EU ETS 2 Market Stability Reserve: Analysis of Reform Proposals

Summary

Policymakers are currently debating how to design the Market Stability Reserve (MSR) for the EU ETS 2, which covers emissions from buildings and road transport, to ensure price stability and environmental integrity. This interim report uses a market model to analyze seven reform options for the MSR, focusing on their impacts on carbon prices, emissions, and allowance circulation. The analysis shows a clear trade-off: more generous MSR releases lower prices but increase cumulative emissions, potentially undermining the system's climate targets. The project is ongoing, contributing to active policy discussions.

Key Facts

Source Document

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