Liese's EUA volatility band contains a price floor as well as a ceiling
The ETS lead MEP's symmetric MSR trigger could limit downside as much as upside, a nuance the bearish consensus does not appear to fully price in.
Peter Liese, the European Parliament's lead MEP on ETS reform, tabled a proposal on Friday (2026-09-11) to introduce automatic Market Stability Reserve triggers tied to price moves of more than 25% in either direction against the preceding 12-month average. The draft would release 25 million EU allowances from the MSR if the average ICE EUA Dec-rolling price over the prior three months ran more than 25% above that baseline, and would constrain releases if prices fell a comparable distance below it, Montel reported.5
ICE EUA Dec-rolling closed at €85.25/tCO2 on Tuesday (2026-09-15), with positioning weighted bearish. The supply narrative underpinning that view has been building since spring: Energy Aspects said in May (2026-05-21) that the EU's Industrial Decarbonisation Bank and ETS investment booster scheme could add allowances to the market from 2027, likely dampening prices. In July (2026-07-17), the European Commission separately proposed slowing the annual linear reduction factor to 3.7% to ease industrial competitiveness concerns, reinforcing the case for a looser cap over time.1,3
The symmetric character of the Liese mechanism carries different implications from what that bearish positioning reflects. A trigger that releases supply when prices spike more than 25% above the 12-month average would, by the same design logic, constrain releases when prices fall a comparable distance below it. For holders of ICE EUA Dec-rolling contracts or longer-dated carbon exposure, that downside clause functions like an embedded structural floor from 2030 onward, applicable whether the mechanism fires frequently or rarely.5
The bearish case remains grounded in supply fundamentals. The EC's July (2026-07-17) package added structural supply through the slower linear reduction factor, and from 2036 the Commission's proposal would allow high-integrity international credits to cover up to 5% of the EU's net emissions reduction target, according to JD Supra's review of the legislation. That offset pathway, if adopted unchanged, would further constrain the ceiling on domestic allowance prices over the next decade.4,3
Liese's own July (2026-07-15) position adds a complication. Weeks before tabling the volatility proposal, he argued that financial companies should remain active in EU carbon markets, pushing back against calls to constrain speculative trading. Fears about manipulation were overblown, he said at the time. A senior parliamentarian who defends financial liquidity and then introduces symmetric price bands in the same reform cycle is not designing a mechanism to push prices lower. He is designing one to stabilise them.2,5
The deeper divergence runs between the Commission's July package and the Parliament's September response. Brussels leaned toward supply flexibility to ease industrial costs; Liese is leaning toward price management through MSR calibration. These serve different objectives. They will need to reconcile in trilogue, and the final text could land materially closer to either end of that spectrum than current market positioning implies.3,5
UKA Dec-rolling closed at £60.09/tCO2 as of Tuesday (2026-09-15), with contrarian positioning also flagging bullish signals. UK carbon is a separate scheme, but sentiment around ETS structural reform tends to bleed across.5
Energy Aspects' May (2026-05-21) forecast that supply additions would dampen prices was made before either the Commission's July linear reduction factor proposal or the Liese September volatility band were on the table. Forecasts built on that earlier baseline predate the full shape of the reform package now being negotiated.1
The operative test for traders is whether the Parliamentary committee retains the downside trigger in the Liese draft or strips it, leaving only the upside release function. A symmetric mechanism intact through committee gives the price floor structural backing. A draft revised to include only the release trigger confirms the bearish consensus. The first committee vote on the ETS reform package is the event that resolves it.5