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Key indicatorsIndicative, as reported; see source
  • EU HRC (N. Europe)€740–760/tex-works N. Europe; tradable €740–750/t, offers €750–760/t; Fastmarkets index €748/t on 22 Oct22 Oct 2026 · Fastmarkets via EUROMETAL
  • China steel exports10.492 MtSeptember; Jan–Sep 85.641 Mt, −2.6% y/y14 Oct 2026 · China Customs via Mysteel / SMM
  • World crude steel142.4 MtSeptember, −0.2% y/y23 Oct 2026 · worldsteel
  • Iron ore fines 61%$89.20/dmtseaborne 61% fines, SMM; +$0.60/dmt d/d23 Oct 2026 · SMM
  • Turkish HMS 1&2 (80:20)~$400/tCFR, September averageOct 2026 · GMK Center
  • EU CBAM certificate€82.32Q3 2026 price, per certificate5 Oct 2026 · European Commission
  • US Section 232 steel10%–50%tariff, by product/country8 Oct 2026 · Congressional Research Service
Trade & Tariffs

EU deal lets the carbon market reserve hold 700 million allowances, up from 400 million: what it means for steel carbon costs and CBAM

Parliament and EU governments have provisionally agreed to let the ETS market stability reserve keep up to 700 million allowances before cancelling the rest, up from 400 million. The change feeds into the carbon price steelmakers pay and the CBAM certificate price.

By Tavishi BalanPublished Updated 5 min read
Illustration: a coke oven battery and quenching tower at an integrated steelworks releasing a white steam plume, with a coal conveyor gallery and rail wagons in front
Illustration of a coke oven battery and steam plume at an integrated steelworks

Executive summary

  • EUROMETAL reports that the European Parliament and EU governments have provisionally agreed to change the market stability reserve (MSR) of the EU Emissions Trading System. The Commission welcomed the deal on 21 October.
  • Today, every allowance in the reserve above 400 million is cancelled. Under the deal, the reserve can keep up to 700 million as a buffer for later release. Cancellation above that level continues.
  • The Commission had proposed in April to stop cancellations altogether. The co-legislators chose a higher ceiling instead, and left any later cuts to that ceiling to the wider ETS review proposed in July.
  • For steel, a larger buffer gives the EU more allowances to release if carbon prices spike. That matters for mills as free allocation shrinks, and for importers, because the CBAM certificate price is set from ETS auction prices. Formal adoption is still needed.

Key numbers

700m Allowances the reserve may keep under the provisional deal, up from 400 million today FactEuropean Commission, 21 Oct 2026

3.2bn Allowances cancelled from the reserve by the end of 2024 FactEuropean Commission, 1 Apr 2026

€82.32 CBAM certificate price for Q3 2026 imports, up from €75.28 for Q2 FactEuropean Commission

+€7.04 Change in the CBAM certificate price from Q2 to Q3 2026 Calc.from Commission figures

4 Jan 2027 Date the Commission is due to publish the Q4 2026 CBAM certificate price FactEuropean Commission

Fact = supported by the cited primary source or clearly attributed reporting/market assessment · Calc. = Loharo calculation from cited figures · Uncertain = an attributed claim not independently confirmed · Analysis = interpretation or forecast with sourced premises.

What happened

The market stability reserve has run since 2019. It takes allowances out of auctions when too many are in circulation and puts them back when the market is short. Under the current rules, every allowance held in the reserve above 400 million is cancelled for good. By the end of 2024, 3.2 billion allowances had been cancelled this way, according to the Commission.

On 1 April 2026 the Commission proposed to stop those cancellations, so the allowances would stay in the reserve as a buffer against future shortages. Parliament and the Council have now agreed a narrower change. In its statement of 21 October, the Commission says the reserve will be able to keep up to 700 million allowances. EUROMETAL, reporting the Council’s announcement, says the deal was reached on 20 October and that cancellation above the new ceiling stays in place.

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The Commission links the deal to the European Council conclusions of 16 October and calls it a first step. A wider reform of the reserve was proposed with the ETS review on 17 July 2026. EUROMETAL reports that a gradual lowering of the new ceiling will be dealt with in that review; we could not check this point against an official text. Parliament and the Council still have to adopt the amendment formally, and it takes effect once it is published in the Official Journal.

Why it matters for steel

Analysis Integrated steelmakers are among the largest buyers of EU allowances once free allocation runs out, and that free allocation is being reduced as CBAM takes over. A reserve that holds more allowances gives the system more to release if prices jump. It does not lower today’s carbon price, and it does not change the overall cap. What it changes is how much room the EU has to soften a future spike.

Analysis The same price feeds into imports. The Commission sets the CBAM certificate price as the weighted average of ETS auction clearing prices. It was €75.36 for Q1 2026, €75.28 for Q2 and €82.32 for Q3, so the cost an importer owes on embedded emissions in coil, plate or wire rod follows the ETS market. From 2027 the price will be published weekly instead of quarterly. A steadier ETS price makes the CBAM part of a landed-cost calculation, as in our worked example, easier to plan.

Analysis The change is modest. The Commission wanted to stop cancellations completely, and the co-legislators kept them. The bigger decisions on the reserve and on industrial carbon costs sit in the ETS review, which is still under negotiation.

Who is affected

  • EU blast-furnace steelmakers: they hold the largest allowance exposure as free allocation shrinks, so the reserve’s capacity to calm price spikes matters most to them.
  • Importers of CBAM steel: their certificate cost is set from ETS auction prices, quarterly in 2026 and weekly from 2027.
  • Buyers of flat and long products: carbon costs show up in mill offers and in the CBAM cost on imported material.

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What to watch

  • Formal adoption: votes in Parliament and the Council, then publication in the Official Journal.
  • The ETS review: whether it lowers the 700 million ceiling over time and how it treats free allocation for steel.
  • 4 January 2027: the Commission’s Q4 2026 CBAM certificate price, the last quarterly figure before weekly pricing starts.

Verification status: Partially verified

  • The agreement is reported by EUROMETAL. The threshold-lowering claim remains insufficiently attributed and is based on a single trade-press source. Last fact-check: 24 October 2026.
  • Key: Verified = material factual claims are supported by an appropriate primary source or clearly attributed reporting/market assessments; Partially verified = a specific material claim remains unsupported, contradicted or materially overstated; Analysis = interpretation or forecast with sourced premises; Developing = material facts are checked but the situation is still changing.

Ask the Analyst

“1,500 t HRC from India into Felixstowe at €600/t CFR”: landed cost with duty, quota and CBAM in one answer.Ask the Analyst

Sources

Primary sources

Supporting sources

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Last fact-check: 23 October 2026 (Europe/Amsterdam).

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Facts, analysis and uncertainty are labelled in line with our editorial standards. Report an error – corrections are dated and noted on the article. Information and analysis only, not investment advice.

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