European Union countries have agreed on a plan to retain more spare carbon emission permits as a buffer against sharp price increases. The proposal would change how the EU manages its emissions trading system, but it must still be negotiated with the European Parliament before it can take effect.
Under the EU’s carbon market, power plants and factories buy permits to cover their carbon dioxide emissions. Spare permits are held in a market stability reserve, which can supply additional permits when prices rise sharply. Currently, permits above a set reserve threshold are cancelled. The countries’ proposal would stop those cancellations until 2030, leaving more permits available as a potential price buffer.
The change follows a surge in fuel prices linked to the Iran conflict and requests from governments, including Poland and Italy, to limit the carbon market’s contribution to electricity costs. The emissions system is not the main cause of Europe’s rising energy prices, Reuters reported, but its effect varies by country and is greater where electricity generation relies heavily on fossil fuels.
From 2031, the countries propose cancelling permits if the reserve exceeds 800 million, with that threshold decreasing in later years. The final rules will depend on negotiations with the European Parliament.
