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Market stability reserve approved for EU ETS

Xinhua, September 18, 2015 Adjust font size:

The Council of the European Union (EU) announced on Friday that it adopted the decision on the creation of a market stability reserve (MSR) for the EU greenhouse gas emission trading scheme (EU ETS).

This new reserve aims at tackling structural supply-demand imbalances in the EU ETS, said the Council of the EU in a press release.

In accordance with the MSR, when in a given year the total emission allowances exceeds a certain threshold, a percentage of allowances will be automatically withdrawn from the market and placed into the reserve.

In the opposite case, allowances will be returned from the reserve to the market.

The EU ETS, launched in 2005, aims at delivering the EU's greenhouse gas emission reduction goals in an economically efficient manner.

However, in 2013, resulting from an imbalance between the supply and demand of allowances, there was a significant surplus of allowances in the EU ETS.

The presence of a large surplus lowered the prices of allowances and reduces the incentives for low-carbon investment. Therefore, if not addressed, the current market imbalance would affect the ability of the EU ETS to meet its targets in a cost-effective manner in the future, said the press release.

The European Commission presented its proposal for a market stability reserve in January 2014. Then, an informal agreement between the European Parliament and the Council was reached in May 2015.

The Parliament endorsed the reform in July 2015. With the approval of the Council, the decision is now adopted in first reading, said the press release. Endit