"Market Stability Reserve" for Emission Trading (Decision)

In the EU, operators of fixed installations and aviation companies are only allowed to emit greenhouse gases where they have emission rights. The fall in the price of emission allowances results, in the Commission's view, from an "imbalance between supply and demand". It wants to remove this imbalance by introducing a "market stability reserve". Depending on market conditions, stabilisation of the allowance market will be achieved either by removing allowances from the market and placing them in the reserve, or by releasing them from the reserve and channelling them into the market.


The Market stability reserve is an instrument which fails to solve a problem that does not exist. Nevertheless, we do not expect it to have any significant negative consequences: Contrary to the Commission's view, the fact that the ETS has a fixed supply is not a problem. Quite the reverse; it has to be so in order that  decisions are effectively controlled by the price. The market stability reserve does not have any substantial effect on the long-term price of allowances because the supply of allowances will not be permanently changed by putting them in the reserve.