European governments continued to hold divergent positions on the proposed ETS market stability reserve (MSR), as talks resumed on Wednesday afternoon following earlier stalemates. However, officials indicated that there was only a small chance of reaching a breakthrough in the evening. As Latvia currently holds the EU presidency, it aims to secure a legislative text for the carbon market fix before its term ends on June 30. However, member states refused to grant Latvia a mandate to negotiate with the European Parliament on their behalf in the morning session. While national representatives generally agreed on the need for talks with the parliament, some wanted to proceed on their own terms, leading to entrenched positions.
The 28 EU member states remain divided over the timing of the scheme, with Germany and the UK, among others, advocating for a 2017 start, while Poland has assembled a blocking minority of governments opposing an MSR start before 2021. The European Parliament compromised on an end-2018 start for the MSR, but many criticize member states for their unwillingness to move from entrenched positions. Despite the narrow blocking minority, the diplomatic source sees potential for deals that could facilitate an earlier start. Key issues still under debate include the fate of 900 million backloaded emissions allowances, unallocated allowances, financial support for low-carbon technologies, and measures to protect industries from higher carbon prices.
