EU carbon market outlook: How companies can prepare for carbon price rebound after 2027

Companies and investors should not treat today’s lower EU carbon prices as a long-term baseline, as tightening allowance supply is expected to keep upward pressure on the market. (Photo: Pexels)

The previous article examined the EU ETS market dynamics in 2026 from both policy and energy perspectives. For companies, however, the more pressing issue is how these policy and market dynamics can be translated into quantifiable cost risks.

This article therefore uses an EU ETS allowance supply demand model incorporating key variables including the Total Number of Allowances in Circulation (TNAC), auction supply, emissions demand, and policy adjustments to estimate carbon price movements under different scenarios. It further examines how rising carbon prices after 2027 could translate into cost pressures for businesses, and how CBAM and supply chain restructuring may reshape the competitiveness of EU exporters, industries likely to face future carbon regulation, and regional suppliers.

Price outlook: Carbon prices are projected to rebound from 2027 onward

Geopolitical uncertainty has made it increasingly difficult for companies to assess the direction of carbon prices, adding further uncertainty to future carbon cost exposure. Even so, allowance supply demand models can still be used to estimate the future TNAC, helping identify the underlying supply demand trend within the EU ETS after excluding short term disruptions from policy and energy market shocks. This also provides a basis for assessing whether current carbon prices are being overvalued or undervalued by external factors.

Unlock the full article to explore three key takeaways:

1. RECCESSARY’s proprietary model projects that EU ETS carbon prices will rebound from 2027 onward, driven mainly by tighter allowance supply after the phaseout of REPowerEU’s frontloaded allowance releases.
2. CBAM exporters, industries likely to be brought under future regulation, and regional suppliers will face three distinct forms of carbon cost pressure as rising EUA prices continue to pass through supply chains.
3. Companies without product specific emissions data face the greatest exposure, as they may eventually be forced to rely on default values, driving up CBAM compliance costs while weakening their competitiveness in export markets.