The European Commission’s proposed framework for climate and energy policies for the 2020-2030 period includes a proposal to reform the EU ETS by establishing a Market Stability Reserve (MSR).
This reserve has two-stated objectives and a third, implied objective. It aims to address the surplus of allowances that has built up in recent years and to improve the system’s resilience to major demand shocks by automatically adjusting the quantity of allowances to be auctioned. It also has the potential to address the problem of uncoordinated policies at the European level.
Next Steps in terms of decision making and implementation of MSR
The Commission’s proposal goes now through the normal legislative process of co-decision in the European Union, which means that EU Member States and European politicians will evaluate the proposal, possibly modify, and then will negotiate an agreement to be implemented in the European legislation. We believe that the final agreement on the MSR can happen in 2016 or even 2017.
The Market Stability Reserve should be a permanent design change at the European Union greenhouse gas emissions trading system – EU ETS.
To see the EC legislative proposal on MSR, please click here.