Sandbag has released new amendments for the Market Stability Reserve proposal, in advance of the ENVI committee deadline for amendments on the 11th December, and as the ITRE committee considers amendments already tabled (which you can read a summary of here).
The Commission proposal is necessary to return the EU Emissions Trading Scheme to relevance as a driver of emissions reductions in Europe. However, without further amendments, the Commission proposal will not prevent a price crash as hundreds of millions of allowances flood the market in the final years of Phase 3, delaying the effectiveness of the MSR for many years.
Sandbag is recommending amendments which would:
- Cancel backloaded allowances
- Cancel unallocated free allowances
- Start the MSR in 2017
- Calibrate the annual supply adjustments
Figure 1: Improvements to the stable functioning of the Emissions Trading Scheme using Sandbag's amendments
The Commission proposal, as it currently stands, fails to bring the oversupply of allowances on the market within the Commission’s desired threshold until 2027, and risks ten years of near-zero carbon prices. As we show, such a delay will destabilise the European carbon market further, and leave the market unable to drive cost effective emission cuts planned for the 2030 climate and energy agreement.
It should further be noted that the Commission uses now obsolete projections for energy consumption and market evolution in the coming years (PDF). Under Sandbag projections, using current data, the Emissions Trading Scheme looks to remain an irrelevance for even longer, despite the Commission’s proposal.
You can use Sandbag's interactive tool here to see how different amendments change the Reserve.
If you would like to meet with one of our policy analysts to discuss these recommendations, or to receive a copy of our MSR tool, which allows each policy to be modelled, please contact us. Policy analysts at Sandbag are also available to aid MEPs with amendment drafting.