The EU's carbon pricing mechanism, primarily driven by the EU Emissions Trading System (EU ETS), has seen a tenfold increase in carbon prices between 2017 and 2021, exceeding €80 tCO₂⁻¹. This surge is attributed to both regulatory reforms and actors' increased foresight. While regulatory changes, such as the Market Stability Reserve (MSR) reform and the 'Fit for 55' package, have played a role, the primary driver is the enhanced credibility of policymakers' long-term commitment to climate targets. This credibility has made actors more farsighted, leading to earlier and more extensive planning for future emissions reductions. Model results support this hypothesis, showing that historical carbon prices can be better explained by myopic actors, while recent price increases require farsighted actors. The study also explores the potential impact of a crisis undermining policy credibility, suggesting that carbon prices could plummet, endangering the energy transition. Overall, the findings highlight the importance of policy credibility in shaping actors' behavior and the sustainability of the EU ETS's effectiveness.The EU's carbon pricing mechanism, primarily driven by the EU Emissions Trading System (EU ETS), has seen a tenfold increase in carbon prices between 2017 and 2021, exceeding €80 tCO₂⁻¹. This surge is attributed to both regulatory reforms and actors' increased foresight. While regulatory changes, such as the Market Stability Reserve (MSR) reform and the 'Fit for 55' package, have played a role, the primary driver is the enhanced credibility of policymakers' long-term commitment to climate targets. This credibility has made actors more farsighted, leading to earlier and more extensive planning for future emissions reductions. Model results support this hypothesis, showing that historical carbon prices can be better explained by myopic actors, while recent price increases require farsighted actors. The study also explores the potential impact of a crisis undermining policy credibility, suggesting that carbon prices could plummet, endangering the energy transition. Overall, the findings highlight the importance of policy credibility in shaping actors' behavior and the sustainability of the EU ETS's effectiveness.