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Today the European Commission announced that the EU ETS surplus of over 2 billion allowances,fell by only 30 million allowances in 2014.

The European Commission data is in line with Sandbag’s 2014 forecast, which Carbon Pulse reported today as the most accurate; only 0.1% different to real data.

Sandbag’s updated forecast shows that the surplus will remain at over 2 billion allowances in 2020 – broadly unchanged compared to today despite the changes to the Market Stability Reserve agreed in Trialogue.

Across 2015 and 2016, the surplus is forecast to reduce by about 250 million allowances in total as backloading takes effect.

However, in 2017 and 2018 the surplus will be allowed to grow again by about 320 million allowances in total, in the gap between backloading ending and the MSR beginning.

Our updated forecast includes the latest data on emissions, international offsets, allocations and the new entrant reserve, and applies the MSR according to the design provisionally agreed in Trialogue. Full details will follow shortly, but the conclusions in our March 2015 report “The Eternal Surplus of the Spineless Market” remain unchanged.

Dave Jones, Power Analyst at Sandbag, commented: “The MSR proposal is a welcome help to stabilise the surplus, but the truth is that further reforms will need to happen to bring the surplus down to an acceptable level. Without further reform, the carbon price is unlikely to significantly change.”