According to this Economist article,
For a long time after it was launched in 2005, the [European Trading System] barely functioned; a glut of allowances (which give the holder the right to emit an amount of greenhouse gases) kept prices close to zero. But after the European Commission sucked out excess permits in 2019, the market began to thrive.
the European Commission got rid of, so-called, excess permits.
What were these excess permits of carbon emissions? Is it the amount of permits that are still up for sale (or to be distributed for free); and hence, aren't used?
And how did the European Comission get rid of them? Is it by decreasing the cap of overall supply of permits within the EU?
This article of the European Environment Agency designates the surplus of permits as a market stability reserve.
The Swedish Energy Agency, describes the market stability reserve as, a rule-based mechanism that enables the delivery of allowances to respond to changes in demand, thus maintaining the balance of the EU ETS.
If the surplus of allowances on the market does not decrease to less than 400 million but if the price of an emission allowance for more than six consecutive months is three times higher than the average price over the last two years, up to 100 million allowances are injected into the market through an increase of auction volumes with units from the reserve.
Hence the number of allowances is dynamic, set according to the condition of the market. But isn't this ultimately limited by the overall EU cap that is decided politically? Also, what is the unit of an allowance?