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  • SPECIAL EDITION: February 26, 2026 — EU ETS in Crisis: Italy Demands Suspension, EUA Prices Crash 25%, 13-Nation Coalition Splinters Europe's Carbon Market

SPECIAL EDITION: February 26, 2026 — EU ETS in Crisis: Italy Demands Suspension, EUA Prices Crash 25%, 13-Nation Coalition Splinters Europe's Carbon Market

VCM.fyi Special Edition — EU ETS Crisis Brief | February 26, 2026

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VCM.fyi team
February 26, 2026

The EU Emissions Trading System, the world's largest carbon market, is facing its most serious political challenge in two decades. Today's developments moved so fast that we published 10 dedicated analyses. This newsletter gives you the TLDR and links to each deep dive.

Bottom line: EUA prices crashed 25% in six weeks as a 13-nation "Friends of Industry" coalition demanded systemic ETS reform. Italy went furthest, calling for outright suspension. But the Nordic bloc fired back, the Commission doubled down on high prices as an investment tool, and France drew a red line on Article 6 credits. The market is now a political battlefield.

The Crisis: What Happened Today

February 26, 2026 will be remembered as the day EU climate policy fractured along North-South lines. Here's the sequence of events and what each means for carbon market professionals.

1. Italy Drops the Bomb: Formal ETS Suspension Request

Italy's Industry Minister Adolfo Urso formally requested a suspension of the EU ETS pending structural reform. Rome's "Energy Decree" frames carbon pricing as an existential threat to Italian industry, with EUA costs cited as a key driver of the 30% decline in Italian industrial output since 2019.

EUA prices immediately dropped to €69.33 — a 9-month low.

2. The Chemicals Emergency: 13 Nations Demand CBAM & ETS Changes

Italy didn't act alone. A coalition of 13 member states — led by Germany, Italy, France, and Poland — issued a joint letter warning that the EU chemicals sector faces an "existential crisis." European chemical investment has plummeted 89% since 2019. The coalition demands a freeze on free allowance phase-outs and export rebates under CBAM.

3. The Nordic Counter-Offensive: "Weakening the ETS is Industrial Suicide"

Sweden, Finland, Denmark, and the Nordic industry bloc hit back hard. Companies like SSAB, Norsk Hydro, and UPM — who have invested billions in decarbonisation — warned that weakening the ETS would strand their clean investments and reward laggards. They urged the Commission to hold firm.

4. Commission's Surprise: ETS Becomes an "Investment Tool"

Instead of caving to pressure, Brussels unveiled a radical plan: transform the ETS into an investment engine for industrial decarbonisation. The centerpiece is a proposed €100 billion Industrial Decarbonisation Bank funded by ETS auction revenues. High carbon prices are the feature, not the bug.

5. Ministers Unite on Volatility: "Friends of Industry" Joint Statement

The 13 "Friends of Industry" ministers issued a formal joint statement demanding ETS reform to address "excessive price volatility." This is the political signal that moved markets — it confirmed this isn't just Italy, it's a structural coalition including Germany and France.

The statement triggered a 25.1% decline in EUA values over six weeks.

6. France Draws a Red Line on Article 6

While joining the industrial reform push, France simultaneously demanded that Article 6 credits (from the Paris Agreement's international trading mechanism) be legally excluded from EU ETS compliance. Paris fears that allowing cheap international offsets into the ETS could collapse EUA prices further — a scenario that would undermine France's nuclear-powered low-carbon industrial base.

This has massive VCM implications: it walls off the EU compliance market from voluntary credits.

7. The Market Reaction: EUA Flash Crash and Recovery

The intraday price action told the story. EUAs opened weak, plunged to €57 on Italy's suspension demand, then staged a partial recovery to €69.33 as compliance buyers stepped in. Speculative funds unwound 47 million tonnes of long positions in two weeks — the largest sell-off since the 2022 energy crisis.

8. Shipping Sector Sees Opportunity in the Chaos

While industrials fight to lower carbon costs, the maritime sector took a different approach: it called for ETS revenues to be earmarked ("hypothecated") for shipping decarbonisation. Maritime emissions rose 13% in 2024 despite EU ETS inclusion. The industry argues that recycling carbon revenues into e-fuels and green ammonia would solve both the pricing and emissions problems.

9. The UK Alternative: Could a Price-Based Mechanism Save the ETS?

As the EU debates how to stabilize its carbon market, attention turned to the UK ETS, which has a Cost Containment Mechanism (CCM) — a price-based trigger that releases extra allowances if prices breach a threshold. The EU's Market Stability Reserve (MSR) works on quantity, not price. Could the UK model work for Europe?

10. The Global Ripple: CBAMs Multiply, Poorer Nations Left Behind

Beyond the EU, carbon border taxes are going global. The UK launches its CBAM in January 2027, Australia has committed to one by 2028, and Canada, Japan, and Taiwan are developing their own. But the elephant in the room is the impact on developing country exporters — Mozambique's aluminium sector alone faces a $50M+ annual CBAM bill with zero domestic climate revenue to offset it.

So What? Implications for Carbon Market Professionals

For ETS Compliance Officers & Traders

  • Volatility is political, not fundamental. The MSR is working as designed (supply is tight), but ministerial rhetoric now dominates price action. Build political risk scenarios into your hedging strategy.

  • €57 is the new technical floor. Compliance buyers stepped in at that level. If the suspension rhetoric escalates, test €50.

  • Short-term bearish, medium-term unclear. The Commission isn't backing down on high prices. Watch the March 25 Environment Council for the next catalyst.

For VCM Participants

  • France's Article 6 firewall is VCM-bullish. If international credits can't enter EU compliance, demand stays in the voluntary market. This protects VCM pricing.

  • ETS instability = VCM opportunity. Corporates hedging EU regulatory risk may increase voluntary credit procurement as a "no-regrets" strategy.

  • CBAM expansion creates correspondent adjustment demand. More border taxes = more countries needing Article 6.2 frameworks. Developers in CBAM-exposed countries should accelerate LoA discussions.

For Project Developers

  • EU-adjacent projects face pricing headwinds if EUA prices drop further. Projects selling into EU compliance-linked demand should stress-test at €50/tonne.

  • Removal credits are insulated. CDR pricing is decoupled from ETS politics. The TD Bank/Charm Industrial benchmark of $44M/44Kt holds.

  • Developing country developers: CBAM is coming to your buyers. Help them understand corresponding adjustments and Article 6 pathways — it's a sales tool.

What to Watch Next

  • March 25 Environment Council — Will the "Friends of Industry" coalition table a formal reform proposal?

  • Commission Clean Industrial Deal — Full text expected Q2 2026. Will it include the €100B Industrial Decarbonisation Bank?

  • EUA price action at €57 support — A break below triggers a new wave of selling.

  • UK CCM trigger test — UK ETS allowances approaching the Cost Containment Mechanism threshold. If triggered, it sets precedent.

  • CBAM transitional reporting — First full compliance data due mid-2026. Expect sector-level impact assessments.

All 10 articles are live now on VCM.fyi Insights. Read the full series for the deep research, specific data points, and source citations behind each story.

Stay ahead of market-moving intelligence.

VCM.fyi provides strategic intelligence for carbon market participants. This newsletter is for informational purposes only and does not constitute investment advice.