Emissions trading: MEPs want to extend the market stability reserve to 2030

Market stability reserve in the EU Emissions Trading System must be extended to 2030 to render it adaptable to major shocks such as the COVID-19 pandemic, MEPs say

Labour MEP Cyrus Engerer
Labour MEP Cyrus Engerer

Labour MEP Cyrus Engerer is leading the report on the revision of the Market Stability Reserve (MSR) for the EU Emissions Trading System (ETS),

His report passed muster at the committee on Environment, Public Health and Food Safety (ENVI) adopting it by 65 votes to 20 against.

“We are adopting the first legislative report of the Fit for 55 package and we are setting the tone for the other reports underlining that we must not compromise our ambitions,” Engerer said.

“In these unprecedented times, a stable ETS is key for all households and businesses in the EU. We have therefore worked swiftly to ascertain the current intake rate and allocations until at least 2030.”

The EU is the first continent to have adopted a climate law with ambitious climate targets with MEPs working to ensure a just transition which also protects the most vulnerable in society so that no one falls behind.

MSR is key to prevent the price of CO2 units falling in the ETS since this could lead to fewer incentives for industries to reduce greenhouse gas emissions.

MEPs therefore want to extend the temporary adjustments in the MSR until the end 2030, so that at least 24% of the market surplus will continue to be put in the reserve after 2023s.

Seeing as MEPs also want to set the minimum number of allowances that can be withdrawn in a given period, to 200 million, the surplus of allowances must be at least 833 million to trigger a new withdrawal.

MEPs believe that such a revision will provide a strong price signal to reduce Greenhouse Gas (GHG) emissions in a cost-efficient manner. Without the revision, it could lead to a harmful increase in the surplus of emission allowances.

MEPs also want the Commission to monitor the functioning of the reserve and keep it fit for purpose in case of future unforeseeable external shocks.

The MSR revision of the ETS is part of the “Fit for 55 in 2030 package", which is the EU’s plan to reduce greenhouse gas emissions by at least 55 % by 2030 compared to 1990 levels in line with the European Climate Law.

The MSR was introduced in the EU ETS in 2019 to address the structural imbalance between the supply of and demand for allowances in the market.

The MSR aligns the supply of emissions allowances in the ETS more closely with demand by reducing or increasing the total number of allowances in circulation in order to stabilise the market.


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