Introducing short term flexibility in the EU ETS to assure its long-term credibility : a multi-criteria analysis of policy options

It is now well established that the European Union Emissions Trading Scheme (EU ETS) needs to be reformed. After more than 18 months of discussions, the EU Commission disclosed, in its communication published in January 2014 on “A policy framework for climate and energy in the period from 2020 to 2030”, its legislative proposal of a market stability reserve (MSR) in the EU ETS. This measure, that should be implemented from the next compliance period (2021-2028) onwards, would reduce the surplus of allowances growing since 2008 and improve the ETS’s resilience to external shocks by automatically adjusting the supply of allowances to be auctioned. The operation of this MSR would be determined by predefined rules that, once agreed on, leave no discretion to either the Commission or Member States.