Governments Seek Stability Ahead of 2028 Rollout
European Union countries have agreed to strengthen a financial safeguard aimed at preventing sharp spikes in carbon prices before a new emissions trading system covering road transport and buildings comes into force in 2028.
The updated system, known as ETS2, will place a carbon price on fuels used for cars, vans and heating. Once fully operational, households and businesses that rely on fossil fuels are expected to face higher costs. That prospect has already triggered political tension across the bloc.
Some governments, including Slovakia and the Czech Republic, have pushed to delay the new carbon market until at least 2030, citing concerns about the social impact on citizens. Meanwhile, Sweden, Denmark, Finland, the Netherlands and Luxembourg have publicly opposed any postponement, warning that further delays could weaken the EU’s climate ambitions.
In a joint letter dated 18 February, the five countries cautioned that tinkering with the market-based pricing mechanism would undermine confidence and create uncertainty for businesses and households planning long-term investments.
Strengthening the “Safety Valve”
At the heart of the new agreement is an extension and adjustment of the EU’s Market Stability Reserve — a mechanism designed to keep supply and demand for carbon allowances balanced and prevent extreme price swings.
The expansion of carbon pricing to road transport and buildings was agreed in 2023 as part of the EU’s broader climate legislation. The goal is to cut emissions from these sectors by 42% by 2030 compared with 2005 levels. Originally scheduled to begin in 2027, the rollout was delayed by a year after concerns about its social consequences gained traction.
Under the revised plan, the reserve will continue operating beyond 2030. Around 600 million carbon allowances — roughly equivalent to a decade’s worth of emission reductions — will remain available as a buffer. If prices rise sharply, these allowances can be released into the market.
Currently, 20 million allowances are triggered when the carbon price exceeds €45 per tonne of CO₂ (based on 2020 prices). The new rules double the potential response: an extra 20 million allowances can be released each time, and interventions can happen twice a year. In total, up to 80 million allowances could be added annually to ease pressure.
Cyprus’ environment minister, Maria Panayiotou, speaking on behalf of the EU presidency, said the move sends a clear signal that the bloc is committed to a predictable and resilient carbon market.
Balancing Climate Goals and Social Pressures
The price-stabilisation changes come alongside a €3 billion early disbursement from the European Investment Bank aimed at helping address rising energy bills. Lawmakers in the European Parliament had pressed for stronger safeguards to protect vulnerable households during the green transition.
Wopke Hoekstra, the European Commissioner for Climate, Net Zero and Clean Growth, said the measures are designed to reinforce both stability and affordability within the new system. The goal, he added, is to ensure authorities can step in quickly if prices climb too high.
The Council’s position must now be examined by the European Parliament, which will need to approve the final framework before ETS2 officially launches in 2028.
