Negotiators aim to stabilize the carbon market before its full implementation in heating and road fuels sectors by 2028. A recent agreement between EU Council and European Parliament negotiators introduces measures to limit volatility, ensuring smoother adoption of the next carbon market. This deal aims to mitigate drastic price changes while encouraging governments to support households and promote cleaner energy solutions.
The provisional agreement modifies the market stability reserve for ETS2, the EU’s second emissions trading system, improving balance between supply and demand. With ETS2 extending carbon pricing to fuel distributors for buildings and transport, price stability is crucial to avoid becoming a cost-of-living issue.
Key changes include extending the market stability reserve beyond 2030 and doubling the release of allowances when carbon prices exceed €45 per tonne of CO2 equivalent. The agreement also seeks gradual allowance releases to prevent market instability.
The deal requires approval from the Council and Parliament, with legal checks before ETS2’s full operation in 2028. ETS2, part of the EU’s Fit for 55 climate package, targets a 42% emissions reduction in covered sectors by 2030. Its success hinges on social fairness, particularly for regions lacking alternatives to fossil fuels.
A clause directs ETS2 auction revenues towards climate and energy transition efforts. This focus pressures member states to invest in renovations, cleaner transport, and direct support rather than using funds as general budget relief. Civil-society groups have urged for the consistent and ambitious rollout of ETS2 with appropriate safeguards.
This agreement finalizes ETS2’s reserve rules. Its effectiveness will be assessed when carbon prices intersect with national support schemes and household energy costs. Success relies on maintaining incentives to reduce fossil fuel usage while ensuring affordable transition for the public.
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