Under the EU Emissions Trading System, or EU ETS, certain companies must surrender enough emission allowances to cover their emissions. The number of allowances on the market gradually declines, and the balance between supply and demand affects their price. The market stability reserve acts as a safeguard: it withdraws surplus allowances from the market or, under defined rules, can return them to circulation.
On 23 September, the Council of the EU agreed its position on a targeted amendment to the system. It proposes temporarily suspending, until the end of 2030, the invalidation of allowances held above the current threshold of 400 million. Those allowances would remain in the reserve, creating more room to respond if the market later becomes too tight.
From 1 January 2031, the Council proposes a new threshold of 800 million allowances. The aim is to improve market liquidity and predictability as the supply of available allowances continues to decline. A larger reserve does not itself determine future market prices, but it can give the system greater capacity to absorb sudden imbalances.
This is the Council's negotiating position. Negotiations with the European Parliament will follow, with a final agreement targeted by the end of 2026. The proposal is distinct from a separate initiative concerning additional free allowances for certain energy-intensive industries: this measure addresses the overall market reserve and the treatment of surplus allowances.