The Market Stability Reserve: Why Canceling or Just Holding Emission Allowances Are Not Good Options

Hanjo Allinger

The Market Stability Reserve The Market Stability Reserve (MSR) is a mechanism designed to reduce surplus emission rights to stabilize the market. Since 2019, the number of new emission allowances auctioned has been automatically reduced if there are more allowances on the market than needed. If there are more than 833 million surplus allowances, 24 fewer allowances will be auctioned for every 100 unused EUAs in the following year, and will instead be transferred to the MSR and ultimately, automatically cancelled. The number of surplus allowances (TNAC, Total Number of Allowances in Circulation) is published annually by the EU Commission: …

Why not a traditional offset business?

Support

Any serious approach to climate protection is important and helps to limit global warming. However, we believe that offsetting alone is not enough. Nor is every approach to climate protection equally well suited to a decision maker. Offsets involve promoting and financing projects outside an issuer’s business that lead to a reduction in emissions. One example is the construction of wind turbines and solar plants in countries whose electricity production is dominated by coal-fired power plants. Another example is the reforestation of large forest areas to store CO2 in biomass. Offset transactions are intended to “neutralize” own emissions that cannot …

Glasgow Climate Conference

Support Uncategorized

The agreement reached at the climate conference in Glasgow in November 2021 sought to reduce the problem of double counting of delivered emission reductions in voluntary offset transactions. It had arisen in January 2021 when the resolutions of the Paris climate summit came into force. Almost all countries in the world had made a binding commitment to reduce their emissions in Paris. If a project is now carried out abroad to offset European emissions, the host country could scale back its own climate protection efforts to the same extent. The contribution of a climate protection project would then no longer …