EU ETS Reform: What the MSR Proposal Means for Buyers

The EU ETS Market Stability Reserve reform is a proposal to change what happens to surplus carbon allowances held in reserve. It does not guarantee lower carbon prices or remove companies’ compliance duties. On 23 September 2026, EU ambassadors agreed the Council’s negotiating position; agreement with the European Parliament is still required. 1

For procurement and sustainability teams, the useful response is to separate carbon-price assumptions from the emissions data behind purchasing decisions. This briefing explains the position as checked on 25 September 2026, and sets out a practical way to assess exposure without treating a legislative proposal as an immediate change in supplier costs.

What the Council wants to change

The Council proposes suspending the cancellation of surplus allowances in the reserve until the end of 2030. From 1 January 2031, its position would raise the invalidation threshold to 800 million allowances, compared with the current 400 million. The Commission’s proposal instead envisages stopping invalidation indefinitely. These are negotiating positions, not a final amendment. 1

The distinction between retaining allowances and releasing them matters. The reserve adjusts auction supply according to the number of allowances in circulation. Under the existing framework, allowances above the applicable reserve threshold are cancelled permanently; retaining them would keep a larger stock available for possible future release under the rules. It would not automatically send that entire stock into the market. 2

For an internal briefing, describe the development as a change under negotiation to the management of the reserve. Avoid statements such as “the EU has cut the carbon price” or “suppliers will now receive cheaper allowances”. Neither follows from the announcement.

What continues to apply to businesses

The EU ETS remains a cap-and-trade system. Operators within its scope monitor and report emissions and surrender allowances against those emissions. Allowances are tradable, and their price is determined by the market. The reserve is one part of this system, rather than a substitute for the underlying compliance framework. 3

This creates three distinct questions for a company assessing a supplier’s quotation:

Question	Evidence to request	Decision it supports
Is the supplying operation directly covered by the EU ETS?	Relevant installation and activity information	Whether direct compliance costs are relevant
Is the supplier passing through a carbon-related cost?	Contract clause, calculation basis and revision mechanism	Whether the proposed charge follows the contract
Could lower emissions improve the purchasing position?	Comparable production data and a credible reduction plan	Whether supplier engagement or a different specification is worthwhile

This is a suggested procurement review, not an additional regulatory reporting requirement. Keep responsibility for interpreting legal coverage with the appropriate compliance team.

Why the discussion matters for CBAM imports

CBAM connects the carbon cost of covered imports to the EU framework. Its definitive regime applies from 1 January 2026 and creates obligations for in-scope importers relating to authorisation, declarations and certificates. A debate about the ETS reserve does not, by itself, change which goods a company imports or establish that those goods fall outside CBAM. 4

There is a concrete pricing link. The Commission calculates CBAM certificate prices from EU ETS auction prices. For 2026, the methodology uses quarterly averages; weekly prices apply from 2027. Certificate purchases start from February 2027, although the relevant imported goods and emissions can relate to 2026. 5

The planning implication is that a carbon-price assumption and a supplier’s embedded-emissions figure should remain separate inputs. Changing one should not silently change the other. A spreadsheet that hides both inside a single “carbon surcharge” makes it difficult to explain whether a purchasing decision is responding to emissions performance, market prices or contractual allocation of costs.

For suppliers in Asia, start with the products and production routes involved, rather than assuming every export to Europe has the same exposure. MindTrust’s guide to CBAM emissions data from Asian suppliers covers the data discussion in more detail.

How to review supplier costs without forecasting the market

Use the following approach as an internal decision framework. It is not a carbon-price forecast or a substitute for a full CBAM calculation.

First, identify the commercial decision: renewing a supply contract, comparing quotations or assessing an emissions-reduction project. A useful analysis answers that decision rather than attempting to predict the whole carbon market.

Second, document the baseline. Record the relevant product, purchase volume, production site, emissions basis and the party contractually responsible for any carbon-related charge. Flag unknowns explicitly. Do not interpret a supplier’s company-wide footprint as a product-specific figure without checking the methodology and boundary.

Third, test several internally approved carbon-price assumptions against the same underlying purchasing information. Keep the assumptions labelled and separate from observed prices. Ask whether the preferred option changes across the range, and which missing evidence could change the conclusion.

Fourth, challenge pass-through claims. If a supplier requests a price increase because of carbon costs, ask how much of the increase comes from emissions, allowance prices, the timing of purchases and the agreed contract terms. Do the same when someone promises a future discount based on the proposed reform.

Finally, assign a review trigger. Reopen the analysis when a relevant legal text is adopted, a contract is renewed or better supplier data becomes available. Do not rebuild it after every headline unless the decision is sensitive to that development.

Keep emissions-reduction decisions grounded in operations

Our practical recommendation is to evaluate supplier projects against their operational benefits and execution requirements as well as carbon exposure. Ask what equipment or process would change, who controls it, how the baseline was established and how the result would be measured.

For an energy-efficiency proposal, examine the energy bill, capital requirement, production constraints and delivery responsibility. For a material change, examine technical approval, quality, availability and the evidence behind the claimed footprint. Keep any carbon-cost benefit visible as a separate assumption rather than using it to disguise a weak operating case.

A project may remain attractive across several price scenarios; another may depend heavily on a particular assumption. Both findings are useful. The objective is to understand the dependency before committing money or promising a reduction to customers.

What to watch next

The next legislative step is negotiation between the Council and Parliament; the Council has stated an ambition to conclude this file by the end of 2026. Treat that as an objective, not a guaranteed adoption date. 1

Maintain a short record of the adopted rules, proposals being monitored and assumptions used in purchasing decisions. Give each an owner and a last-checked date. That makes it easier to update the analysis when the legal position changes without rewriting the supplier programme around every political announcement.

If you need to connect supplier emissions data with a practical decarbonisation roadmap, talk to our team.

Sources

1. Council of the European Union, Market stability reserve: Council agrees targeted amendment for a resilient and predictable carbon market, 23 September 2026. Read the announcement.
2. European Commission, Market Stability Reserve, accessed 25 September 2026. Read the explanation.
3. European Commission, About the EU ETS, accessed 25 September 2026. Read the overview.
4. European Commission, Carbon Border Adjustment Mechanism, accessed 25 September 2026. Read the overview.
5. European Commission, Price of CBAM certificates, accessed 25 September 2026. Read the pricing methodology.