The UE member states have finally approved new regulations on creating a stability reserve for the EU CO2 emissions allowances market. Their purpose is to increase the prices of permits for emission greenhouse gases, and to persuade the industry to “green” investments. The regulations that were accepted by EU’s environment ministers on Friday specify creating a market stability reserve (MSR) in 2018 and starting its operation from 1st January 2019, and also transfer of 900 million of allowances withdrawn from the market in the so called backloading process. Initially the allowances were supposed to return to the market.
The reform also provides that the allowances that are not allocated will be directly transferred to MSR in 2020, and the decision whether they would be used in future will be made while reviewing the emission trading scheme. Until the end of 2025 about 10 percent of allowances is to be excluded from the reserve. The so called solidarity envelope is to be distributed among the poorest EU member states (with lower GDP than 90 percent of EU average). Our country will also profit from that solution.
The stability reserve, through increasing prices of CO2 emission allowances, will encourage the industry to fulfil the assumptions of EU climate and energy policy and to invest in green technologies. Presently, the price of a single gas emissions permit is close to 7 Euro and it is definitely too little to achieve the objectives of EC which were set while creating the carbon market. The reserve is supposed to automatically withdraw permits from the market if a present limit is exceeded. They are to be returned into the market in case of their shortages. Since 2008, as a result of the crisis, the prices of permits have dropped by 65 percent.