The market stability reserve has been introduced in the EU Emissions Trading Scheme to reduce the surplus of emission rights. Due to events in the past there is a large surplus of emission rights:
- Too many emission rights have been made available to industrial companies and plant operators in relation to their requirements. Unused emission rights can be carried over from one year to the next.
- In the course of the economic crisis in 2008/2009, emissions from industry fell more than expected due to lower production.
- Plants could offset part of their emissions through emission reductions in developing countries.
Due to the surplus the EU decided to auction less and to transfer the non-auctioned emissions rights to a market stability reserve. The EU records not only how many emission rights are in the market, but also how many have been handed in for actual carbon emissions or simply cancelled. Based on the number of available emission allowances, the EU calculates how many emission allowances will be auctioned and how many will be transferred to the market stability reserve.
From 2023, excess quantities will be canceled from the market stability reserve. If you cancel emission rights yourself today, the EU may cancel less in the future. To prevent this, we will initially only hold the emission rights on our account. They are no longer available to the market because we do not sell them again. However, they are still counted as available surplus quantities by the EU and will lead to the EU canceling even more emission rights. We will only delete the emission rights when the EU stops deleting them. This is the case when no more emission rights are transferred to the market stability reserve. Under the current rules, this comes to life when the surplus of emission rights falls below 833 million tonnes.