In Part 1, we explained why future carbon prices could land anywhere between €70 and €160 per ton and teed up that carbon pricing is quickly becoming a global issue. That level of uncertainty creates real financial risks for firms operating within the EU and beyond, particularly in carbon-intensive sectors.
Now, in Part 2, we turn from market dynamics to action. We break down how EU-based companies should prepare, what to watch for, and what to do now to stay ahead regardless of where the carbon price ultimately settles.
Agility is a must in a questionable carbon market
Betting on a single carbon price outcome is a high-risk strategy. With regulations in flux and uncertainty at every turn, even well-informed forecasts can miss the mark. Instead, firms should treat carbon price projections as directional guardrails and prepare for a wide range of scenarios. The companies that track the right KPIs, spot directional shifts early, and move faster than their peers will most likely outperform those who are slow to respond.
So, what would it take for carbon prices to hit €70 or €160 per ton by 2030? Below, we break down what would need to align on both the supply and demand sides of the carbon market to push prices to the lower or upper ends of this range.
| Uncertainty driver | Conditions for a €70/t in 2030 | Conditions for a €160/t in 2030 |
| Supply: Allowance cap trajectory | Cap follows existing Fit-for-55 rules, shrinking supply gradually but modestly | Regulators cut 100 million EU allowances in 2025 and consider stricter cuts starting 2027 |
| Supply: Market Stability Reserve | Intake rate drops 24% to 12% after 2023, leaving a surplus above 700 million allowances | Intake rate stays at 24%, cancelling over 3 billion allowances and tightening the market by 2027 |
| Supply: Free allocation phase-out and CBAM factor | Free allowances phase out slowly; CBAM maintains about 50% free allocations | Free allowances cut faster; CBAM replaces them fully by 2034 or sooner if import demand grows |
| Demand: Industrial activity and fuel prices | Weak industry and low gas prices reduce emissions and allowance demand | Stronger industry and higher gas prices keep coal running and emissions high |
| Demand: Parallel policies | Renewables reach 65% of power with coal capacity dropping below 20 GW | Renewables lag, under 55%, with coal capacity remaining above 50 GW |
| Demand: Market sentiment and hedging | Market participation is broad, funds remain neutral or short | Bidding concentrated among top players; funds go net long and stay that way through 2030 |
Note that no single factor will push carbon prices to extremes and reaching €70 or €160 / tCO2 requires multiple supply and demand forces to align. The more these uncertainty drivers move in sync, whether toward scarcity or surplus, the more likely prices will shift toward the edges of the forecast range. For example, carbon prices could plausibly rise to €160 even if gas prices only reach €45/MWh, provided other conditions (like accelerated free allocation phase-out, weak parallel policies, and strong industrial activity) push in the same direction. It’s the interaction of these factors, not any single one, that will ultimately set the carbon price.
Regardless of where the carbon pricing lands, firms should act now
It’s not enough to simply plan for multiple scenarios. Companies should begin executing concrete steps today based on projections. Below, we highlight how a variety of firms will be impacted financially by a higher or lower 2030 carbon price and how they should act in the next 12 months to prepare.
| Sector | Penalty per unit output | What to do if prices reach €70/t | What to do if prices reach €160/t |
| Coal / lignite generators | €63 to €144/MWh (around 0.9 tCO₂ per MWh) | Monetize reserve fees, limit hedging to 1-2 years, make minor upgrades | Plan closure or CCUS retrofit by 2027-28, secure alternative revenues, renegotiate fuel deals |
| Gas generators | €26 to €60/MWh (around 0.37 tCO₂ per MWh) | Optimize assets, retrofit turbines, pilot hydrogen blending | Shift to peak generation, retrofit for hydrogen, launch CCS projects |
| Integrated utilities (gas and renewables) | €18 to €40/MWh (around 0.25 tCO₂ per MWh) | Maintain balance and renewables phase-in, split CAPEX evenly, seek price arbitrage | Accelerate renewables deployment, prepare for possible windfall taxes |
| Oil & gas producers | €10 to €25/t CO₂ (higher for refining and chemicals) | Reduce emissions, promote gas as coal replacement, diversify cautiously | Electrify upstream, pivot to hydrogen and renewables, begin hedging |
| Renewables and storage developers | N/A | Lock stable contracts, focus on efficiency, pair builds with batteries | Scale quickly, expand M&A, invest in grid storage |
| Steel (BF-BOF route) | €126 to €288/t steel (approx. 1.8 t CO₂ per ton) | Use free allocations, pilot decarbonization, prepare for CBAM | Invest in DRI/EAF and CCS, secure renewable PPAs, apply CO₂ surcharges |
From this analysis, we see two contrasting futures emerging:
- A €70/t world that supports incremental changes:
- Firms generally continue with business-as-usual strategies.
- Optimization focuses on efficiency improvements.
- Major capital investments and shifts can be delayed.
- Modest carbon prices reinforce existing trends without forcing disruption.
- A €160/t world that demands immediate, decisive action:
- Coal must be phased out swiftly.
- Gas plants need upgrades or operational rethinking.
- Industrial companies must accelerate deep emissions cuts.
- Renewables face urgent growth and deployment challenges.
- Oil and gas companies must reassess and transform portfolios.
- Early, proactive realignment of assets, technologies, and business models is essential.
Next up: Monitoring and adapting to global carbon market changes
Firms with exposure to EU carbon pricing, whether through operations, supply chains, or trade, should treat carbon as a live market variable. Those that can track the right signals, model price paths, and act ahead of the curve will gain a structural advantage. As we’ve outlined above, it is not a viable strategy to wait for clarity.
The key is to plan for the full range of potential carbon prices, invest in real-time monitoring, and make carbon risk a part of every commercial decision. Doing so pays off in two ways: protecting margins today and positioning the business to win over the long term. Decisions made now, about asset values, power purchase agreements, and infrastructure investments, will lock in costs or value for years to come. Leadership in 2030 depends on the choices made today.
While EU-based firms face direct compliance costs, companies outside Europe are increasingly exposed through trade, procurement, and shifting global standards. The EU’s Carbon Border Adjustment Mechanism is already reaching across borders, and global buyers are beginning to factor carbon intensity into sourcing decisions.
Stay tuned for Part 3, where we’ll examine what EU carbon pricing means for US and international firms, including which key indicators to watch, where the risks lie, and how to stay competitive as EU carbon pricing begins to shape global market dynamics.
Missed Part 1? Catch up, here.
