Trading Strategies in EU Carbon Markets

Jun 16, 2025

SparkChange tracks the carbon hedging activity of companies responsible for around 50% of EU ETS emissions and 40% under the UK ETS. This report provides a sectoral overview based on the latest financial and sustainability disclosures.

Utilities remain the most advanced in carbon hedging. Nearly all major players hedge their generation spreads, and thus their carbon exposure. Following a dip in 2022 due to energy market volatility, most have resumed systematic hedging, though with variation. On average, utilities hedged~60% of year-ahead generation, 30% for Year+2, and 10% for Year+3.

Airlines are facing a sharp increase incompliance obligations due to rising emissions and the phase-out of free allocations by 2026. Most major carriers hedge carbon prices, with low-cost airlines typically more proactive. There is a loose correlation between carbon cost as a share of EBITDA and hedge ratios.

Industrial companies show highly varied approaches. Some, especially in steel, have hedged out to 2030. Others have reverted to spot buying. In 2024, several companies  expanded hedging to cover all projected liabilities through the decade.

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