Europe’s carbon market EUAEurope’s carbon market (EUAs) is more than just a climate tool, it’s the shield behind CBAM, the mechanism that makes sure EU companies aren’t undercut by cheaper, dirtier imports. If the EUA price is too low, the shield weakens. If it’s too volatile, industry can’t plan. Stability is everything.
Here is where things get interesting. The EU needs to keep EUA prices high enough to make CBAM credible, but safe enough to avoid the kind of shock we saw with gas. After all, a few years ago gas went wild, and industries were brought to their knees. That can’t happen again.
So.. what becomes the fallback? Coal. Not because it’s clean, but because it’s predictable. The cost structure is simple: coal price plus carbon cost. No sudden geopolitical swings like with gas. For a recovering EU industry, that predictability is worth gold. It creates a strange dynamic: coal, the enemy on paper, becomes a short-term safe harbor.
The effect? Coal keeps power prices stable and, at the same time, drives steady demand for EUAs (since coal emissions are high). That demand holds the EUA price line, making sure CBAM remains a strong shield.
Of course, this can’t be the long-term play. Europe can’t afford to lock itself back into coal. But in the recovery phase, the mix of stable energy prices for industry and stable EUA demand for the carbon market makes coal a reluctant ally.
It’s a trade-off: coal today as a cushion, renewables tomorrow as the foundation. The big picture is that EUAs stay strong, CBAM stays credible, and Europe buys itself time to scale renewables without breaking its own industries along the way.
