EU Member States Agree 2021 Start for Market Stability Reserve

On 25 March, the Council of the European Union, the body representing the EU Member States in the EU decision-making process, agreed on a common position on the Market Stability Reserve (MSR), which would absorb the 900 million backloaded allowances in 2018 but only become operational in 2021. This is in line with the European Commission's proposal, put forward in January 2014. The MSR will help address the current surplus of around two billion allowances in the European carbon market, as well as control extreme supply and demand fluctuations in the future. Latvia, currently holding the Council presidency, now has a mandate to enter into trilogue talks with the European Parliament in order to reach an informal agreement on the MSR. The resulting text would, however, still need to be formally approved by both institutions. According to the Council's position, the issue of the additional unallocated allowances, stemming from plant closures or set aside for new entrants, will be taken up by the Commission as part of the upcoming review of the European emissions trading system.