In April, the European Commission launched a 12-week public consultation as part of its evaluation of the EU Emissions Trading System (EU ETS) and the Market Stability Reserve (MSR), with a legislative proposal expected in the third quarter of 2026.

PGE, Poland’s largest energy company and the operator of Bełchatów, the EU ETS’s highest-emitting lignite power plant, has put forward several proposed changes to the current system parameters, including:

• Reducing the intake rate from the current 24% to 12% after 2030. The intake rate refers to the proportion of allowances transferred to the Market Stability Reserve (MSR) when the Total Number of Allowances in Circulation (TNAC) exceeds 1,096 million.

• Suspending the invalidation rule, which currently cancels allowances in the Market Stability Reserve (MSR) that exceed the 400 million threshold. According to PGE, “these allowances could be used to stabilize the market in the future or to support the financing of the EU’s climate policies.”

• Revising the Total Number of Allowances in Circulation (TNAC), which determines whether allowances are absorbed into the MSR, as it is “not an effective indicator reflecting market liquidity.” TNAC includes allowances effectively unavailable due to market participants’ banking strategies, thereby amplifying market tightening.

• Introducing flexible derogation mechanisms to account for “the expected rise of emissions due to defence spending.”

• Increasing market transparency and introducing position limits to curb speculative activities.

• Simplifying the mechanism designed to prevent major price shocks (Article 29a).

• Continuing free allocation to district heating beyond 2030.