The Council of the EU and the European Parliament reached a provisional agreement on October 20, 2026, to raise from 400 million to 700 million the threshold above which emissions allowances in the EU Market Stability Reserve (MSR) are invalidated.
The reserve is part of the EU Emissions Trading System (ETS). Under current rules, allowances above the threshold are permanently removed from circulation to prevent oversupply. Raising the threshold will allow more allowances to remain in the reserve, providing an additional buffer against potential shortages and sharp price fluctuations.
According to the Council, the change is intended to help the reserve respond to market conditions, including possible supply constraints after the mid-2030s as the EU’s overall emissions cap continues to fall. More than 3 billion allowances have been permanently removed from the market since the invalidation mechanism was introduced in 2023.
The European Commission had proposed suspending invalidation indefinitely, but the Council and Parliament agreed to keep the mechanism with the new threshold. They also agreed to consider a gradual reduction in the threshold as part of a broader review of ETS and MSR rules.
The provisional agreement must be approved by the Council and the European Parliament. It will then undergo legal and linguistic revision before formal adoption.
There are no comments yet.