The ENVI committee of the European Parliament has chosen to preserve the automatic invalidation of emissions allowances, backing a greener and more restrictive approach than the European Commission itself proposed.

Reacting to today’s vote, ECR shadow rapporteur Alexandr Vondra condemned the decision as a missed opportunity to protect European industry from further costs and uncertainty and avoid price spikes of ETS allowance.

The parliamentary position marks a significant departure from the Commission’s original proposal. While the Commission proposed ending ceasing the automatic invalidation of allowances held in the EU Emissions Trading System’s Market Stability Reserve (MSR), Parliament has chosen to preserve the mechanism.

As a result, allowances above the limit of 650 million will be permanently removed from the market from 1 March 2027 – further reducing supply and increasing the risk of scarcity and price spikes at a time when European industry is already struggling with high energy costs and fierce international competition.

MEP Alexandr Vondra, ECR shadow rapporteur of the file and coordinator in the European Parliament’s Environment Committee, said:

“This is a deeply unfortunate decision. The Market Stability Reserve was created to stabilise the carbon market, not to manufacture artificial scarcity and drive prices even higher. Europe is already struggling with high energy prices, declining industrial competitiveness and fierce international competition. Yet Parliament has decided to remove hundreds of millions of allowances from the system rather than keeping them in reserve as a safeguard against future shortages and price shocks.”

The targeted Commission’s proposal from April this year (ahead of and compliance with the EU ETS revision of the 17 July) was simple: it recognised that permanently destroying allowances makes little sense when Europe faces the risk of future scarcity and excessive volatility in the carbon market. The position adopted by the Environment Committee, however, takes a greener approach than the one proposed by the Commission.

“Industry needs more time for ambitious decarbonization efforts! For once, the Commission understood that circumstances have changed. An allowance kept in the reserve is a safeguard. An invalidated allowance is gone forever. Yet the European Parliaments’ centre-left majority has decided to be greener, and above all more expensive than the Commission itself. Ideological climate policy will continue to have negative effects on European citizens’ pockets,” Vondra said.

For the ECR Group, the MSR should serve as a genuine buffer to spread decarbonization investment over a longer period of time, as well as a safeguard against future market disruptions rather than a mechanism for permanently reducing the supply of allowances.

“Europe cannot afford to be greener than reality,” Vondra added.

“What may look good on a climate modelling spreadsheet has very real consequences for factories, jobs and investment. The EU ETS needs predictability and stability, not policies that deliberately increase the risk of scarcity and higher costs. Today’s vote in the ENVI committee was a missed opportunity to take a more economically realistic approach. But let’s hope for the Plenary vote next week.”

The vote in the committee was 43 in favour, 21 against, and 6 abstentions.