Brussels, 23 September, (Brussels Morning Newspaper) – European Union countries have agreed to keep more spare carbon permits in the bloc’s emissions trading system in an effort to prevent sharp EU carbon price spikes, according to EU diplomats and a document seen by Reuters. The move forms part of a wider response to higher energy costs linked to the Iran conflict.
EU Countries Back Larger Carbon Permit Reserve
EU ambassadors agreed on Wednesday to change how surplus allowances are managed under the Emissions Trading System, or ETS. The system requires power plants and major industrial emitters to obtain permits covering their carbon dioxide emissions.
Under the agreed position, surplus allowances held in the Market Stability Reserve would no longer be automatically cancelled under the current 400 million-permit ceiling. Governments instead want to preserve a larger pool of allowances that could provide additional protection against future price increases.
The Commission first proposed changing the reserve mechanism in April. Its official figures show that the total number of allowances in circulation stood at 1,023,494,202 in 2025, resulting in 190,494,202 allowances being placed into the reserve between September 2026 and August 2027.
Current Carbon Prices Remain Below Safeguard Level
The latest Commission data provide context for the intervention.
For September, the average allowance price over the preceding six months was €75.99, compared with a two-year reference average of €70.68. The Commission calculated that the six-month average would have needed to reach €170.73 for the existing excessive-price safeguard under Article 29a to meet its activation condition.
That means the current safeguard has not been triggered, while governments are seeking to strengthen the system against possible future volatility.
EU Officials Address Industry and Carbon Costs
European Parliament lead negotiator Peter Liese has argued that the wider ETS overhaul can ease pressure on European businesses without abandoning emissions targets.
“It is possible to adapt a current scheme and give industry more breathing space without endangering the climate targets.”
Liese made the comments this month while proposing that governments direct more ETS revenues towards industrial decarbonisation. His proposal would allocate 75% of revenues to supporting domestic industry, compared with the Commission’s proposed 50%.
The Commission has also described its July ETS proposal as a measure intended to strengthen European industrial competitiveness while supporting delivery of the EU’s 2040 climate target. It said the reforms would reinforce the ETS as a driver of investment and increase support for industrial decarbonisation.
Energy Costs Increase Pressure for ETS Changes
The agreement comes as European governments confront elevated fuel and energy costs. Reuters reported that the Commission’s original proposal was part of the EU response to the surge in fuel prices caused by the Iran conflict.
Slovak Prime Minister Robert Fico this week called for an emergency EU summit over fuel prices, while France has expanded targeted assistance for households and sectors affected by higher fuel costs.
The carbon-market changes are therefore aimed at giving policymakers greater flexibility if EU carbon price volatility adds further pressure to industrial and electricity costs.
What Happens Next?
Wednesday’s agreement establishes the EU member states’ negotiating position rather than final legislation.
The European Parliament is developing its own position on the wider ETS revision, with negotiations between Parliament and EU governments expected after their respective mandates are finalised.
The final legislation will determine how many allowances remain available in the reserve and how the EU balances carbon-market stability, industrial competitiveness and its legally established emissions-reduction objectives.
