Carbon analysis — 2026-09-13

Carbon is no longer only a compliance cost for European emitters. Through CBAM, it is becoming an input into the landed cost of industrial goods sold into Europe — with 2026 liabilities accruing now but cash settlement beginning in 2027.

TL;DR

• EU allowances for December 2026 delivery traded around €85.4/t on 8 September, moving above €86 intraday on 9 September.
• UK allowances imply roughly £61.6/t, derived from published futures notional exposure rather than a direct ICE settlement print.
• California allowances imply approximately $32.9/t on 10 September, against $32.92 the previous session.
• The UKA figure sits above both the July government monthly average of £58.68 and the August average of £59.34.
• The definitive CBAM regime has been live since 1 January 2026. It is no longer in transitional reporting.
• CBAM certificate prices are calculated quarterly from the weighted average of EU ETS auction clearing prices: €75.36 in Q1 and €75.28 in Q2, with Q3 due on 5 October.
• Operators monitor 2026 emissions now, certificates become purchasable in February 2027, and the first 2026 declaration and surrender occurs by September 2027.
• Aluminium, iron and steel and hydrogen are charged on direct embedded emissions only. Indirect emissions from electricity are not presently included, though cement and fertilisers do include them.
• The Commission's 2026 default value for Australian unwrought aluminium is 1.870 tCO₂e per tonne of direct emissions; the Bahrain equivalent is 2.057.
• The UK and EU are negotiating ETS linkage, which both sides have said should create the conditions for mutual CBAM exemptions.

The Compliance Board

Prices are shown in native currency. Converting between them would introduce an FX assumption into what should be a clean policy comparison. The UKA and CCA figures are derived from published futures notional exposure rather than direct exchange settlement prints; the UKA derivation additionally requires conversion at a sterling rate of approximately $1.356/£.

The contracts are not directly comparable as investments. They are useful as policy-market benchmarks: each prices an allowance permitting one tonne of emissions within a different regulatory system.

Those gaps persisted for years without creating a direct trade problem, because carbon costs applied only to domestic production. A steelmaker in a jurisdiction with no carbon price simply faced no carbon price, and that difference stayed inside its own cost structure.

CBAM changes that arrangement, though less completely than is often assumed.

The Liability Accrues Now. The Cash Leaves Later.

The definitive CBAM regime took effect on 1 January 2026, ending the transitional reporting phase. Importers of covered goods are now accumulating real financial obligations rather than filing data returns.

The pricing mechanism links CBAM directly to the EU carbon market. The Commission calculates a quarterly CBAM certificate price from the weighted average of EU ETS auction clearing prices: €75.36 for the first quarter of 2026 and €75.28 for the second, with the third-quarter figure due on 5 October.

The gap between those certificate prices and the €85 secondary-market EUA price is worth noting. CBAM references auction clearing rather than futures, so the two series track each other without being identical, and an importer's obligation is set by the auction-derived figure rather than by the screen price.

The timing is the part most likely to be missed. Operators monitor 2026 emissions now. Certificates become purchasable from February 2027. The first declaration covering 2026 imports, and the surrender of certificates against it, occurs by September 2027.

An importer bringing aluminium or steel into the EU today is therefore accruing a liability that will not be settled in cash for more than a year.

That has two practical consequences. Landed-cost calculations that treat carbon as a 2027 expense are understating the cost of 2026 imports, because the obligation attaches to goods entering now. And importers carry genuine price exposure across the intervening period, since certificates will be purchased at quarterly auction averages that have not yet been determined.

Carbon has become an accrued industrial cost before it has become a cash cost. Many 2026 landed-cost models may not yet be treating it that way.

What This Means for Aluminium

Aluminium is one of the clearest examples of how carbon policy is entering industrial trade economics, but the mechanism is narrower than the metal's full carbon footprint.

Under the definitive CBAM regime, aluminium is currently assessed on direct embedded emissions. Indirect emissions associated with electricity consumption — a major component of primary aluminium's overall emissions intensity — are not presently included, although the European Commission is studying whether indirect-emissions coverage should ultimately be extended to additional CBAM sectors. Cement and fertilisers, by contrast, do include indirect emissions.

That makes CBAM a partial rather than complete equalisation of the carbon cost faced by European and overseas aluminium producers.

The numbers are nevertheless material. The Commission's 2026 default value for Australian unwrought aluminium is 1.870 tonnes of direct CO₂-equivalent emissions per tonne of aluminium, while the equivalent Bahrain default is 2.057 tonnes. At a €75 CBAM certificate price, that equates mechanically to roughly €140 to €154 per tonne of aluminium before adjustments.

Those figures should not be read as the final CBAM charge. The number of certificates ultimately surrendered is adjusted to reflect the continuing free allocation available to comparable EU producers, while qualifying carbon prices already paid in the country of origin can also reduce the liability.

The broader industrial point remains intact. Importers are now accumulating a carbon-linked liability on 2026 metal even though certificate purchasing does not begin until February 2027, so carbon belongs in landed-cost analysis today rather than when the cash leaves the business next year.

For aluminium, the next policy question may be even more consequential. If indirect electricity emissions are eventually brought into scope, CBAM would begin capturing a much larger part of the difference between hydro-, gas- and coal-powered primary aluminium. Until then, the mechanism principally targets direct process emissions rather than the full electricity-driven carbon intensity of the metal.

The UK Is Negotiating Its Position

The UK occupies an unusual position. Its carbon price remains below the EU level, leaving British exporters exposed to the EU CBAM framework even though they already incur a domestic carbon cost. That UK carbon price can be recognised when calculating the CBAM obligation, so the relevant economic exposure is not simply the full EU charge on top of UK ETS. A formal link between the two systems would go further by creating the conditions for mutual CBAM exemptions.

If linkage is achieved, the economic consequence runs in both directions. UK exporters would escape the border mechanism entirely, while UK-EU linkage would be expected to compress the allowance-price differential, although the extent and speed of convergence would depend on the final linkage design.

The current £61.6/t level is itself informative. It sits above both the July government monthly average of £58.68 and the August average of £59.34, so the market has firmed through a period when linkage talks have been active. Whether that reflects linkage expectations, tightening supply or broader energy-market conditions is not established by the price alone.

California Prices Carbon Differently

The Californian market sits at roughly $32.9/t, well under half the EU level, and its architecture is materially different from the EU ETS. The programme includes an annually increasing auction reserve price, an Allowance Price Containment Reserve and a formal price ceiling, which together constrain the range within which allowances trade. CARB reports that the programme covers approximately 80% of Californian greenhouse gas emissions.

Those design features contribute to the difference but do not mechanically determine it. Allowance supply, expectations about future caps, banking behaviour, sectoral mix and policy expectations all affect where the price sits.

For an American producer, the practical position is that most industrial output faces either the Californian price or no carbon price at all, since there is no federal US carbon market. That asymmetry is what CBAM exists to address, and it is why the mechanism matters more for transatlantic trade in covered goods than the headline price difference alone suggests.

Outlook

Base case: CBAM obligations accrue through 2026 without generating visible cash-flow impact, so the cost stays embedded in landed prices rather than appearing as a discrete line item. EU, UK and Californian prices remain widely divergent, and the first genuine test arrives with certificate purchasing in February 2027.

Upside risk to EU prices: Tightening allowance supply or stronger industrial demand lifts EUA, which mechanically raises the CBAM certificate price through the auction-average linkage and increases the charge on imported goods.

Downside risk: Weaker European industrial activity reduces allowance demand, softening both EUA and the derived CBAM price. UK-EU linkage, if achieved, would remove the border mechanism for UK goods while raising UK domestic compliance costs.

What would change the view: The Q3 CBAM certificate price on 5 October, any concrete progress in UK-EU linkage negotiations, and the Commission's conclusions on extending indirect-emissions coverage. The last would materially change the aluminium calculation.

Key Risks

• The UKA and CCA prices are derived, not settled. Both are inferred from published futures notional exposure rather than exchange settlement prints, and the UKA figure additionally depends on the FX rate used.
• CBAM certificate prices track auctions, not futures. The €75.28 Q2 figure sits well below the €85 secondary-market EUA price, so importers' obligations are set on a different basis from the headline carbon price.
• The accrual-to-settlement gap creates price exposure. Obligations accruing through 2026 will be settled from February 2027 at quarterly auction averages not yet determined.
• Default-value arithmetic is not the final charge. Free-allocation adjustments and recognition of origin carbon prices both reduce the certificates ultimately surrendered.
• Aluminium coverage is partial. Direct emissions only, which excludes the electricity intensity that dominates primary aluminium's footprint. Extension of indirect coverage would change the calculation substantially.
• UK-EU linkage cuts both ways. Exemption from the border mechanism would come alongside pressure on the allowance-price differential.

Intelligence Monitoring Points

• Q3 CBAM certificate price, due 5 October: calculated from weighted-average EU ETS auction clearing prices.
• EUA Dec-26: currently around €85.4/t, and the reference from which CBAM pricing derives.
• Indirect-emissions scope: whether the Commission extends coverage to aluminium, iron and steel and hydrogen.
• UK-EU ETS linkage negotiations: whether mutual CBAM exemption is agreed, and on what allowance-price terms.
• UKA against EUA: the spread is currently around 20%. UK-EU linkage would be expected to compress the allowance-price differential, although the extent and speed of convergence would depend on the final linkage design.
• CCA Dec-26: roughly $32.9/t, and the widest gap to European pricing among the major compliance systems.
• UK government monthly UKA averages: £58.68 in July and £59.34 in August, against the current derived futures level.
• February 2027 certificate purchasing: the first point at which accrued 2026 obligations become cash outflows.
• September 2027 declaration deadline: the first surrender of certificates against 2026 imports.

FAQ

What are the three compliance markets on the Bloodstone board? EU allowances (EUA), UK allowances (UKA) and California allowances (CCA), each on the December 2026 futures contract and each quoted in its native currency.

Why not convert them to a single currency? Because the spreads between these markets reflect policy differences, and converting them would fold an FX assumption into a comparison that should be about carbon pricing rather than exchange rates.

Is CBAM live? Yes. The definitive regime took effect on 1 January 2026, replacing the transitional reporting phase. Importers are accumulating real obligations on 2026 imports.

When do importers actually pay? Certificates become purchasable from February 2027, and the first declaration covering 2026 imports must be made with certificates surrendered by September 2027. The economic liability is current even though the cash settlement is more than a year away.

How is the CBAM price set? From the weighted average of EU ETS auction clearing prices, calculated quarterly. Q1 2026 was €75.36 and Q2 was €75.28, with Q3 due on 5 October.

Does CBAM capture aluminium's full carbon footprint? No. Aluminium, iron and steel and hydrogen are charged on direct embedded emissions only. Indirect emissions from electricity — the dominant component of primary aluminium's intensity — are not presently included, though cement and fertilisers do include them.

What would a CBAM charge on aluminium look like? The Commission's 2026 default for Australian unwrought aluminium is 1.870 tCO₂e per tonne of direct emissions, and 2.057 for Bahrain. At €75 per certificate that is roughly €140 to €154 per tonne gross, before free-allocation adjustment and any recognition of carbon prices already paid at origin.

Why does the UK price sit below the EU? The two systems are separate, with different supply trajectories. British exporters remain within the CBAM framework, though their domestic carbon cost can be recognised in the calculation, and linkage negotiations contemplate mutual exemption.

Why is California so much cheaper? Its market architecture includes an auction reserve price, a containment reserve and a price ceiling that constrain the trading range. Supply, cap expectations, banking and sectoral mix also contribute. There is no federal US carbon market, so most American industrial output faces no carbon price at all.

Bloodstone carbon pages: EU ETS Allowance (EUA) · UK ETS Allowance (UKA) · California Carbon Allowance (CCA)

Data and source note: EUA Dec-26 pricing as traded 8 and 9 September 2026. UKA and CCA Dec-26 prices are derived from published futures notional exposure rather than direct ICE settlement prints; the UKA derivation uses a sterling rate of approximately $1.356/£ as at 9 September 2026. UK monthly allowance averages are from UK government published statistics. CBAM certificate prices, regime timing, sectoral coverage, emissions scope and default values are from European Commission publications. Californian programme design and coverage are from California Air Resources Board publications. UK-EU linkage negotiation status is as reported through 13 September 2026.

Sources

• ICE EUA Futures
• ICE UKA Futures
• ICE California Carbon Allowance Futures
• European Commission — Price of CBAM certificates
• European Commission — CBAM definitive regime
• European Commission — CBAM legislation and guidance
• UK Government — UK ETS trigger prices and average monthly prices
• California Air Resources Board — Cap-and-Trade Program

This document is published by Bloodstone Research for informational and institutional research purposes only. It does not constitute investment advice, an investment recommendation, an offer or solicitation to buy or sell any financial instrument, commodity or security, or a forecast of future performance. Market conditions and data may change without notice. Readers should conduct their own analysis and, where appropriate, seek independent professional advice before making investment decisions. For institutional enquiries contact research@bloodstonecapital.co.uk.