EU to raise ETS allowance withdrawal threshold to 700 million — RMF24

The European Union has agreed on changes to the market stability reserve in the ETS CO₂ emissions trading system. The threshold after which allowances are permanently withdrawn from the market is to increase from 400 million to 700 million. This was reported by RMF24, citing an announcement by the Irish presidency of the EU.

Changes to the ETS reserve

The market stability reserve is a mechanism that regulates the number of emission allowances available on the market. According to the outlet, a larger reserve is intended to serve as a buffer: if there is a shortage of allowances on the market, additional permits can be released. According to RMF24's assessment, a larger number of available allowances should reduce their price and energy costs for industry and households.

There are no plans to completely abolish the cancellation of allowances. At the same time, the parties agreed to consider a gradual reduction of the withdrawal threshold as part of a broader reform of the ETS system.

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Poland's position

According to RMF24, Poland initially sought a complete halt to the cancellation of allowances — a decision proposed by the European Commission. In the end, Warsaw agreed to a compromise, as the priority was to stop the further reduction in the number of permits on the market as quickly as possible.

The current mechanism provides for the permanent withdrawal of around 16 million allowances per month, which RMF24 calls a potential loss of €1.4 billion. A Polish diplomat quoted by the outlet said that the 700 million threshold has mainly theoretical significance, while the main result is the cessation of further cancellation of permits. Last week, EU leaders at a summit in Brussels called for work on the reserve to be accelerated in order to limit fluctuations in CO₂ prices and their impact on electricity costs.