2 April 2026 – On 1 April, the European Commission proposed ending the systematic cancellation of surplus CO2 allowances held in the Emissions Trading System’s Market Stability Reserve (MSR). A one-sentence piece of legislation, with no impact assessment of its own, pushed through on a fast-track basis. We had already begun to wonder whether it might be a bad April Fools’ joke.
EU ETS: European Commission Without a Plan Applies a Sticking Plaster
On 1 April, the European Commission proposed ending the systematic cancellation of surplus CO2 allowances held in the Emissions Trading System’s Market Stability Reserve (MSR). In future, allowances above the 400-million threshold are no longer to be cancelled but instead retained as a “buffer” – to be released back into the market during future price spikes. A one-sentence piece of legislation, with no impact assessment of its own, pushed through on a fast-track basis. We had already begun to wonder whether it might be a bad April Fools’ joke.
The Commission’s Official Justification: Liquidity and Market Stability
The Commission’s official justification: liquidity and market stability. The political reality: the high carbon price is feeding through to electricity bills. Italy called for the full suspension of the ETS; Prime Minister Meloni spoke of a surcharge of up to €30 per megawatt-hour. The European Council rejected suspension in March – but tasked the Commission with swift reform.
The contradiction is fundamental: the very same Commission that cancelled a total of 3.2 billion allowances in the last years in order to push the carbon price to between €80 and €100 per tonne now declares that this very scarcity is threatening “market resilience.” What yesterday was presented as an inevitable and ideologically driven climate policy out of Brussels is today a risk factor.
It is well documented how little the decades of low carbon prices did to transform European steel producers. But the high allowance prices have equally failed to prompt any genuine change of course at any of the major steel producers within the EU. Corporate headquarters have preferred to pocket billions of euros from selling surplus allowances received free of charge rather than producing steel – and are now evidently using the high carbon prices as an argument for policy rollback rather than as an incentive to invest.
The EU Runs the World’s Most Expensive Carbon Pricing System
This exposes the central flaw in Europe’s climate architecture: the EU operates the world’s most expensive carbon pricing system – and is now loosening it under political pressure, while the affected industry has done precious little to advance the transformation it has received billions in taxpayer-funded subsidies from both the EU and member states to pursue.
SMEs Are Paying the Price for Brussels’ Climate Policy Experiments
What Europe needs is an honest and pragmatic debate about how much climate policy the continent can still afford, when energy prices are being dictated not only by wars but also by an outdated price-setting mechanism. For now, the costs are being borne entirely by the competitiveness of downstream industries – with their millions of small and medium-sized enterprises, which receive no free CO2 allowances, no subsidies, and no energy cost relief, yet are expected to pay CBAM taxes and tariffs on steel and stainless steel – again, without any impact assessment of their own.
Instead, what we get is: a sticking plaster on a symptom – and the Commission ducking the fundamental question until June.
Thorsten Gerber, CEO of the Gerber Group, had this to say today: “To avoid saying anything that might get me into legal trouble, I’d better say nothing at all.”
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