Countries Move to Prevent Price Surges
EU member states have agreed to reinforce a mechanism designed to prevent sudden spikes in carbon prices as the bloc prepares to launch a new carbon tax covering cars, vans, and buildings. The updated system, known as ETS2, is scheduled to take effect in 2028, and the changes aim to keep the carbon price stable and predictable for households and businesses relying on fossil fuels.
While Slovakia and the Czech Republic have pushed to delay the tax until 2030 due to concerns about its social impact, Sweden, Denmark, Finland, the Netherlands, and Luxembourg have opposed any postponements. In a joint letter, they warned that delaying or weakening the system could undermine EU climate policy and create uncertainty for investors and consumers.
Reinforcing the Market Stability Reserve
The decision centers on the EU’s Market Stability Reserve, a long-term tool that manages the supply of carbon allowances to prevent market shocks. The reserve currently holds 600 million allowances — roughly ten years’ worth of emission reductions — which can be released if prices rise too sharply.
Under the new rules, each release will increase from 20 million to 40 million allowances, with the option to release them twice a year. This means up to 80 million allowances could be added annually to temper extreme price fluctuations, ensuring smoother implementation of the ETS2 system.
Balancing Climate Goals and Consumer Protection
The ETS2 system, introduced in 2023 as part of the EU’s climate law, aims to cut emissions from transport and buildings by 42% by 2030 compared with 2005 levels. Its launch was initially scheduled for 2027 but was delayed to address concerns about social impacts.
Officials stress that these changes provide a clear signal that the EU is committed to a stable carbon market while protecting affordability. The Council’s decision will now be reviewed by the European Parliament, which must approve the final rules before the new system starts in 2028. The move comes alongside a €3 billion frontload from the European Investment Bank to help vulnerable households manage rising energy costs.
