18 February 2026, the Council (at EU ambassadors level) adopted its position on a targeted amendment of the market stability reserve for the new emissions trading system for buildings, road transport and other sectors (ETS2). The amendment aims to ensure a better price stability and predictability for a smoother start of ETS2 in 2028. The amendment does not change the overall design of the market stability reserve.
The market stability reserve helps address supply and demand imbalances in ETS2. It automatically adjusts the number of emission allowances available when prices fluctuate.
Highlights
The Council endorsed the European Commission’s proposal without changes, following a July 2025 initiative supported by 19 member states calling for a smooth start of ETS2.
To strengthen long-term market predictability and confidence, the Market Stability Reserve will be extended beyond 2030. The 600 million allowances held in the reserve – equivalent to around ten years of ETS2 emission reductions – will remain available for future release if needed.
The current price control mechanism triggers a release of 20 million allowances when the cost of carbon exceeds €45 per tonnes CO2 equivalent (in 2020 prices). The amendment adds a top-up of 20 million allowances to each release and provides for it to be triggered twice per year. This means that up to 80 million additional allowances can be injected into the market annually.
A more gradual and responsive release of allowances from the reserve will be introduced to safeguard market stability. This will help avoid abrupt supply shocks when the number of allowances in circulation falls between 210 and 260 million, and provide a more stable price signal to the market.
Next steps
The Cyprus presidency can now start talks with the European Parliament on the final text, once the latter has adopted its position, with the ambition of advancing negotiations as much as possible under its term.
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