EU to Remove 190 Million Carbon Allowances from Market to Support ETS Stability
The European Commission has confirmed that 190.5 million EU Emissions Trading System (EU ETS) allowances will be transferred into the Market Stability Reserve (MSR) between September 2026 and August 2027, reinforcing efforts to maintain a stable carbon market and support long-term decarbonisation investments across Europe.
The decision follows the publication of the latest Total Number of Allowances in Circulation (TNAC), which showed a surplus of 1.02 billion allowances in 2025. The TNAC serves as the key indicator determining the operation of the MSR, the mechanism designed to address imbalances in the EU carbon market by adjusting the supply of emission allowances.
Under the rules governing the MSR, the current surplus level triggers the automatic withdrawal of 190,494,202 allowances from auction volumes over a 12-month period beginning on 1 September 2026. The reduction in auction volumes is expected to be reflected in updated auction calendars scheduled for publication around July 2026.
The Commission reported that the MSR held 400 million allowances as of 1 January 2026 following the invalidation of surplus allowances. Current legislation stipulates that allowances held in the reserve above this threshold are no longer valid.
The EU ETS remains the European Union’s flagship climate policy instrument, covering emissions from power generation, industry, aviation and, since 2024, maritime transport. According to the Commission, verified emissions under the system totalled approximately 19.57 billion tonnes of CO₂ equivalent between 2013 and the end of 2025.
Market data also highlights the scale of the scheme, with more than 8.77 billion allowances auctioned and over 9.22 billion allowances allocated free of charge to industrial sectors since 2013.
The MSR was introduced to strengthen the resilience of the EU carbon market by automatically adjusting allowance supply in response to market conditions. By reducing surplus allowances, the mechanism aims to preserve a meaningful carbon price signal and provide greater certainty for low-carbon investments.
In April 2026, the Commission proposed amendments to the MSR framework that would halt the current allowance invalidation mechanism. However, until any legislative changes are formally adopted and enter into force, the reserve will continue to operate under existing rules.
The next TNAC assessment, which will determine MSR operations for the subsequent period, is scheduled to be published by 1 June 2027.
