The European Securities and Markets Authority has published its third annual market report on EU carbon markets, highlighting the key role of financial intermediaries in the market. Financial intermediaries provide liquidity, act as counterparties, and help compliance entities access allowances and manage price risk. In 2025, investment firms and credit institutions accounted for around 62% of overall trading volumes in the EU carbon market. The EU carbon market rose to €777 billion in 2025, driven by strong trading activity and higher prices. However, in early 2026, prices fell 29% over three months and volatility reached a two-year high due to different expectations over future EU ETS rules and market conditions. Despite this, the market remains resilient with no major concerns identified on transparency or market integrity. The annual average price of EU emission allowances was up 13% from 2024, and auction revenues rose by 11% despite a slight decrease in the volume of allowances auctioned. ESMA recommends making Legal Entity Identifiers mandatory for all trading accounts, including for the upcoming ETS2, as progress on their availability remains limited. The authority will continue to monitor the carbon markets and support the legislators in their future endeavors. The report provides valuable insights into the EU carbon market, and ESMA's recommendations aim to further strengthen the market's integrity and transparency.