In Tuesday’s session, EUA Dec’26 briefly dropped below €65—a level not seen since April last year—before closing at €66.65, down 3.41% day-on-day, as markets continued to absorb political signals ahead of the 19–20 March European Council meeting.

Speaking to reporters at a meeting of environment ministers, EU Climate Commissioner Wopke Hoekstra confirmed that the Commission plans to address the Market Stability Reserve (MSR) in the coming months. While no detailed timeline was provided, he signalled that the MSR review will precede the EU ETS review, currently anticipated toward the end of the semester.

In a letter this week, European Commission President Ursula von der Leyen also mentioned that the executive “will present a proposal to increase the firepower of the Market Stability Reserve, so that it can more effectively address excessive price volatility and keep prices in check in the short term.” Furthermore, the Commission is planning “to accelerate work on the upcoming ETS revision, notably to set out a more realistic decarbonisation trajectory beyond 2030.”

With no concrete measures yet announced by the executive, analysts are largely left to rely on speculation. According to S&P Global Energy Horizons, potential adjustments to the Market Stability Reserve (MSR) could involve reducing the intake rate—the share of the Total Number of Allowances in Circulation (TNAC) placed into the reserve—from 24% to 12%.

“Current estimates indicate this adjustment would release approximately 42 million EUAs into the market at the end of 2026 alone,” said Danylo Babkov, carbon analyst at S&P Global. A similar view was expressed by Stefan Kermer, founder of analytics company Carbon Insights, also quoted by S&P Global. “The MSR at 12% is the key element. It adds supply and weakens the absorption mechanism simultaneously.”

Peter Liese, an influential member of the European Parliament and former lead rapporteur for the overhaul of the EU Emissions Trading System (ETS) under the ‘Fit for 55’ package, also signalled support for changes to the MSR intake. “The market stability reserve must be amended as soon as possible to allow for more allowances,” Liese said, adding that another possible solution would be to reduce the linear reduction factor from 4.4% to 3.4%.

The European carbon market remained on a downward trajectory on Wednesday, with losses moderating compared to the prior session. Allowances are expected to remain sensitive to developments and headlines around political intervention.