The number of reserve allowances on the European emissions trading market may increase by 75%. The Council and the Parliament of the European Union have provisionally agreed on this figure. The decision is driven by the need to smooth out spikes in the price of greenhouse gas emission allowances that polluting companies are obliged to pay for under the EU ETS emissions trading system.
This was reported by the European Commission.
The political agreement between the EU authorities is intended to make the carbon market more stable and resilient. The European Commission insisted on this in its proposals in April 2026, which were confirmed by the conclusions of the Council of the EU published last week.
An important factor is ensuring the competitiveness of the European economy, as businesses and governments have consistently complained about unpredictable financial pressure from the EU ETS.
Key change
Previously, the Market Stability Reserve (MSR) provided for the accumulation of a maximum of 400 million allowances. The surplus was cancelled.
After the changes, the EU ETS buffer will hold up to 700 million CO2 emission allowances.
The reserve makes it possible to balance the market: it reduces supply when there are too many allowances and increases it when their shortage on sale drives up the price.
Following the provisional agreement, the European Parliament and the Council of the EU will have to formally adopt the text. The amendment to the Market Stability Reserve Decision will then enter into force after publication in the Official Journal of the EU.
As a reminder, the European Commission had earlier planned to stop cancelling "excess" allowances altogether. The European Parliament did not support this, agreeing to raise the cancellation threshold to 650 million. However, some governments still intend to demand the abolition of the mechanism for removing "excess" allowances.
Under pressure from individual EU member states, on 17 July the European Commission presented a package of updates to the EU ETS, which some experts consider a weakening. The European Parliament is making its own adjustments. In particular, it wants to oblige member states to return more than 75% of emissions market revenues to the economy by supporting the decarbonisation of businesses.
