A draft law to reform the EU Emissions Trading Scheme (ETS), by reducing the surplus of carbon credits available for trading into order to support the price, was informally agreed upon by member of European Parliament and the Latvian Presidency of the EU Council of Ministers on 5 May 2015. The proposed law would create a system that automatically takes a portion of ETS allowances off the market and into the reserve if the surplus exceeds a certain threshold. In the opposite scenario, allowances could be returned to the market. The Market Stability Reserve (MSR) would start operating in 2019, instead of in 2021 as originally proposed by the European Commission. Under the deal, the 900 million “backloaded” allowances would be placed in the reserve. The so-called “solidarity allowances”, amounting to 10% of the annual total and allocated to certain EU member states in Central and Eastern Europe, would be exempt from the reserve until 2025.
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