A squeeze market is created when supply is withheld and demand increases causing the market to rise. If as a player you hold the marginal supply you can in effect dictate the price. In commodities this type of market occurs regularly, for example coffee producers can have a bad year in Kenya and a good year in Costa Rica, the production in Kenya is greater than Costa Rica and so the Costa Ricans can squeeze the market.

The EU ETS (European Union Emissions Trading Scheme) are setting out proposals for the Phase II NAP (National Allocation Plan) and they have stated that they want to make the scheme bite more than Phase I. This is normal it is business improvement, however, the scheme works on three principle supply sources, EU ETS- trading, JI joint implementation specific projects in developing countries, and CDM (Clean Development Mechanisms) specific projects in developed countries. Phase I has seen the EU ETS grow and develop and because the level of emitting is within the noise of doing business the scheme has worked because the trading volumes are manageable. Phase II's bite is causing players to look more carefully at CDM and JI projects, this is good but has one main problem, it require investment and time, and quite often the projects will not deliver the emissions allowances for sometime, the result is the potential for a squeeze as players clamber to buy allowances on the open market.