COMMISSION PROPOSES TARGETED ADJUSTMENTS TO ETS2 MARKET STABILITY RESERVE
On 27 November, the Commission proposed targeted adjustments to the Market Stability Reserve (MSR) for the EU Emissions Trading System covering buildings and road transport (ETS2). These changes aim to improve market liquidity and reduce price volatility as the ETS2 prepares for full operation. The proposal follows recent agreements by the Council and European Parliament to postpone the start of ETS2 by one year to 2028.
Key measures include a top-up mechanism to double the number of allowances to be injected if the carbon price exceeds EUR 45 per tonne (in 2020 prices), ensuring stronger intervention if the price should go above this level. The Commission also proposes a more gradual and responsive injection mechanism for allowances when the total number in circulation falls between 210 and 260 million, reducing the risk of sudden price fluctuations. The text includes the proposal for an earlier start of ETS2 auctions which will make revenues available already in 2027 for early investments and deliver an early price signal.
The Commission’s proposal is part of a broader effort to address concerns raised by Member States and stakeholders regarding initial price levels and market stability. The EU aims to ensure an orderly and efficient start for ETS2 with specific adjustment to the MSR, allowing national authorities and fuel producers to prepare adequately. The adjustments are expected to contribute to a more stable and predictable carbon market, facilitating the decarbonisation of the buildings and transport sectors while mitigating undue economic impacts. The proposal will now proceed through the ordinary legislative procedure for adoption by the European Parliament and Council.
Source: European Commission