The United Kingdom has proposed to start the reforms of the European Emissions Trading Scheme (EU ETS) four years earlier than planned, in 2017 instead of 2021, in order to boost investments in renewables and to tackle the ETS oversupply. The EU ETS market currently has a surplus of around 2 billion allowances. In a first stage, the European Commission approved the "back-loading" (freezing the auctioning) of 900 million carbon allowances. The Market Stability Reserve (MSR) is expected to enter into force in 2021, to address the emission allowances surplus that has built up and to improve the system's resilience to major shocks by adjusting the supply of allowances to be auctioned. The United Kingdom aims to accelerate the MSR reform, forecasting the surplus to reach 3.2 billion allowances in 2020.
Source: DECC
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