There is no single carbon price. For businesses buying energy, materials or imported goods, that distinction is becoming harder to ignore.
What is a carbon price?
A carbon price puts a cost on greenhouse gas emissions. Under an emissions trading scheme, covered businesses must surrender allowances for their emissions. They can obtain those allowances at auction or on the market, where prices move with supply and demand. A carbon tax works differently: the government sets the charge.
Voluntary carbon credits are different again. They generally represent a claimed reduction or removal of emissions, rather than permission to emit under a regulated scheme.
There were 41 emissions trading systems in force worldwide in 2026. The EU and UK have separate allowance markets; California and Québec share one, while other US states operate different schemes. Australia also has tradable instruments, including Australian Carbon Credit Units and Safeguard Mechanism Credits.
A tonne of carbon dioxide may be a standard unit, but there is no standard price for it. The cost a business faces depends on where it operates, what it buys and which rules apply.
Why do carbon prices move?
The EU Emissions Trading System offers a useful example. Its average auction price fell from €83.60 a tonne in 2023 to €64.74 in 2024, then rose to €73.43 in 2025. For a company buying allowances on a particular date, or agreeing a supply price months ahead, the annual average tells only part of the story.
Demand for allowances changes with industrial output and the fuels used to generate electricity. A cold, still period can mean more fossil fuel generation; stronger renewable output can have the opposite effect. Policy is always a moving target, as governments expand the list of activities that are covered by the carbon credit systems, market demand tends to rise. Governments decide how many allowances enter the market and which activities the rules cover. The EU has brought maritime transport into its scheme, adding another source of demand.
The same forces do not affect every market in the same way. The UK, for example, increased its auction reserve price from £22 to £28 in 2026. An EU allowance price cannot be used as a proxy for a UK allowance price, let alone for a credit traded in Australia.
How can carbon prices affect a company that does not buy allowances?
Often through its suppliers. A steel or aluminium producer may face a carbon cost and recover some of it from customers. The charge might appear separately on an invoice or be included in the material price. What matters to the buyer is whether that price can change between placing an order and taking delivery.
Imports bring another route of exposure. The EU’s Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase in January 2026. It covers selected goods, including products in the steel, aluminium, cement and fertiliser sectors. CBAM certificate prices are linked to EU allowance auction prices, using quarterly averages in 2026 and weekly averages from 2027. The UK plans to introduce a separate CBAM in January 2027.
Carbon costs can therefore reach businesses that have no direct obligation to buy emissions allowances. How much of that cost reaches a buyer depends on the product, the supplier and the terms of the contract.
How can a business work out its carbon price exposure?
Start with its operations and purchases. Does it run a facility covered by an emissions trading scheme? Does it import goods covered by CBAM? Do supplier quotes contain a carbon surcharge or a clause allowing the price to change?
For each charge, establish which market price or formula is used, when the price is fixed and who bears any increase before delivery. For imported goods, the product’s customs classification is an important part of checking whether CBAM applies. The rules establish who has a regulatory obligation; the contract determines how costs are shared with a customer.
The official starting points are the EU ETS guidance, UK ETS participation guidance, European Commission’s EU CBAM guidance and UK government’s CBAM policy summary.
Carbon costs are entering more purchasing decisions. Knowing which price sits behind a charge, and who pays when it moves, gives a business a clearer view of its exposure.
If you are interested in protecting your business against carbon price increases through insurance, contact ChAI to discuss your exposure and the options available.
