Governments Seek to Calm Fears Over Rising Bills
European Union countries have agreed to strengthen a key safeguard in the bloc’s carbon market, aiming to prevent sharp price spikes before a new carbon charge on road transport and buildings comes into force in 2028.
The upcoming system — known as ETS2 — will expand the EU’s emissions trading framework to cover fuels used in cars, vans and home heating. While designed to cut pollution, it is expected to raise costs for households and businesses that rely on fossil fuels, prompting growing political tension across the bloc.
Some governments are uneasy about the social consequences. Slovakia and the Czech Republic have called for a delay until at least 2030, arguing that families could struggle with higher energy and transport bills. On the other side, Sweden, Denmark, Finland, the Netherlands and Luxembourg have warned against watering down or postponing the reform, saying it would weaken EU climate policy and create uncertainty for investors.
To ease concerns, member states have now agreed to extend and reinforce a mechanism that can step in if carbon prices rise too sharply.
Strengthening the Safety Valve
At the heart of the decision is an update to the EU’s Market Stability Reserve — a long-term tool that adjusts the supply of carbon allowances to keep the market balanced.
Originally introduced to deal with excess allowances and price volatility, the reserve will now remain active beyond 2030 and play a bigger role in cushioning potential shocks under ETS2. The carbon market expansion, agreed in 2023 as part of the EU’s climate law, aims to reduce emissions from transport and buildings by 42% by 2030 compared with 2005 levels. The start date was initially set for 2027 but was postponed amid concerns about its social impact.
Under the revised rules, the EU will have greater flexibility to release allowances into the market if prices surge. Currently, 20 million permits are released if the price exceeds €45 per tonne of CO₂ (based on 2020 prices). The new agreement doubles the potential intervention, allowing up to 80 million allowances per year to be injected into the system if needed.
Roughly 600 million allowances — considered a substantial buffer — will remain available to stabilise the market in case of sudden pressure.
Balancing Climate Goals and Affordability
EU officials say the changes send a message that the bloc is serious about both climate ambition and economic stability. By reinforcing the “safety valve,” policymakers hope to reassure citizens and businesses that price spikes will not spiral out of control.
The move follows a recent €3 billion frontloading by the European Investment Bank to help address rising energy costs, reflecting mounting pressure from lawmakers who want stronger protections for vulnerable households.
Before the updated rules take effect, the European Parliament must review and approve the Council’s position. If adopted, the strengthened safeguards will accompany ETS2 when it launches in 2028 — an effort to ensure the green transition remains both credible and manageable for Europeans.
