The European Commission has announced a package of reforms to the EU’s new Emissions Trading System for buildings and road transport, known as ETS2, seeking to reinforce price stability and investor confidence ahead of the market’s launch in 2027.
The changes come after 19 member states urged Brussels to strengthen safeguards for the fledgling carbon market, which will extend emissions pricing to heating and transport fuels.
While the Commission declined to publish regular market data—a key request from several capitals—it endorsed a series of structural adjustments aimed at enhancing predictability.
The overhaul, unveiled on Tuesday, is intended to help ease the transition to cleaner heating and transport fuels, offering an additional incentive for citizens and small businesses on the ground.
To start with, the volume of safeguard allowances released when prices exceed $52 (€45) per tonne of carbon dioxide equivalent (CO2e) will double to 40 million per intervention, with the cap now applicable twice per year.
The measure could inject as many as 80 million allowances annually between 2027 and 2029 if prices surge, according to ClearBlue Markets.
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In a bid to accelerate funding for green projects, the Commission also advanced the start of ETS2 allowance auctions to mid-2026, giving member states earlier access to carbon revenues.
The Market Stability Reserve (MSR)—designed to manage supply imbalances—will now remain in force beyond 2031, meaning that allowances unused at the end of 2030 will be retained in the reserve.
An extended buffer mechanism will allow more gradual releases when liquidity tightens, softening potential price swings.
Additionally, a new Frontloading Facility, established with the European Investment Bank (EIB), will pre-finance investments in energy efficiency and sustainable mobility.
The tool targets support for lower-income households to bolster political backing for the transition.
The Commission said the measures can be introduced without amending the ETS Directive, and its services will prepare the necessary legal proposals for swift adoption in the coming weeks.
Read more: ETS2 Carbon Market Needs Certainty, Not Delays, IETA Warns
