On Tuesday 5 April, the European Parliament adopted by a large majority (490 votes in favour, 127 against and 7 abstentions) the draft report by Cyrus Engerer (S&D, Malta) on the revision of the ‘Market Stability Reserve’ (MSR), a mechanism to deal with the surplus of allowances in the EU Emissions Trading System (ETS).
This is the first dossier of the ‘Fit for 55 package’ on which the Parliament has adopted its position, less than 3 months after the presentation of Mr Engerer’s draft report.
Given its highly technical nature, MEPs agreed to avoid politicising the issue (see EUROPE 12868/12) in order to get it out of the way quickly and not to risk further complicating the negotiations on the revision of the ETS (see EUROPE 12921/10).
Introduced in 2019, the MSR allows for an automatic adjustment of the number of allowances in circulation according to a pre-defined ‘intake rate’ that determines the share of allowances to be placed in the reserve.
While this rate was to be reduced to 12% (its previous level) from 2024 onwards, under the terms of EU Directive 2018/410, MEPs and the European Commission want to keep it at 24% until 31 December 2030 (see EUROPE 12768/2, 12912/19).
“Our impact assessment shows that reverting to 12% would not reduce the surplus fast enough”, explained Commission Executive Vice-President in charge of the Green Deal, Frans Timmermans, in a debate with MEPs on the eve of the vote.
The same applies to the minimum quantity of allowances to be placed in the reserve. This would remain at 200 million allowances, instead of falling to 100 million after 2023.
According to Timmermans, the market stability reserve has reduced the surplus of allowances “from 1.65 billion in 2018 to 1.38 billion allowances in 2019”, while limiting “the increase in the surplus of emission allowances that one could have seen in 2020 due to lower emissions because of Covid-19”.
The Council of the EU has not yet adopted its position.
See the adopted text: https://aeur.eu/f/14t (Original version in French by Damien Genicot)