The Environment Committee of the European Parliament has approved a reform of the EU Emissions Trading Scheme (ETS), which aims to reduce the surplus of carbon credits available for trading in an attempt to support the price of the emission rights. The scheme would start operating on 1 January 2019 instead of 2021 as proposed by the European Commission.
The proposed law would create a system that automatically takes a portion of ETS allowances off the market and into a reserve if the surplus exceeds a certain threshold. In the opposite scenario, allowances could be returned to the market.The current surplus of emission allowances is estimated at over 2 billion.
Under the proposed deal, « backloaded » allowances (900 million allowances withdrawn from the market, initially to be returned from 2019), would be placed in a "Market Stability Reserve". Remaining allowances unallocated at the end of the current trading phase (2020) should also be placed in the reserve. The Market Stability Reserve will start operating on 1 January 2019, instead of 2021 as proposed by the European Commission.
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