SmarterMarkets™ Weathering Decarbonization Episode 2 | Mark Lewis, Partner and Managing Director, Climate Finance Partners LLC
Feb 14, 2026
Mark Lewis, Partner and Managing Director at Climate Finance Partners and carbon markets specialist. He breaks down EU ETS mechanics and recent price shocks. He explores who holds allowances, why industry is feeling pressure, and policy levers like free allocation, offsets and CBAM. He also outlines how compliance markets 2.0 could shift price discovery across heavy industry and regions.
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LRF Tweaks Mostly Affect Late 2030s
- Changing the linear reduction factor from 4.4% to 3.4% only shifts most extra supply into the late 2030s.
- The cap would fall to zero around 2042 instead of 2039, so near-term supply impact is limited.
Link Free Allowances To Decarbonization Pledges
- Regulators should tie any extension of free allowances to binding decarbonization commitments from industry.
- That ensures companies invest in low-carbon technologies instead of relying on prolonged protection.
Industrials Hold Most Surplus Allowances
- Around 70% of the accumulated surplus (TNAC) is likely held by industrial firms, not utilities.
- Utilities hold fewer surpluses because they were never heavily overallocated and typically buy allowances on the market.
