In a significant development, the Environment committee has passed the European People’s Party’s (EPP) compromise proposal for the Market Stability Reserve (MSR) by 58 votes to 10, with 1 abstention. This positive outcome clears the path for the MSR proposal to proceed to the next legislative stage, marking another step forward for the proposed amendment to the EU Emissions Trading System (EU ETS) put forth by the European Commission.
Moreover, the proposal has received authorization to bypass a plenary vote and can now directly enter trialogue negotiations. Member states must solidify their positions to facilitate the negotiation process.
The main points outlined in the proposal are as follows:
Establishment and Operational Timeline: The MSR is to be established in 2018 and will be operational by December 31, 2018. Once the number of surplus allowances is published in May 2018, the allowances will be promptly placed in the reserve.
Backloaded and Unallocated Allowances: The proposal entails the transfer of the 900 million tonnes (Mt) of backloaded allowances, along with any unallocated allowances resulting from the New Entrant Reserve (NER) or installation closures, to the reserve.
Funding for Breakthrough Industrial Innovation: Out of the unallocated allowances, 300 Mt will be made available, equivalent to 50 Mt annually from the start date of the MSR until December 31, 2025. This allocation aims to provide funding to support breakthrough industrial innovation projects in the carbon leakage sectors.
Removal Rate and Allowance Thresholds: The proposal suggests a removal rate of 12% for surplus allowances, with agreed thresholds for the removal and restoration of allowances set at 833 Mt and 400 Mt, respectively.
This approval sets the stage for further negotiations, with trilogue discussions on the horizon. The progression of the MSR proposal reflects a significant development in shaping the future of the EU ETS.
