EU environment ministers approve creation of market stability reserve

The new reserve aims at tackling structural supply-demand imbances in the EU emission trading scheme

EU environment ministers on Friday adopted the decision on the creation of a market stability reserve for the EU greenhouse gas emission trading scheme (EU ETS), the Council of the European Union said in a press statement. This new reserve aims at tackling structural supply-demand imbalances in the EU ETS.

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year the total of emission allowances exceeds a certain threshold, a percentage of allowances will be automatically withdrawn from the market and placed into the reserve.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

A market stability reserve will be established in 2018 and operational from 1 January 2019. "Backloaded" allowances (the 900 million allowances whose auctioning was postponed from the years 2014-2016 until 2019-2020) will be placed in the reserve. Unallocated allowances from phase 3 of the EU ETS will be placed in the reserve in 2020. See also our cepInput on the matter.