According to the European Commission, the total number of allowances in circulation on the European carbon market amounts to roughly 1,694 million. This is the first publication of this type for the purposes of the Market Stability Reserve (MSR) and the figure will help determine whether allowances intended to be auctioned in the subsequent year should be placed into the reserve.
In July 2015, the European Parliament approved a proposal to start reforming the European Union Emissions Trading System (EU ETS) in 2019, by establishing a Market Stability Reserve (MSR) that would remove some of the surplus of carbon allowances and revive falling emission permit prices. The MSR would also release the pollution permits in the case of higher demand.
The total number of allowances in circulation will be used as an indicator to determine whether, and if so, how many allowances will be placed in the reserve, or whether allowances will be released from the reserve in tranches of 100 million allowances each year. Up to 12% of the total number of allowances in circulation could be placed in the MSR, which would reduce 2018 auction volumes by around 203 million allowances. Discussions are currently being held in the Council and the European Parliament on temporarily doubling the rate at which allowances will be placed in the MSR, which could raise the volume of allowances to be placed in the MSR to around 406 million.
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