The EU carbon market will gain more flexibility: the reserve threshold will be raised to 700 million.

On October 20, the European Parliament and the Council reached a provisional political agreement on modifying the Market Stability Reserve (MSR) of the ETS. The agreement opts for a more restrained approach than the European Commission's proposal, maintaining the invalidation of emission units above a higher threshold instead of eliminating it entirely. This aims to preserve the effectiveness of the EU's carbon emission reduction system while avoiding unpredictability and excessive costs for European industry. The MSR was established in 2019 to address structural imbalances between supply and demand in the carbon market. The current rules invalidate units above 400 million, but the new agreement raises this threshold to 700 million, providing a buffer against market disruptions. The comprehensive reform of the ETS remains ongoing, with further reviews planned to align the MSR rules with the overall emissions trading system.