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Greenhouse gas emissions market reform at the end of the decade

03 June 2015
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At a meeting held this weekend behind closed doors, the representatives of the European Union member states agreed, with the majority of votes, that the reform of the European market of greenhouse gas emissions will start. The representatives of Poland, Romania, Bulgaria, Cyprus, Hungary and Greece voted against this proposal.

The reform of the world's largest CO2 market and its future is the issue discussed for months. The main plan is to introduce additional regulation mechanism that will effectively control the allocation of permits for greenhouse gas emissions called Market Stability Reserve. The main objective is to regulate the price which is (only) 7 eur/t by decreasing the number of unallocated permits for greenhouse gas emissions and thus affect the stability of prices in the Emissions Trading System (abbr. ETS)

Market Stability Reserve would work as a regulatory bank of carbon dioxide, based on the mechanism of supply and demand. In case of excessive surplus MSR can intermit the supply, or in reverse case the supply can be increased. This would regulate the prices, which would finally lead to the transition to use new and cleaner technologies in industry in order to reduce greenhouse gas emissions. The expected price increase would be to 15 euro/t, then about 25 euro/t, and the target level is just over 30 euro/t.

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