The European Commission (EC) has proposed changes to the Market Stability Reserve (MSR) to reinforce the stability and predictability of the EU Emissions Trading System (ETS) (EC press release, 01/04/2026).
The Commission stated that the amendment would stop the invalidation of allowances above 400 million, allowing them to be kept as a buffer to support market stability. Under the current system, all allowances in the reserve above 400 million are invalidated. The Market Stability Reserve reduces the surplus of allowances to the market when there are too many in circulation and injects allowances when there is market scarcity. The Market Stability Reserve has been operational since 2019 and had invalidated 3.2 billion allowances by the end of 2024.
“Mainly thanks to the ETS, domestic emissions in the EU dropped by 39%, while the economy grew by 71% between 1990 and 2024. In a context of heightened energy price volatility and geopolitical tensions, the Commission is working with Member States to ensure the ETS is a stable tool that continues to deliver these benefits while remaining robust, predictable and fit for purpose”, according to the statement. The EU aims to cut its GHG emissions by at least 55% by 2030 compared to 1990 levels.
The proposal will now be submitted to the European Parliament and the Council under the ordinary legislative procedure. A comprehensive review of the EU ETS will follow in July 2026, including any relevant adjustments to keep the MSR fit for purpose in the next decade.
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