European Union member states and the European Parliament have reached a provisional agreement on reforms to the Emissions Trading System (ETS). The changes aim to prevent significant price fluctuations in carbon permits, a key component of the EU’s climate policy. A key element of the deal is a price cap of 45 euros per tonne of CO2. Once this price is reached, additional allowances will be automatically released from the Market Stability Reserve. This mechanism is designed to increase supply and curb price spikes. The agreement seeks to balance environmental ambition with economic stability for businesses operating within the ETS. Further legislative steps are required for formal adoption of the revised system.