The Commission’s thinking is that by allowing spare permits to remain in the system if carbon pricing spikes too high in the years to come, it will balance them — a welcome change for Italy, Poland, Austria, and other allies who led calls for reexamining the ETS in light of the energy crisis wrought by the U.S.-Israeli war in Iran.
The Commission said Wednesday that the ETS remained “a key driver for decarbonisation,” but added that “in light of recent challenges, the EU ETS needs to be modernised and made more agile.”
The market reserve was first introduced in 2015 to boost the carbon price by removing permits once they reached a certain number. That was because in the early years of the ETS, the carbon price was stubbornly low due to a surplus of permits in the market.
Environmental watchdogs and EU diplomats who opposed opening up the ETS have said the changes could lead to more pollution and increased emissions in the bloc, in favor of pleasing industry players.