The European Union is taking concrete steps to reduce chaotic fluctuations in carbon prices within the EU Emissions Trading System (EU ETS). On April 1, the first of these measures was announced—it concerns adjustments to the Market Stability Reserve (MSR).
As emphasized by the European Commission, the proposal follows a statement by President Ursula von der Leyen at a recent European Council meeting.
Ending the cancellation of excess allowances
The Market Stability Reserve acts as a buffer to maintain the stability of the carbon market. It is used to add new allowances when there is a shortage and to reduce them when there is a surplus.
Under the proposed change, surplus allowances were canceled if the reserved amount exceeded 400 million. The new amendment will halt this mechanism.
The benefit of EU ETS
The European Commission has again assured that the Emissions Trading System is a key decarbonization tool within the EU. As an added benefit, it has reduced the European Union’s dependence on fossil fuels, thereby strengthening member states’ resilience amid global energy crises.
Overall, greenhouse gas emissions in the European Union have already decreased by 39% while economic indicators have increased by 71%. This refers to the period from 1990 to 2024.
That is why EU ETS stability is crucial for the bloc, so the authorities are working with member states to ensure the carbon market’s stability.
The MSR stabilization proposal will be submitted for consideration by the European Parliament and the European Council, after which it will come into effect according to standard procedure.
The European Commission promises that in July 2026 there will be a comprehensive review of the Emissions Trading System.
EcoPolitic previously reported that the President of the European Commission announced four measures to improve the carbon market, which take into account the current needs of industry.
These announcements came amid a debate on the effectiveness of the EU ETS and its unjustifiably high pressure on business.
