Council adoption is complete

The Council formally adopted amendments to the ETS2 market stability reserve on 9 October. The changes are intended to improve liquidity and contain excessive allowance-price increases ahead of the system's planned full launch in 2028.

The Council says the decision must be signed and published in the Official Journal and enters into force on the twentieth day after publication. This report does not assign an entry-into-force date before that publication is verified.

The price-control mechanism

The amendment doubles the allowance release from 20 million to 40 million when the specified EUR 45 trigger, expressed in 2020 prices, is exceeded. It also extends the reserve beyond 2030 and makes releases more gradual when circulation falls below 260 million allowances.

ETS2 concerns buildings, road transport and additional sectors, with obligations placed upstream on fuel distributors. It is distinct from ETS1 and from the carbon border mechanism.

What the safeguards mean

T&M analysis: a larger allowance release can moderate a price surge, but it is not a guarantee that carbon costs remain below a fixed price. Businesses should retain more than one carbon-cost assumption in budgets and commercial contracts.

The important exposure question is where a business sits in the fuel supply chain and how costs could pass through. A company affected indirectly through purchased fuel is in a different position from the entity responsible for surrendering allowances.