EU member states and the European Parliament have reached a provisional deal to change a key safety valve in the new emissions trading system covering buildings and road transport, ahead of its full launch in 2028.
The agreement concerns the market stability reserve, a mechanism designed to balance supply and demand in ETS2 by adjusting the number of carbon allowances available, the Council of the EU announced on Thursday.
ETS2 is the EU’s second emissions trading system and will apply to fuel distributors supplying the buildings and road transport sectors and certain other sectors, which will have to surrender allowances matching the emissions linked to the fuels they sell.
What will change in the reserve
The deal would extend the lifetime of the market stability reserve beyond 2030, the Council said.
It would also strengthen a price control measure by doubling, from 20 million to 40 million, the number of allowances that can be released when the cost of carbon exceeds €45 per tonne of CO₂ equivalent, measured in 2020 prices.
The provisional agreement also sets out a more gradual release of allowances when the number in circulation falls below 260 million, to avoid sudden shifts linked to hitting a fixed threshold.
Cyprus environment minister Maria Panayiotou said the changes would “reduce price volatility” and help the system respond to “unwarranted price increases.”
Under the deal, the European Commission’s future review of the reserve would consider how many allowances remain inside it.
A separate review of ETS2 is also set to include an assessment of the price stability mechanisms and the market stability reserve rules.
The text includes a reference to using revenues from ETS2 allowance auctions for climate and energy transition measures in buildings and road transport, in line with existing EU provisions.
The agreement now needs formal endorsement by the Council and the European Parliament before it can be adopted, following a legal and linguistic check.
