On Thursday 27 November, the European Commission officially presented the adjustments to the market stability reserve, designed to ensure a “progressive and smooth” launch of the ETS2 emissions trading system.
The proposal aims to respond to the concerns expressed by several Member States and MEPs ahead of the entry into force of ETS 2, which targets the decarbonisation of the transport and construction sectors (see EUROPE 13735/1, 13667/12).
Firstly, the Commission wants to ensure “stronger intervention” if the price of carbon exceeds a certain threshold. It therefore confirms the addition of a top-up mechanism enabling the number of allowances injected to be doubled if the price of carbon exceeds €45 per tonne (2020 price).
The proposal then extends the validity of ETS2 allowances in the reserve beyond 31 December 2030. This will allow the 600 million allowances available to be released if necessary to stabilise the price.
The measure “helps increase market predictability and confidence among financial actors and market participants, thereby promoting price stability over time”, the proposal states.
In addition, the injection rate mechanism has been modified to ensure a “more gradual and responsive” release of allowances from the reserve into the market. An injection of allowances from the reserve is proposed when the total number of allowances in circulation is between 210 and 260 million.
Secondly, an early launch of ETS2 auctions is designed to generate revenue from 2027 for early investment. The Commission had previously indicated that it was working with the European Investment Bank (EIB) to set up a new “ETS2 Frontloading Facility” for Member States, which will be “launched shortly”.
“This anticipation could mobilise up to €6 billion for the years 2026-2027”, notes the Commission, which points out that this mechanism is in addition to the national revenues from ETS2 and the Social Climate Fund.
These adjustments to the market stability reserve can be implemented without amending the ETS2 Directive. A one-year postponement of the system has been introduced (to 2028), as part of the negotiations on the 2040 climate target (see EUROPE 13755/34).
To see the proposal: https://aeur.eu/f/jpe (Original version in French by Pauline Denys)