Aug 1, 2026 · 49 min · 13 segments
Our *Summer Playlist* rolls on this week with Mark Lewis, Partner and Managing Director at Climate Finance Partners LLC. David Greely sits down with Mark to discuss the recently released European…
Mark LewisGuest
David GreelyHost
I know many people in the carbon markets were holding their breath waiting on this report.
Now we're recording this 10 days after the publication by the European Commission, and I think the Commission was really balancing two main policy priorities.
Number one... which what's been playing out over the last six months, this growing sense of urgency amongst many member states and amongst European industry, that there is a crisis of European industrial competitiveness.
And the Commission had to be very conscious of that in the proposals that it put forward, and we can get into that.
And on the other hand, of course, there is the overriding policy objective, which is how does the Commission make the European carbon market fit for the next decade between 2031 and 2040 in order to enable the EU to meet, number one, its 2040 climate target, which is 90% emissions reduction target versus 1990 levels.
And number two, ensure that beyond 2040 and on to 2050, we're still on a trajectory that allows the EU to hit net zero, which is legally enshrined in EU law, by 2050.
So those, I would say, are the three kind of big picture issues that the EU was grappling with when it put this forward.
And before we get into those specifics, as you said, it's only been about 10 days.
But broadly speaking, how is the market receiving this report? And are you seeing it as bullish or bearish for the carbon market?
I mean, I think on the day that it was launched, and typically these things are put out by the commission around midday European time.
And what you saw on the day of publication was in the morning, prices came off to maybe even three euros at the low in the morning before the paper was published.
And by the end of the day, we were back to kind of where we had been the night before.
But I think what captured all the headlines on the day of publication, and that's what explains why the market was perhaps weaker in the earlier part of the day as we were getting leaks about what was going to be in it, was the headline about the linear reduction factor.
Currently, we're on a trajectory, the cap is falling very sharply to 2030, 4.3% until 2028, and then 4.4%.
So what the market was always going to be most focused on, I think, was how does the decline in the trajectory of the cap over 2031 to 2040, as put forward in the proposal by the commission, compare with the current rate of decline? And what the commission said there was, we will reduce it slightly.
I know many people in the carbon markets were holding their breath waiting on this report.
Now we're recording this 10 days after the publication by the European Commission, and I think the Commission was really balancing two main policy priorities.
Number one... which what's been playing out over the last six months, this growing sense of urgency amongst many member states and amongst European industry, that there is a crisis of European industrial competitiveness.
And the Commission had to be very conscious of that in the proposals that it put forward, and we can get into that.
And on the other hand, of course, there is the overriding policy objective, which is how does the Commission make the European carbon market fit for the next decade between 2031 and 2040 in order to enable the EU to meet, number one, its 2040 climate target, which is 90% emissions reduction target versus 1990 levels.
And number two, ensure that beyond 2040 and on to 2050, we're still on a trajectory that allows the EU to hit net zero, which is legally enshrined in EU law, by 2050.
So those, I would say, are the three kind of big picture issues that the EU was grappling with when it put this forward.
And before we get into those specifics, as you said, it's only been about 10 days.
But broadly speaking, how is the market receiving this report? And are you seeing it as bullish or bearish for the carbon market?
I mean, I think on the day that it was launched, and typically these things are put out by the commission around midday European time.
And what you saw on the day of publication was in the morning, prices came off to maybe even three euros at the low in the morning before the paper was published.
And by the end of the day, we were back to kind of where we had been the night before.
But I think what captured all the headlines on the day of publication, and that's what explains why the market was perhaps weaker in the earlier part of the day as we were getting leaks about what was going to be in it, was the headline about the linear reduction factor.
Currently, we're on a trajectory, the cap is falling very sharply to 2030, 4.3% until 2028, and then 4.4%.
So what the market was always going to be most focused on, I think, was how does the decline in the trajectory of the cap over 2031 to 2040, as put forward in the proposal by the commission, compare with the current rate of decline? And what the commission said there was, we will reduce it slightly.
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