EU ETS: 190 Million Allowances to Enter the Market Stability Reserve
The European Commission has published the 2025 Total Number of Allowances in Circulation (TNAC), confirming that 190.5 million allowances (EUAs) will be transferred into the Market Stability Reserve (MSR) between 1 September 2026 and 31 August 2027 (European Commission, 29 May 2026).
The TNAC is an important structural indicators within the EU Emissions Trading System (EU ETS). Published annually by the European Commission, it determines whether allowances are withdrawn from the market and placed into the MSR or released back into circulation (European Commission, TNAC Communication 2025).
For 2025, the TNAC stood at 1,023,494,202 allowances (European Commission, TNAC Communication 2025).
What is the TNAC?
The indicator includes allowances held by market participants, allowances in compliance accounts and allowances otherwise available in circulation. The European Commission calculates and publishes the figure annually, typically by 1 June, as required under the Market Stability Reserve framework (European Commission, TNAC Communication 2025).
The TNAC serves as the key mechanism for determining how the Market Stability Reserve operates.
What is the Market Stability Reserve?
The Market Stability Reserve was introduced to address significant imbalances between the supply and demand of allowances within the EU ETS and to improve the system's resilience to future shocks (European Commission, MSR Overview).
When the TNAC exceeds predefined thresholds, a portion of allowances is automatically transferred into the reserve. These allowances are withheld from auction volumes, reducing the number of allowances available to the market. Conversely, if the market experiences a shortage of allowances, allowances can be released from the reserve to support market stability (European Commission, MSR Overview).
Based on the 2025 TNAC calculation, the European Commission has confirmed that 190,494,202 allowances will be transferred into the MSR over the period from 1 September 2026 to 31 August 2027, reducing auction supply during that period (European Commission, 29 May 2026).
Additional Developments
The Commission also confirmed that, as of 1 January 2026, there were 400 million allowances held within the MSR (European Commission, 29 May 2026).
Under the current rules, allowances held in the reserve above this level are no longer valid. However, in April 2026, the European Commission proposed an amendment to the MSR framework that would discontinue the invalidation mechanism. Until any amendment enters into force, the reserve will continue to operate under the existing provisions of Decision (EU) 2015/1814 (European Commission, 29 May 2026).
Market participants should also note that the reduction in auction volumes resulting from the latest TNAC calculation is expected to be reflected in updated auction calendars due to be published around July 2026 (European Commission, 29 May 2026).
Why it Matters
The annual TNAC publication remains an important structural event in the European carbon market.
By influencing the number of allowances available through auctions, the MSR plays a significant role in shaping supply dynamics and long-term market fundamentals. For compliance entities, traders and other EUA market participants, understanding the relationship between the TNAC and the MSR is essential when assessing future supply conditions and carbon market developments.
The latest TNAC figure remains well above the threshold that triggers transfers into the reserve, reinforcing the MSR's role as a mechanism for reducing surplus allowances and managing market supply. The resulting reduction in auction volumes will be an important consideration for market participants as they monitor EUA supply dynamics through 2026 and 2027.
The next TNAC indicator is expected to be published by 1 June 2027 (European Commission, 29 May 2026).
The TNAC and MSR continue to shape the future of EUA supply. If you'd like to understand what these developments mean for your business, contact Grey Epoch today for tailored carbon market insights and support.
References
European Commission (2026), 190 million EU ETS allowances to be placed in the Market Stability Reserve between September 2026 and August 2027.
European Commission (2026), Communication on the Total Number of Allowances in Circulation in 2025.
European Commission, Market Stability Reserve (MSR) – EU ETS Overview.
