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Agreement reached on EU emissions market reform

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29 May 2015

Agreement reached on EU emissions market reform

Report summary

On 5 May 2015, the European Council and Parliament reached agreement on the introduction of a Market Stability Reserve (MSR) measure to the EU Emissions Trading Scheme (ETS) from 2019. The introduction of the MSR represents a substantial reinforcement of the ETS and will drive a rebalancing of the carbon market's supply-demand balance. The cost of European emissions is likely to increase gradually in response to the MSR and high cost carbon will be a feature of the market in the long-term.

Table of contents

    • Rebalancing the EU emissions market
    • Europe finds common ground on reserve arrangements
    • The MSR will support higher emissions prices
      • ETS allowance (EUA) balance – with and without the market stability reverse
    • Higher emissions costs change the economics of power generation
      • Coal-gas parity costs in power – coal price cases (US$/t)
    • A long-term outlook of higher carbon costs makes investment in existing coal more difficult
    • Conclusions

Tables and charts

This report includes 3 images and tables including:

  • Agreement reached on EU emissions market reform: Image 1
  • ETS (EUA) price forecast – comparing the H2 2014 outlook and MSR 2019 case
  • Agreement reached on EU emissions market reform: Image 3

What's included

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    Agreement reached on EU emissions market reform

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