On 9 October 2026, the Council of the European Union formally endorsed legislation strengthening the Market Stability Reserve (MSR) under EU ETS 2, the emissions trading system covering buildings, road transport and additional sectors. The measure aims to increase the resilience of the new carbon market to fluctuations in the supply and demand of allowances and to provide more stable price signals for decarbonisation investments. The full press release is available here, while the adopted legislative text can be found here.

The new rules adjust the operation of the Market Stability Reserve to enable a more effective response to potential surpluses of allowances in the market. The mechanism is intended to prevent imbalances that could reduce the effectiveness of EU ETS 2 as a key EU climate policy instrument.

Strengthening the MSR forms part of the EU’s broader efforts to ensure the smooth functioning of the new emissions trading system and support the achievement of climate objectives under the Fit for 55 package. A more stable market is also expected to improve predictability for businesses and investors. The measure confirms the commitment of EU institutions to ensuring that the expanded emissions trading system continues to provide effective long-term incentives for greenhouse gas emission reductions and investments in low-carbon technologies.

Following the Council’s approval, the legislative act will be published in the Official Journal of the European Union and will enter into force in accordance with the provisions of the adopted regulation.