This week the EU Council announced that it had reached its negotiating position on amending the market stability reserve (MSR) under the EU emission trading system or EU ETS 1 (click here). The EU Parliament recently published its negotiating position (click here) following the EU Commission’s original proposals made in April 2026 (click here).
The Council’s proposals deviate from those set out by the Parliament in several areas. Regarding the EU emissions allowances (EUAs) invalidation mechanism, where the Parliament would keep it running under its proposal, the Council would like to suspend it until the end of 2030 and then reinstate it. The Parliament proposes raising the invalidation threshold from 400 million to 650 million allowances, whereas the Council has proposed not to cancel any allowances until the end of 2030 and then apply a higher threshold of 800 million. The Parliament's higher threshold would take effect on 1 February 2027, while the Council's proposed suspension would run from the entry into force of the amending decision until the end of 2030, with its new 800 million threshold starting on 1 January 2031.
Finally, the Parliament's text does not address an annual decrease of the threshold, whereas the Council states that an annual decrease should be added to the Commission's July 2026 ETS review proposal, which is currently being examined by the co-legislators (click here).
The EU Council and Parliament will now begin negotiations for the final text. The announcement states that the EU Council aims to conclude negotiations by the end of 2026.
