Carbon Emissions Market Update: Bullish Momentum Ahead?

Price Action and Technical Overview

Carbon emissions prices continue to show a bullish trend, supported by steady upward movement with periodic pullbacks. Recent price action suggests that the market is oscillating between the upper Bollinger Band and the moving average, indicating ongoing strength despite short-term retracements.

At present, there are no major technical indicators signalling a reversal. Instead, the market appears to be consolidating within a broader uptrend, potentially setting the stage for further gains.

Key Market Drivers

European Pollution Allowance Cuts (January 2026)

Europe is preparing to reduce the number of pollution permits available from January 2026. With fewer allowances in circulation, companies may face higher costs to cover their emissions. As supply decreases, the reduced availability often leads to higher carbon credit prices, providing strong upward pressure on the market.

UK–EU Carbon Market Linkage

In addition, the UK and EU are moving towards linking their carbon markets. Combining two major trading systems is likely to increase liquidity, attract more participants, and boost overall demand. This integration may serve as another catalyst for future price appreciation.

Outlook for Traders and Investors

With positive regulatory developments, tightening supply, and consistent upward price movement, the carbon emissions market could experience sustained bullish momentum over the coming years. For traders, this environment may favour long positions, while long-term investors could view current levels as an opportunity to build or expand exposure in anticipation of further price growth.