassured.
