--- description: "Council and Parliament provisionally agreed to keep invalidating EU ETS reserve allowances, but above 700 million instead of 400 million. Not law yet." title: "EU ETS market stability reserve: what the provisional deal on invalidating allowances would change" image: "https://greenfineprint.com/card/articles/eu-ets-market-stability-reserve-invalidation.png?v=3vg944" url: "https://greenfineprint.com/articles/eu-ets-market-stability-reserve-invalidation" --- Decode 6 min read # EU ETS market stability reserve: what the provisional deal on invalidating allowances would change By [Clara Christ](https://greenfineprint.com/editors/clara-christ) and [Cenker Karagöz](https://greenfineprint.com/editors/cenker-karagoz) Published 25 Oct 2026 Status as of 25 Oct 2026 What changed Nothing in law yet. On 20 October 2026 the Council of the EU and the European Parliament provisionally agreed to keep invalidating allowances held in the market stability reserve, but above 700 million instead of today's 400 million; the European Commission had proposed to stop invalidation. Who is affected Indirectly, through the allowance market: operators of installations, aircraft operators and shipping companies in the EU ETS, and EU countries, whose auction volumes the reserve draws on. What to do Nothing is required now. The deal is about the reserve, and until the amending decision is adopted and in force the 400 million rule applies. Deadline None. The 700 million threshold would apply after formal adoption Part of [EU ETS](https://greenfineprint.com/regulations/eu-ets) In force Change pending In force since 25 October 2003 The Council of the EU and the European Parliament provisionally agreed on 20 October 2026 to keep invalidating surplus [allowances](https://greenfineprint.com/glossary/emission-allowance) held in the EU Emissions Trading System's (EU ETS) [market stability reserve](https://greenfineprint.com/glossary/market-stability-reserve), but only above 700 million allowances instead of 400 million [1](#src-1)[2](#src-2). The European Commission had proposed, in COM(2026) 153, to stop invalidation altogether [3](#src-3). The agreement is provisional, not law: both institutions still have to endorse it and formally adopt it, and until the amending decision is adopted and in force, today's 400 million rule applies [1](#src-1)[2](#src-2)[3](#src-3). The law in force is on our [EU ETS hub](https://greenfineprint.com/regulations/eu-ets). ## What did the Council and Parliament agree? They provisionally agreed to keep the invalidation of allowances in the reserve, with a higher threshold of 700 million allowances [1](#src-1). In the Council's words, the higher threshold would enter "into immediate effect, after the proposal is formally adopted" [1](#src-1). The two institutions reached the deal on 20 October 2026, and the Council announced it on 21 October 2026 [1](#src-1). The deal changes one rule of the market stability reserve (MSR), the EU ETS tool that takes allowances out of EU countries' auctions when too many are in circulation and releases them when too few are [2](#src-2). The reserve's rules are in the MSR Decision ([Decision (EU) 2015/1814](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02015D1814-20240101)). Its Article 1(5a) says that from 2023, allowances held in the reserve above 400 million "shall no longer be valid" [2](#src-2). In the Council's words, they are "invalidated and removed from the market" [1](#src-1). The Commission counts 3.2 billion emission allowances invalidated this way by the end of 2024 [3](#src-3). The two institutions also agreed that "a gradual decrease of the invalidation threshold should be included in the context of the wider ETS review" [1](#src-1). As far as the Council's release shows, that decrease isn't part of this act: it is left to the broader review of the EU ETS, which the Council is still discussing [1](#src-1). Our [Decode of the EU ETS review proposal](https://greenfineprint.com/articles/eu-ets-review-changes) covers what the Commission proposed there. ## How does it compare with today's law and the Commission's proposal? The agreement sits between today's law and the Commission's proposal. The "Today's law" column is law; the proposal and the agreement are not. | Provision | Today's law | Commission proposal, 1 April 2026 (not law) | Provisional agreement, 20 October 2026 (not law) | | ------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | | Invalidating allowances held in the reserve | Yes: allowances above the threshold "shall no longer be valid" \[2\] | Stops: Article 1(5a) "shall cease to apply" \[3\] | Stays: "the invalidation mechanism will still be in place" \[1\] | | Threshold | 400 million allowances \[2\] | None, since nothing would be invalidated \[3\] | 700 million allowances \[1\] | | From when | From 2023; the Commission says the threshold has been fixed at 400 million since 2024 \[2\]\[3\] | From the date the amending decision enters into force \[3\] | "immediate effect, after the proposal is formally adopted"; no date given \[1\] | | Later cut in the threshold | None in the law \[2\] | Not part of the proposal \[3\] | A gradual decrease to be dealt with in the wider ETS review, not in this act \[1\] | | The reserve's other rules | Allowances go in when more than 833 million are in circulation; 100 million come out when fewer than 400 million are \[2\] | Unchanged: the proposal doesn't change "the overall design of the MSR" \[3\] | Unchanged: the amendment "does not alter the overall design of the MSR" \[1\] | _Sources: Decision (EU) 2015/1814 as in force; Commission proposal COM(2026) 153 of 1 April 2026; Council press release of 21 October 2026_ [1](#src-1)[2](#src-2)[3](#src-3)_. We couldn't find the agreed text, and the Council's release doesn't include it, so the right-hand column rests on the Council's release only_ [1](#src-1)_._ Yes, the threshold would rise to 700 million, but the two 400 million figures in today's law are different rules [1](#src-1)[2](#src-2). Article 1(5a) counts allowances held in the reserve and sets the invalidation threshold; Article 1(6) counts allowances in circulation and triggers a release of 100 million [2](#src-2). The Council's release mentions only the invalidation threshold [1](#src-1). Parliament voted on the proposal on 15 September 2026 and sent it back to its committee for negotiations with the Council [4](#src-4). This page compares the law, the proposal and the agreement; it doesn't set out Parliament's own amendments. ## Why did the Commission want to stop invalidation? The Commission argues that invalidation has done its job. It says the reserve removed the historical surplus of allowances, and that 3.2 billion allowances had been invalidated by the end of 2024 [3](#src-3). Its review concluded that, in the next decade, the reserve should hold more than 400 million allowances so that it can release them to balance the market [3](#src-3). The Commission's reasoning is about future scarcity. It says a larger reserve could act as "a liquidity buffer for managing future market tightness from the mid-2030s and beyond" [3](#src-3). It also says continued invalidation is forecast to increase scarcity, "leading to higher prices both today and in the future" [3](#src-3). In its public consultation, the change most often rated important was raising the invalidation threshold above 400 million [3](#src-3). The Council presents the deal as a compromise. It says the agreement keeps "a safeguard against excessive oversupply of allowances" while giving the reserve "a larger buffer for future market fluctuations" [1](#src-1). The Council puts the total invalidated since 2023 at "over 3 billion" allowances [1](#src-1). Neither source puts a figure on the effect on the allowance price. ## What does it mean for companies in the EU ETS? The deal changes the reserve, not what companies have to do. The Commission's proposal adds one paragraph to Article 5 of the MSR Decision, and the Council says the agreed amendment is "targeted" [1](#src-1)[3](#src-3)[5](#src-5). Our reading: operators of installations, aircraft operators and shipping companies keep [surrendering allowances](https://greenfineprint.com/glossary/surrender-of-allowances) under the same rules, and any effect on them would come through the supply of allowances and their price. The reserve reaches companies through the supply of allowances. What it takes in depends on the total number of allowances in circulation, which counts allowances issued to installations, shipping companies and aircraft operators [2](#src-2). Allowances that aren't invalidated stay in the reserve and could later be released to the market [2](#src-2)[3](#src-3). EU countries are affected through their auctions. Allowances placed in the reserve are deducted from the volumes EU countries auction [2](#src-2). The Commission says its proposal may affect national budgets indirectly, through auction revenues, and would make prices more predictable for EU countries [3](#src-3). ## Is it law yet, and what happens next? No. The Council says the provisional agreement "still needs to be confirmed by both institutions before formal adoption" [1](#src-1). The Council gives the next steps: "The provisional agreement will now have to be endorsed by the Council and the Parliament. It will then be formally adopted by both institutions following legal-linguistic revision." [1](#src-1) Parliament's procedure file doesn't show the deal yet. On 25 October 2026 it still listed the file as "Awaiting Parliament's position in 1st reading", with no event after 15 September 2026 [4](#src-4). As proposed by the Commission, the amending decision would enter into force on the third day after its publication in the Official Journal of the EU [3](#src-3). The agreed text could change that. Until the amending decision is adopted and in force, Article 1(5a) applies as it stands: allowances held in the reserve above 400 million are no longer valid [2](#src-2). ## What is still open? Three things aren't settled yet. * We couldn't find the agreed text, so everything on the deal here comes from the Council's press release, which doesn't include the text [1](#src-1). * The start date isn't known: the Council says only that the 700 million threshold takes effect "after the proposal is formally adopted", so the date from which it counts depends on when that happens [1](#src-1). * The path below 700 million is left open: a gradual decrease of the threshold is to be settled in the wider ETS review, which is still under discussion within the Council [1](#src-1). ## What can I do now? You don't need to do anything because of this agreement: it isn't law, and it would change the reserve rather than your obligations [1](#src-1)[3](#src-3). * You can follow the endorsement and formal adoption in Parliament's [procedure file 2026/0085(COD)](https://oeil.secure.europarl.europa.eu/oeil/en/procedure-file?reference=2026/0085%28COD%29) and in the Council's press releases. * You can read the [Council's press release of 21 October 2026](https://www.consilium.europa.eu/en/press/press-releases/2026/10/21/ets-market-stability-reserve-council-and-parliament-reach-provisional-agreement-on-targeted-amendment/) and the [Commission's proposal](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52026PC0153) for their full text. * You can check what applies today on our [EU ETS hub](https://greenfineprint.com/regulations/eu-ets), which takes on the change once it is adopted and published. This is general information, not legal advice. For decisions about your company, check with a lawyer or adviser. ## References 1. [Council of the EU, press release: ETS market stability reserve: Council and Parliament reach provisional agreement on targeted amendment](https://www.consilium.europa.eu/en/press/press-releases/2026/10/21/ets-market-stability-reserve-council-and-parliament-reach-provisional-agreement-on-targeted-amendment/) · Council of the European Union OFFICIAL 2. [Market Stability Reserve Decision, Article 1](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02015D1814-20240101#art%5F1) · EUR-Lex OFFICIAL 3. [Commission proposal COM(2026) 153](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52026PC0153) · European Commission OFFICIAL 4. [Legislative Observatory procedure file 2026/0085(COD)](https://oeil.secure.europarl.europa.eu/oeil/en/procedure-file?reference=2026/0085%28COD%29) · European Parliament OFFICIAL 5. [Market Stability Reserve Decision, Article 5](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02015D1814-20240101#art%5F5) · EUR-Lex OFFICIAL [Clara Christ](https://greenfineprint.com/editors/clara-christ) [Cenker Karagöz](https://greenfineprint.com/editors/cenker-karagoz) ## More on EU ETS [Open the EU ETS hub →](https://greenfineprint.com/regulations/eu-ets) PROPOSAL COM(2026) 616 In force Change pending ### [EU ETS review 2026: what the Commission's proposal would change, for whom and from when](https://greenfineprint.com/articles/eu-ets-review-changes) What the Commission's July 2026 EU ETS review proposal would change for installations, ships, flights, waste incinerators and EU countries, and from when. 16 min read DIRECTIVE 2003/87/EC In force Change pending ### [EU ETS for shipping: what shipping companies must surrender, and who pays](https://greenfineprint.com/articles/eu-ets-shipping) EU ETS for ships of 5,000 gross tonnage and above carrying cargo or passengers to or from EU ports: which voyages count, what to surrender and who pays. 13 min read DIRECTIVE 2003/87/EC, ART. 10A AND 10B In force Change pending ### [EU ETS free allocation: benchmarks, the carbon leakage list and how free allowances are cut](https://greenfineprint.com/articles/eu-ets-free-allocation) How EU ETS free allowances are worked out for 2026-2030: benchmarks, the carbon leakage list, the 20% conditions, the CBAM factor and two pending proposals. 15 min read ```json {"@context":"https://schema.org","@graph":[{"@type":"WebSite","@id":"https://greenfineprint.com/#website","name":"Green Fine Print","url":"https://greenfineprint.com/","inLanguage":"en","publisher":{"@id":"https://greenfineprint.com/#publisher"}},{"@type":"NewsMediaOrganization","@id":"https://greenfineprint.com/#publisher","name":"Green Fine Print","url":"https://greenfineprint.com/","logo":{"@type":"ImageObject","url":"https://greenfineprint.com/card/logo.png","width":512,"height":512}},{"@type":"NewsArticle","@id":"https://greenfineprint.com/articles/eu-ets-market-stability-reserve-invalidation#article","mainEntityOfPage":"https://greenfineprint.com/articles/eu-ets-market-stability-reserve-invalidation","url":"https://greenfineprint.com/articles/eu-ets-market-stability-reserve-invalidation","headline":"EU ETS market stability reserve: what the provisional deal on invalidating allowances would change","description":"Council and Parliament provisionally agreed to keep invalidating EU ETS reserve allowances, but above 700 million instead of 400 million. 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