EU ETS Phase 4 reform (2018-2021)
After a decade of surplus allowances pushed EU carbon prices below €10 per tonne, the European Union tightened its emissions cap, created the Market Stability Reserve to absorb excess allowances, and accelerated the annual cap reduction. Prices climbed above €80 per tonne within four years.
Higher carbon prices made coal power uneconomic and accelerated the bloc's shift to renewables.
The reform became the reference point for cap tightening in other carbon markets.
California's removal of 118 million allowances applies the same logic: shrink surplus supply to make the price signal bite.
