European Carbon Prices to Hit €100 This Winter
Bank of America analysts project carbon allowance costs will spike as energy supply shocks influence power generation trends.
Updated on Oct. 23, 2026 in Oil and Gas
Live Poll
Are you planning to switch to an electric vehicle because of rising fuel costs?
European Union carbon allowance prices are projected to reach €100 per metric tonne this winter. This forecast follows significant energy supply shocks in the Middle East that have disrupted global oil and gas markets.
Why it matters
Rising natural gas prices have forced power generators to rely more heavily on coal, directly impacting the demand for carbon allowances. Furthermore, the EU Carbon Border Adjustment Mechanism is intensifying cost pressures by reducing free emissions allocations and taxing imports.
European carbon prices are expected to hit €100 per metric tonne this winter before retreating below €80 in the second half of 2027. Global oil demand is estimated to decline by 3 million barrels per day in 2026, with a projected recovery of 4.3 million barrels daily by 2027.
The players
Bank of America
This global financial institution provides investment banking, consumer banking, and global wealth management services.
The details
Energy price volatility, exacerbated by the war in the Middle East, has caused oil prices to climb 40 percent since late February. While conventional fuel demand faces headwinds, China reported an 80 percent year-on-year increase in electric truck sales during the first quarter of 2026.
Timeline
Late February 2026: Oil prices began their 40 percent climb.
First quarter 2026: Chinese electric truck sales surged 80 percent.
Winter 2026-2027: Carbon prices are projected to reach €100 per tonne.
Second half of 2027: Carbon prices are expected to drop below €80 per tonne.
Market Landscape
The projected rise in carbon costs reflects the broader implementation of the EU Carbon Border Adjustment Mechanism. This policy shift forces industries to account for emissions costs more aggressively, positioning carbon allowances as a central factor in European industrial economics.
Higher carbon costs for power producers will likely be passed on to industrial and household consumers through increased electricity rates. Businesses reliant on international supply chains may also face higher price volatility as carbon costs are applied to imported goods under new EU regulations.
The takeaway
Energy market volatility currently favors electrification in major manufacturing hubs like China while creating significant cost hurdles for European heavy industry. Consumers should prepare for potential increases in energy-related expenses as carbon pricing mechanisms continue to evolve.
Further reading
For broader trends in energy markets, see our coverage on Oil and Gas.
Live Poll
Are you planning to switch to an electric vehicle because of rising fuel costs?
