European Union Allowance (EUA) prices continued their recovery in May, driven by energy‑market fundamentals, expectations of tighter future supply, and improving sentiment after a sharp sell‑off earlier in the year. Hot weather offered support as higher power prices, underpinned by a fall in French nuclear output, sustained EUA demand. Another key driver was anticipation around the EU ETS supply controls, particularly the Market Stability Reserve (MSR) and forthcoming Total Number of Allowances in Circulation (TNAC) data. Participants continued to view the ETS as structurally tightening, with declining caps and the gradual reduction of free allocations reinforcing expectations of future scarcity. The main bearish influences remained weaker European industrial activity and headline risks around the Iranian conflict. However, financial investors grew more confident in the price strength, with the month's final CoT report showing funds had added 12 million tonnes week‑on‑week. EUAs closed May at €80.63, up 8.48% month‑on‑month.
UK Allowance (UKA) prices in May were supported by growing optimism around linking the UK and EU carbon markets, with reports that both sides were exploring greater alignment or a potential future linkage of their trading systems. UK ETS policy expectations added further support, with participants focused on future supply, auction volumes, and the framework's development. Liquidity also improved following the launch of UKA futures and options trading on the European Energy Exchange (EEX), expected to attract more participation from compliance entities, investors, and hedgers. UKAs closed at £58.67, up 15.61% from April.
California Carbon Allowance (CCA) prices in May were driven by regulatory developments, strong auction demand, and expectations of tightening long‑term supply. The key factor was the California Air Resources Board's (CARB) end‑of‑month approval of amendments to the Cap‑and‑Invest program, reinforcing confidence that California remains committed to progressively reducing emissions through a declining cap. Strong demand in the May 2026 California–Québec joint auction also lent support: all current‑ and advance‑vintage allowances sold out, with current‑vintage clearing above the floor price — signalling continued compliance demand and a positive read for the broader market. CCAs closed May at $31.39, up 7.14% month‑on‑month.
Regional Greenhouse Gas Initiative (RGGI) prices again delivered one of the strongest performances among global compliance carbon markets in May, buoyed by expectations of tightening supply, auction demand, power‑market fundamentals, and policy developments across participating states. The key driver was the continued tightening of the RGGI cap, with participants expecting supply to decline as the program pursues increasingly ambitious reduction targets. Expectations around Virginia's anticipated return further supported sentiment. RGGI prices closed at $44.18, up 12.86%.
The Greenedge Carbon Allowances Absolute Return AMC recorded a 11.09% performance for May. EUAs continue to strengthen as confidence returns, reflected in increased fund positioning; however, the July ETS review could cap gains amid lingering uncertainty. Despite no recent linking updates, UKAs remain supported by wider European realignment. The UK discount to EUAs has stabilised and still presents a compelling opportunity for convergence. In the US, RGGIs remain the standout global compliance performer, as tight supply and speculation over Virginia's inclusion boost prices. CCAs have begun to firm as confidence returns following the resolution of the program reviews.
