Carbon credit prices in Europe increased during Q1’26, supported by tighter allowance availability, stronger compliance activity, and firmer hedging demand from covered industries. The market carried bullish momentum from late 2025, when carbon values had already risen ~25% year on year due to lower auction volumes and stronger fund participation. In January, European carbon prices crossed a multi-month high as traders reacted to reduced allowance supply and the start of CBAM’s definitive phase. The new carbon border rules raised cost exposure for importers in steel, cement, aluminum, fertilizers, electricity, and hydrogen, especially where verified emissions data was unavailable. This strengthened buying interest as companies prepared for higher carbon-linked import costs. However, the rise was later capped by weaker industrial margins and political pressure after energy costs jumped sharply during the Iran war. Crude prices increased ~40%, and European gas rose ~66%, raising electricity and production costs for downstream users. Calls to ease or suspend ETS-related costs triggered a correction, with carbon values slipping from around one level to a lower range in March. Overall, Q1’26 showed a firm but volatile trend, driven by supply tightness, CBAM-linked compliance demand, and energy-market stress.
Analyst Insight
According to Procurement Resource, carbon credits may remain volatile in the near term, with support from tighter allowance supply and CBAM compliance needs. Price gains may stay limited if energy costs keep pressuring industrial demand.
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A carbon credit is a tradable certificate representing the reduction, avoidance, or removal of one metric ton of carbon dioxide equivalent (CO2e) from the atmosphere. Carbon credits are generated through verified projects such as reforestation, renewable energy, methane capture, and carbon sequestration initiatives. Organizations purchase these credits to compensate for unavoidable greenhouse gas emissions and support global climate mitigation efforts through voluntary or compliance carbon markets.
Verra, Gold Standard, American Carbon Registry, Climate Action Reserve, Architecture for REDD+ Transactions, Puro.earth
Carbon Offset, Carbon Offset Credit, Verified Emission Reduction (VER), Emission Reduction Credit (ERC) and Carbon Allowance (in compliance markets)
CurrencyUS$ (Data can also be provided in local currency)
Supplier Database AvailabilityYes
Customization ScopeThe report can be customized as per the requirements of the customer
Post-Sale Analyst Support360-degree analyst support after report delivery
Note: Our supplier search experts can assist your procurement teams in compiling and validating a list of suppliers indicating they have products, services, and capabilities that meet your company's needs.
Carbon credits are produced through projects that reduce, avoid, or remove greenhouse gas emissions. Project developers establish a baseline scenario, implement emission-reduction activities, monitor results, and undergo independent third-party verification. Following successful validation and verification, credits are issued by recognized registries. Common project types include renewable energy installations, forest conservation, afforestation, methane capture, biochar production, and direct air capture technologies.
Carbon credits are widely used by: Industries including power generation, oil and gas, aviation, manufacturing, mining, cement, steel, and chemicals to meet sustainability targets and regulatory emission requirements. Companies purchase credits to offset residual emissions, comply with emissions trading schemes, support net-zero commitments, and enhance environmental credentials. They also serve as financial instruments within carbon trading markets, enabling businesses to manage climate-related risks and carbon liabilities.
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