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CARBON TRADING REFORM PUTS 20 BLN-EURO UTILITY WINDFALLS AT RISK - CITI

Citi warns that growing political pressure over energy affordability is reviving calls to reform Europe’s carbon market – a shift that could bite into utility profits.

The EU Emissions Trading System (ETS) has been a major earnings tailwind for clean power producers, with Citi estimating CO2‑linked windfall profits for the sector could reach about 20 billion euros ($23.1 billion) by 2030, roughly 20% of which is generated by listed utilities.

Every 10 euro-per-tonne move in carbon prices, however, would mean an around 2% hit to sector net income, the bank says.

While an outright ETS suspension looks unlikely, Citi flags a 17% earnings haircut in such a scenario.

The most exposed names include Verbund and Endesa in Western Europe, alongside Hidroelectrica and CEZ in eastern Europe, all rated Sell.

With rising consumer anger, industrial pushback, and governments hunting for ways to ease bills, Citi argues that “managing the CO2 price” may become policymakers’ simplest lever.

For an earlier Reuters story on the carbon market reform risks for Europe's utilities, read here: AI-fuelled optimism meets policy risks for European clean energy stocks.

($1 = 0.8648 euros)

(Danilo Masoni)

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