Brussels, 21 October 2025 – EU governments worried about high carbon prices are pushing the Commission to loosen the rules on the Market Stability Reserve (MSR), allowing more emissions allowances into the new ETS2 carbon market for road transport and buildings. Environmental groups warn that such a move would undermine the EU’s climate targets. The EEB and Carbon Market Watch (CMW) stress that the only sensible way to prevent high prices is to cut emissions now, not delay action.

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Weakening ETS2 would derail EU climate goals

“Allowing more emission permits to reduce high carbon prices is a short-sighted measure proposed by governments that have been too slow to tackle the real issue. High carbon prices reflect high fossil demand – that’s the root cause EU governments should address, not the symptom. While governments worry about high prices, gas boilers and internal combustion engine cars continue to be sold, fuelling fossil demand despite EVs and heat pumps being readily available.There are smarter ways to protect households without weakening climate action, such as giving early access to ETS2 revenues to invest in clean technologies before the carbon market begins, and redistributing revenues through targeted direct payments to citizens,”

said Luke Haywood, Head of Climate and Energy at the European Environmental Bureau.

“Rather than cave in to member states seeking to undermine climate action, the Commission must uphold the crucial environmental and social principles of ETS2. National governments don’t need to weaken this key policy as they already have it within their power to make the ETS2 price picture less daunting by undertaking socially targeted climate investments,”

said Emma Wikström, expert on carbon markets at Carbon Market Watch.

Frontloading ETS2 revenues: a smarter move

“We welcome the European Commission’s proposal to frontload ETS2 revenues via the European Investment Bank. Early access to these funds can help households switch to clean heating and transport, cutting emissions before the carbon market kicks in. The sooner these investments are made in fossil-free solutions, the lower ETS2 prices will be; and the smoother the transition for households and small businesses,”

said Luke Haywood.

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