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Main Title: Reviewing the Market Stability Reserve in light of more ambitious EU ETS emission targets
Author(s): Osorio, Sebastian
Tietjen, Oliver
Pahle, Michael
Pietzcker, Robert C.
Edenhofer, Ottmar
Type: Article
Abstract: The stringency of the EU's Emission Trading System (ETS) is bound to be ratcheted-up to deliver on more ambitious goals as formulated in the EU's Green Deal. Tightening the cap needs to consider the interactions with the Market Stability Reserve (MSR), which will be reviewed in 2021. We analyse these issues using the model LIMES-EU. First, we examine how revising MSR parameters impacts allowance cancellations. We find that varying key design parameters leads to cancellations in the range of 2.6–7.9 Gt – compared to 5.1 Gt under current regulation. Overall, the bank thresholds, which define when there is intake to/outtake from the MSR, have the highest impact. Intake rates above 12% only have a limited effect, and cause oscillatory intake behaviour. Second, we analyse how more ambitious climate 2030 targets can be achieved by adjusting the linear reduction factor (LRF). We find that the LRF increases MSR cancellations substantially up to 10.0 Gt. This implies that increasing its value from currently 2.2% to only 2.6% could be consistent with an EU-wide target of −55% by 2030. However, MSR cancellations are subject to large uncertainty, which increases the complexity of the market and induces high price uncertainty.
Subject(s): EU climate policy
EU ETS reform
linear reduction factor
market stability reserve
Issue Date: 4-Sep-2021
Date Available: 22-Jun-2022
Is Part Of: 10.14279/depositonce-15568
Language Code: en
DDC Class: 333 Boden- und Energiewirtschaft
Sponsor/Funder: BMBF, 01LA1810C, Ökonomie des Klimawandels - Verbundprojekt: Die Zukunft fossiler Energieträger im Zuge von Treibhausgasneutralität (FFF) - Teilprojekt 3: Europäische Interaktion
EC/H2020/730403/EU/Innovation pathways, strategies and policies for the Low-Carbon Transition in Europe/INNOPATHS
BMBF, 03SFK5A, Verbundvorhaben ARIADNE: Evidenzbasiertes Assessment für die Gestaltung der deutschen Energiewende - Teilvorhaben A
Journal Title: Energy Policy
Publisher: Elsevier
Volume: 158
Article Number: 112530
Publisher DOI: 10.1016/j.enpol.2021.112530
EISSN: 1873-6777
ISSN: 0301-4215
TU Affiliation(s): Fak. 6 Planen Bauen Umwelt » Inst. Landschaftsarchitektur und Umweltplanung » FG Ökonomie des Klimawandels
Appears in Collections:Technische Universität Berlin » Publications

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