“Fit for 55”: Parliament wants to extend the Market Stability Reserve to 2030
- First Plenary vote on the “Fit for 55 in 2030” package
- Extend the Market Stability Reserve of the EU Emissions Trading System (ETS) to 2030
- Opportunity to step up the EU's climate action before COP27 in Egypt
The market stability reserve of the EU Emissions Trading System must be extended to 2030 to protect against falling CO2 prices due to external shocks such as those caused by COVID-19.
Parliament has adopted its revision of the Market Stability Reserve (MSR) for the EU Emissions Trading System (ETS) with 490 votes in favour, 127 against and 7 abstentions.
Parliament believes that the MSR is central to the proper functioning of the ETS, as it protects against the falling CO2 prices in case of external shocks. Without the MSR, there would be fewer incentives for industries to reduce greenhouse gas (GHG) emissions, which would go against the increased ambitions in the EU Climate Law.
According to MEPs, such a revision will provide a strong price signal to reduce GHG emissions in a cost-efficient manner and state that, without the revision, it could lead to a harmful increase in the surplus of emission allowances in the ETS. MEPs also want the Commission to monitor the functioning of the reserve and keep it fit for purpose in case of future unforeseeable external shocks.
MEPs therefore want to extend the temporary adjustments in the MSR until the end 2030, so that after 2023 at least 24 % of the market surplus should be put in the reserve. However, as Parliament wants to set to 200 million the minimum number of allowances which can be withdrawn in a given period, there will only be further withdrawals to the reserve, when the surplus of allowances is above 833 million.
The ETS must be adaptable to be ambitious
The MSR revision of the ETS is part of the “Fit for 55 in 2030 package", which is the EU plan to reduce greenhouse gas emissions by at least 55 % by 2030 compared to 1990 levels in line with the European Climate Law. Parliament underlines that it is important to maintain an ETS which adapts to the dynamic needs of the covered economic sectors, such as the impact of the COVID-19 pandemic. They add that the revision of the ETS, including of its MSR, is a unique opportunity to step up EU's climate action before COP27 in Egypt.
After the vote, rapporteur Cyrus Engerer (S&D, MT), said: “Today we are adopting the first legislative report of the Fit for 55 package and we are setting the tone for the other reports, underlining that we must not compromise our ambitions. In these unprecedented times, a stable ETS is key for all households and businesses in the EU. We have therefore worked swiftly to ascertain the current intake rate and allocations until at least 2030. The EU is the first continent to have adopted a Climate Law with ambitious climate targets and we are working to ensure a just transition that also protects the most vulnerable in our society so that no one falls behind.”
Parliament is now ready to start negotiations with member states.
The MSR was introduced in the EU ETS in 2019 to address the structural imbalance between the supply of and demand for allowances in the market. The MSR aligns the supply of emissions allowances in the ETS more closely with demand by reducing or increasing the total number of allowances in circulation in order to stabilise the market.