European carbon prices moved higher in Wednesday’s session after the European Commission presented its proposal to reform the Market Stability Reserve (MSR), confirming earlier media reports that only limited adjustments would be made.

The EUA Dec ’26 contract climbed strongly, briefly touching €74.91—its highest level since 12 February—before closing at €74.64. This represented a daily gain of €2.13 and marked a fifth consecutive session of increases, underscoring continued bullish sentiment in the market.

On this occasion, the EU executive has opted to revise the MSR Directive to halt the automatic invalidation mechanism, a minimal change described as a targeted adjustment to a single parameter “without affecting its overall design.”

“In the next decade, the reserve should have larger holdings than the current 400million limit, to allow for releases to balance the market. Therefore, the invalidation of allowances held in the reserve should be stopped to allow for a larger number of allowances to remain in the reserve,” according to the explanatory memorandum.

While the carbon market reacted with rising prices, the decision drew mixed reactions across the EU. The goal is to “send a signal that we are serious about keeping prices stable,” a senior EU official told reporters on Wednesday, quotes by EUobserver.

However, some critics argued that the proposal represents a step back in climate ambition. “It’s like amputating someone’s arm when they have a headache,” said Green MEP Michael Bloss, adding that “The problem for industry is not the high price of CO2 , but the high cost of fossil gas. Instead of setting the course for phasing out fossil fuel emissions, the Commission is creating a surplus”.

Yesterday’s proposal is “a welcome first step” as posted by Adolfo Aiello, deputy director general of Eurofer — the lobby for European steelmakers, anticipating further reform proposals in the nearest future. 

According to Bloomberg, quoting an EU official, “the European Commission expects to propose soon after Easter updated industrial product benchmarks that will determine how free ETS allowances are allocated from 2026 to 2030”.