Raising the climate policy ambition of the European Union

The report “Raising the Climate Policy Ambition of the European Union. Reforming the EU Emissions Trading System” analyses the impacts of the different options for the revised ETS and market stability reserve (MSR), based around the following:

• Three emissions baseline scenarios which take into account the impact of the Covid-19 pandemic on CO2-emissions. This is because the economic slowdown brought about by the pandemic could give rise to a potential new surplus of allowances coming onto the system in the 2020s.
• An ETS target of 65% lower emissions and 70% lower emissions by 2030 (compared to 2005 levels): the linear reduction factor is adjusted to achieve these targets and three scenarios of cap rebasing are included: (150, 250, and 350 million allowances). Rebasing is necessary to reset the starting point of the cap to verified emissions level, correcting the inflated starting point used until now.
• The report looks at how the market stability reserve could be reformed in order to remove the historical surplus of allowances, as well as a potential new surplus.