In a ‘non-paper’ published on Wednesday 25 June, 16 Member States asked the European Commission to consider improvements before the launch of the Emissions Trading System (ETS2) in 2027, highlighting uncertainty over prices and potential social impacts.
The signatory countries set out five proposals, four of which call for a targeted revision of the Auction Regulation and/or the decision on the Market Stability Reserve (MSR).
One of these proposals is to launch ETS2 auctions from mid-2026, with a redistribution of the 2027 auction timetable over 1.5 years. According to the signatories, early auctions would provide market players with a clearer view of expected prices, “enabling households, businesses, fuel distributors and national authorities to better prepare for the entry into force of the system in January 2027”.
The signatory countries are also concerned that the current design of the MSR for ETS2 could lead to significant price fluctuations in 2028 and 2029, “as small deviations around the activation threshold could result in abrupt allowance injections - or none at all”. They are therefore calling for the adoption of a “more gradual and responsive trigger rule”, inspired by ETS 1 in 2023, and possibly a slight increase in the volume of allowances released in the event of a very tight market.
In addition, they call for the lifetime of the MSR to be extended beyond 2031 and for the current “soft price cap” of €45/tCO2 to be strengthened, either by increasing the volume of allowances released or the frequency of injections. This was designed as a guarantee against possible high price levels, but the signatory countries consider the measure insufficient.
These countries are Austria, Belgium, Bulgaria, Croatia, the Czech Republic, Estonia, Germany, Italy, Latvia, Lithuania, the Netherlands, Poland, Romania, Slovakia, Slovenia and Spain. They will potentially be joined by Poland, pending political approval at the time of writing.
To see the letter, go to https://aeur.eu/f/hkh (Original version in French by Pauline Denys)