The market stability reserve of the EU Emissions Trading System is extended to 2030 to protect against falling CO2 prices due to external shocks such as those caused by COVID-19.
Parliament has adopted the review of the Market Stability Reserve (MSR) for the EU Emissions Trading System (ETS) with 504 votes for, 118 against and 11 abstentions. Its review 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 temporary adjustments in the MSR is extended until the end 2030. This means that at least 24% of the market surplus should be put in the market stability reserve and a minimum of 200 million allowances until 31 December 2030. From 1 January 2031, onwards the intake rate would fall to 12% and the minimum number of allowances to 100 million.
The revised MSR will allow to maintain an ETS, which adapts to the dynamic needs of the covered economic sectors and protect against falling CO2 prices in case of external shocks such as the impact of the COVID-19 as without the MSR, there would be fewer incentives for industries to reduce greenhouse gas emissions.
The Commission must monitor the functioning of the reserve and keep it fit for purpose in case of future unforeseeable external shocks.
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After the vote, rapporteur Cyrus Engerer (S&D, MT), said:
“Ensuring a strong emissions trading system will lower our dependence on fossil fuels and on Russia. We need to accelerate our transition to renewables and to work towards energy sovereignty.
The MSR contributes to the solid functioning of the emissions trading system especially in relation to the reduction of surpluses of emission allowances. Maintaining the double intake rate at which allowances are placed in the reserve will help us to meet our 2030 climate ambitions and it is therefore another step towards our fossil fuel-free European future.”
Next steps
The text still also has to be formally endorsed by Council. It will then be published in the EU Official Journal and enter into force 20 days later. Parliament is expected to vote on the deal with member states on a revised ETS in the plenary session 17-20 April.
Background
The MSR established in 2015 to address the structural imbalance between the supply of and demand for allowances in the EU ETS. 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.
Source – EU Parliament