MEPs back amendments to EU carbon market stability reserves for ETS1 and ETS2

Strasbourg, 15 September

MEPs set out their position on reforming the market stability reserve (MSR) for ETS1
Changes to MSR for ETS2 for buildings, road transport and other sectors adopted
Main review of EU ETS to drive competitiveness and decarbonise cost-effectively is ongoing

On Tuesday, Parliament voted on two separate proposals to support market stability in the European emissions trading systems ETS1 and ETS2.

Market stability reserve for ETS1

Under the EU emissions trading system (ETS) as it currently operates all allowances held in the reserve above a threshold of 400 million are cancelled. The Commission has proposed to end this invalidation mechanism, allowing the allowances to be kept as a buffer to support market stability.

To ensure the orderly functioning of the European carbon market and the MSR, increase long-term market predictability, and contribute to and align with the EU’s 2040 and 2050 climate targets, MEPs are proposing keeping the invalidation mechanism but raising its threshold from 1 February 2027 from 400 to 650 million allowances. This would maintain a sufficiently large buffer to absorb supply and demand imbalances, while avoiding the possible excessive build-up of allowances in the reserve that could occur under the Commission’s proposal.

Plenary backed the changes by 367 votes to 240, and with 59 abstentions. Parliament is now ready to start negotiations with Council on the final text.

Rapporteur Pierfrancesco Maran (S&D, IT) said: “Today’s vote strikes the right balance between climate ambition and industrial competitiveness. Raising the invalidation threshold and setting a clear date for entry into force gives the MSR the necessary flexibility while safeguarding the EU ETS. The agreement supported by a broad majority sets the scene for the ETS revision, proving that ambitious climate and industrial policies can go hand in hand.”

MSR for the ETS2 for buildings, road transport and additional sectors

In a separate vote, Parliament adopted (467 for, 158 against, 41 abstentions) the provisional agreement with Council to amend the MSR for the EU emissions trading system for buildings, road transport and additional sectors (ETS2) to cushion consumers against sharp price swings.

Once adopted by Council, it will enter into force 20 days after it has been published in the EU Official Journal.

Rapporteur Danuše Nerudová (EPP, CZ) said: “Europe must do more to shield households from the potential negative social impacts of ETS2. This revision will strengthen price stability for citizens. It underlines that member states must give priority to activities to address the social effects of the ETS2 when they spend its auction revenues and assess the prolongation of the current price control mechanism. The Commission will also assess by October 2027 the application ETS2 to buildings, road transport and other sectors and the appropriateness of the current measures to protect vulnerable households.”

Background

The MSR has been operational since 2019 to address the structural imbalance between the supply of and demand for allowances in the EU ETS. The MSR aligns the supply of emissions allowances in the ETS more closely with demand by reducing or increasing the total number of allowances in circulation to stabilise the market.

Parliament is also working on a Commission proposal to revise the EU ETS to drive competitiveness and decarbonise cost-effectively.

Further information

Source – EU Parliament

MEP Vondra: EU Parliament should back Commission plan to prevent ETS price spikes

Strasbourg, 15 September 2026

Ahead of today’s vote on the EU Emissions Trading System’s Market Stability Reserve, ECR Shadow Rapporteur Alexandr Vondra is calling on the European Parliament to reject the compromise adopted by the Environment Committee and support the European Commission’s original proposal to end the automatic invalidation of allowances held in the reserve.

Under the committee’s position, allowances above a threshold of 650 million would continue to be permanently removed from the market from 1 March 2027. The Commission instead proposes to stop invalidation, allowing the reserve to provide a larger buffer against future market imbalances, scarcity and price spikes.

Speaking in the debate on Monday, Vondra said:

High energy prices are one of the biggest headaches facing Europe today. They hurt households, businesses and industry, and they are one of the reasons why we are falling behind competitors such as the United States and China.”

“We need a stable and predictable carbon market. That means avoiding artificial scarcity of allowances and reducing the risk of sudden price spikes. On this occasion, the Commission understood the problem and came forward with a simple and sensible proposal to stop the invalidation of allowances in the Market Stability Reserve.

Unfortunately, the compromise agreed in the Environment Committee moves away from that approach and preserves a mechanism that permanently removes allowances from the market. At a time when European industry is already under enormous pressure, we should not be creating additional risks of scarcity and higher costs.

Parliament has the opportunity to correct this. I will urge colleagues to reject the committee compromise and stand behind the Commission proposal. It is the reasonable way forward if we are serious about stable prices, competitiveness and protecting Europe’s industrial base.”

Source – ECR