- Composition of the study group
- Administrator / Assistant in charge: Anna CAMERON + Ulrike MEISSNER / Lukáš ĎURECH
The Commission proposal for a revised Emission Trading System (ETS) directive was published on 14 July 2021, along with proposals for the revision of other EU key climate legislation, the so-called "Fit for 55" package to ensure emission reductions of at least 55 % by 2030 . In the context of the revision of the EU ETS, changes are also proposed to the functioning of the Market Stability Reserve (MSR).
The EU ETS was launched in 2005 and covers about 45 % of EU greenhouse gas emissions. The latest revision of the EU ETS Directive, adopted in 2018, sets the total quantity of emission allowances for phase 4 (2021-2030), in line with what was the current EU emission reduction target at the time (40 % reduction below 1990 levels by 2030).
The objective of the Commission's proposal is to lower the overall emission cap even further and increase its annual rate of reduction. There will also be a phase out of free emission allowances for aviation and an alignment with the global Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Shipping emissions will be included for the first time in the EU ETS.
To address the lack of emissions reductions in road transport and buildings, a separate new emissions trading system is set up for fuel distribution for road transport and buildings.
The Market Stability Reserve (MSR) complements the rules governing the EU ETS. It was established in 2018 (operational since 2019) with the aim to control the historical surplus in the EU ETS and to improve market stability in case of future shocks. The MSR functions by triggering adjustments to the annual volumes of allowances to be auctioned. In order to preserve a maximum degree of predictability, clear rules for placing and releasing allowances in the reserve were set.
With the new proposal, the Commission seeks to ensure that the current parameters of the MSR (intake rate of 24 % and minimum amount to be placed in the reserve of 200 million allowances) are maintained beyond 2023 and until the end of Phase IV of the EU ETS on 31 December 2030 to ensure market predictability.
This opinion will provide the civil society perspective on the proposal for a revised EU ETS, as well as changes to the functioning of the Market Stability Reserve, in line with following the revision of the EU emission reduction target to at least 55 % by 2030.