# EU Emissions Trading: Agreement on the Market Stability Reserve > EU Parliament and Council provisionally agree to raise the Market Stability Reserve invalidation threshold to up to 700 million allowances. Source: https://www.mtrlegal.com/en/eu-emissions-trading-agreement-market-stability-reserve/ · Language: en · Updated: 2026-10-29 --- ## Provisional Agreement on the Market Stability Reserve The [European Commission](https://ec.europa.eu/commission/presscorner/detail/de/ip_26_2206) welcomes the provisional political agreement reached by the European Parliament and the Council on a targeted amendment to the Market Stability Reserve under the EU Emissions Trading System. On 20 October 2026, the two institutions agreed to adjust the rules governing the invalidation of emission allowances. The amendment is intended to strengthen the stability and long-term resilience of the European Union’s carbon market. The political agreement does not yet conclude the legislative process. The agreement still requires formal adoption by the [European Parliament](https://www.mtrlegal.com/wiki/europaeisches-parlament/) and the Council. ### Threshold to Be Raised to up to 700 Million Allowances The agreement focuses on the threshold for invalidating allowances in the Market Stability Reserve. It is to be raised from the current level of 400 million to up to 700 million allowances. The agreed amendment therefore concerns the number of allowances remaining in the reserve. Following formal adoption by both EU institutions, the rules are intended to enter into force immediately. ## Legislative Process Based on the Commission Proposal The political agreement is based on [Proposal COM(2026) 153 final](https://eur-lex.europa.eu/legal-content/DE/TXT/HTML/?uri=CELEX%3A52026PC0153), which the European Commission presented on 1 April 2026. It is being considered under procedure 2026/0085(COD) and provides for an amendment to Decision (EU) 2015/1814 concerning the invalidation of allowances in the Market Stability Reserve. The ordinary legislative procedure comprises the following steps in particular: - The Commission presented its proposed amendment on 1 April 2026. - The European Parliament and the Council reached a provisional political agreement on 20 October 2026. - Both institutions must still formally adopt the agreed text. - The amendment is intended to enter into force immediately following this formal adoption. Until these steps have been completed, the rules have not been definitively adopted. ### Previous Scale of Allowance Invalidation Since the existing invalidation rules entered into force, a total of 3.2 billion allowances have been invalidated. The agreed increase in the threshold changes the conditions governing the number of allowances that may remain in the Market Stability Reserve. For the Council, the Irish Council Presidency conducted the negotiations with the European Parliament. The political agreement specifically concerns the rules governing the Market Stability Reserve under the existing [EU Emissions Trading System](https://www.mtrlegal.com/wiki/emissionshandel/). ## Further Review of the Market Stability Reserve ### Targeted Amendment as the First Step in the Reform According to the European Commission, the agreed adjustment represents only a first step towards a more comprehensive modernisation of the Market Stability Reserve. The Commission submitted a broader proposal in this regard on 17 July 2026. The co-legislators also agreed to examine a gradual reduction of the invalidation threshold as part of the broader review of the EU Emissions Trading System. This does not yet constitute a final decision on such a reduction. Its specific form remains subject to the further legislative process. ### Formal Adoption Still Pending The political agreement establishes the position negotiated between the European Parliament and the Council. However, it does not replace the formal decisions required from the two institutions. The amendment can become binding only after they have adopted it. MTR Legal Rechtsanwälte advises companies, investors and high-net-worth individuals on matters of commercial law.