[Regulatory Update] EU Council and Parliament Reach Provisional Agreement to Strengthen the ETS2 Market Stability Reserve — Expanding Capacity to Intervene During Price Surges
ETS2's institutional design is progressing ahead of its full launch in 2028, and the MSR is an important mechanism for responding to sharp swings in allowance prices. For companies affected by the carbon price through fuel costs in buildings and road transport, it is important to track not only the allowance price itself but also the design of the market stability mechanism; understanding the MSR's design, rather than just the broad framing of "ETS2 is starting", makes it easier to grasp the cost impact on companies.
Related Regulation Information
EU Emissions Trading System (EU ETS)
The EU Emissions Trading System (EU ETS) is the central pillar of Europe's climate policy and the world's largest cap-and-trade carbon market, designed to cut greenhouse gas emissions in the most cost-effective way possible. Under the Fit for 55 package and the European Green Deal, the EU ETS aims to cut emissions from covered sectors by 62% by 2030, compared with 2005 levels. The system covers power plants, large energy-intensive industries such as steel and cement, intra-European aviation, and, since 2024, the shipping sector. The overall emissions cap for covered installations is lowered gradually each year. Companies obtain emission allowances through auctions or free allocation and freely trade any surplus or shortfall on the market. The EU ETS is designed as the counterpart to the Carbon Border Adjustment Mechanism (CBAM), together forming the most powerful economic regulatory framework driving decarbonization across international supply chains.
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