European Commission published the annual review for the total number of allowances in circulation (TNAC) in the end of may 2025.
This indicator plays an important role in the functioning of the Market Stability Reserve (MSR). Based on the TNAC, the amount of allowances that will be withdrawn from the market or released, is determined. The TNAC represents the difference between the supply of allowances and their demand.
The MSR functions automatically when the TNAC is outside the set range. Allowances are withdrawn from the auction volume and placed in the reserve if the TNAC exceeds the threshold of 833 million. The intake rate of the reserve is set at 24% of the TNAC when this number is above 1 096 million. When the TNAC is between 833 million and 1 096 million, the intake is the difference between the TNAC and 833 million. If the TNAC is less than the threshold of 400 million, 100 million allowances are released from the reserve and auctioned.
Allowances are either placed in or released from the reserve over the course of 12 months. From 2023 onwards, any allowances held in the reserve on 1 January every year above the threshold of 400 million are no longer valid.
On the grounds of the previous Communication (3 June 2024) 266 816 768 allowances were to be placed in the reserve from 1 September 2024 to 31 August 2025.
According to the current Communication of EC the TNAC in 2024 г. is 1 148 049 585 allowances, and in the end of 2024 in the MSR there were 670 506 086 allowances.
On 1 January 2025, 270 506 086 of these allowances were invalidated under Article 1(5a) of the MSR Decision. The remaining holdings of the reserve amount to 400 000 000 allowances.
Between 1 September 2025 and 31 August 2026, 275,531,900 allowances (24% of the total number of allowances in circulation) will be placed to the Reserve based on the MSR decision. A decrease in the auction volumes will be reflected in the auction calendars that will be adopted around July 2025. A corresponding number of allowances will be deducted from the auction volumes of EU Member States, the three European Economic Area – European Free Trade Association countries (Iceland, Liechtenstein and Norway) and, for the generation of electricity in Northern Ireland, the United Kingdom. These allowances will be deducted in line with countries’ respective auction shares.
Next year’s publication of the TNAC will determine the MSR’s operation from September 2026 until August 2027.
