Parliament adopts CO2 market stability reserve

Parliament adopts CO2 market stability reserve

Source: EP news

The European Parliament voted in favour of the establishment and operation of a Market Stability Reserve (MSR) proposal, informally agreed with the Council, in yesterday’s plenary session.

The legislative proposal to establish an MSR in the EU Emission Trading System (EU-ETS) seeks to address the problem of an oversupply of allowances, leading to a low carbon price. The proposal foresees the reserve as a mechanism to prevent extreme fluctuation of carbon price, by reducing or increasing the supply of allowances.

In the adopted text the MSR will be established in 2018 and will become fully operational from 1st January 2019. The auction of 900 million allowances was postponed for 2019-2020 from originally proposed 2014-2016, and these "backloaded" allowances will be placed in the market reserve. Unallocated allowances will be directly included in the MSR in 2020, while their future usage will be decided in the upcoming EU-ETS review.

The legislation will be evaluated by the Council of ministers in September, which has to approve it before the legislative text can come into force. 

Link: text negotiated with the Council