Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Decision (EU) 2015/1814 as regards the amount of allowances to be placed in the market stability reserve for the Union greenhouse gas emission trading scheme until 2030
Date: 2021-07-14
Institutions: Directorate-General for Climate Action, European Commission
Subjects: EU Emissions Trading Scheme, EU emission allowance, EU environmental policy, auction sale, environmental protection, greenhouse gas, pollution control measures, reduction of gas emissions, reserves

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 14.7.2021  COM(2021) 571 final 2021/0202 (COD)  Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Decision (EU) 2015/1814 as regards the amount of allowances to be placed in the market stability reserve for the Union greenhouse gas emission trading scheme until 2030 {SWD(2021) 552 final}  
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

• 
The European Green Deal Communication1 launched a new growth strategy for the EU that 
aims to transform the EU into a fair and prosperous society with a modern, resource-efficient 
and  competitive  economy.  It  reaffirms  the  Commission’s  ambition  to  increase  its  climate 
targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to 
protect the health and well-being of citizens from environment-related risks and impacts. The 
necessity and value of the European Green Deal have only grown in light of the very severe 
effects  of  the  COVID-19  pandemic  on  the  health,  living  and  working  conditions  and  well-
being of the Union’s citizens. 

Tackling  climate  change  is  an  urgent  challenge.  In  line  with  the  scientific  findings  of  the 
Intergovernmental  Panel  on  Climate  Change  (IPCC)  Special  Report,  global  net-zero  CO2 
emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as 
soon  as  possible  later  in  the  century.  This  urgent  challenge  requires  the  EU  to  step  up  its 
action and demonstrate global leadership by becoming climate neutral by 2050. This objective 
is set out in the Communication ‘A Clean Planet for all’ - A European strategic long-term 
vision for a prosperous, modern, competitive and climate-neutral economy’2. 

Based  on  the  European  Green  Deal  strategy  and  a  comprehensive  impact  assessment,  the 
Commission’s Communication  of  September  2020  on  Stepping  up  Europe’s  2030  climate 
ambition3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward 
a  comprehensive  plan  to  increase  the  European  Union’s  binding  target  for  2030  towards  at 
least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps 
give certainty to policymakers and investors, so that decisions made in the coming  years do 
not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. 
The 2030 target is in line with the Paris Agreement objective to keep the global temperature 
increase to well below 2°C and pursue efforts to keep it to 1.5°C.  

The  European  Council  endorsed  the  new  EU  binding  target  for  2030  at  its  meeting  of 
December 20204. It also called on the Commission “to assess how all economic sectors can 
best contribute to the 2030 target and to make the necessary proposals, accompanied by an 
in-depth  examination  of  the  environmental,  economic  and  social  impact  at  Member  State 
level,  taking  into  account  national  energy  and  climate  plans  and  reviewing  existing 
flexibilities”. 

1 
2 
3 
4 

COM(2019)640 final. 
COM(2018) 773 final. 
COM (2020) 562 final. 
European Council Conclusions 10-11 December 2020 EUCO 22/20 CO EUR 17 CONCL 8. 

EN 

1 

  EN 

                                                 
To  this  end,  the  European  Climate  Law5,  as  agreed  with  the  co-legislators,  will  make  the 
EU’s  climate  neutrality  target  legally  binding,  and  raise  the  2030  ambition  by  setting  the 
target of at least 55 % net emission reduction by 2030 compared to 1990.  

In  order  to  follow  the  pathway  proposed  in  the  European  Climate  Law,  and  deliver  this 
increased  level  of  ambition  for  2030,  the  Commission  has  reviewed  the  climate  and  energy 
legislation  currently  in  place  that  are  expected  to  only  reduce  greenhouse  gas  emissions  by 
40 % by 2030 and by 60 % by 2050. This ‘fit for 55’ legislative package, as announced in the 
2030  Climate  Target  Plan,  is  the  most  comprehensive  building  block  in  the  efforts  to 
implement the ambitious new 2030 climate target, and all economic sectors and policies will 
need to make their contribution.  

As part of this package, the Commission has to increase the environmental contribution of the 
EU Emissions Trading System (EU ETS) by amending Directive 2003/87/EC of the European 
Parliament  and  of  the  Council6  (EU  ETS  Directive)  in  a  manner  commensurate  with  the 
overall target. In addition, unprecedented near term investments are needed to overcome the 
negative  impact  of  the  COVID-19  crisis  on  jobs,  incomes  and  businesses,  including  in  the 
sectors covered by the EU Emissions Trading System (EU ETS). 

To address the structural imbalance between the supply of and demand for allowances in the 
market  and  to  improve  the  resilience  of  the  EU  ETS  to  major  shocks,  Decision  (EU) 
2015/1814 of the European Parliament and of the Council7 (the MSR Decision) established a 
market stability reserve (the MSR) in 2018. The MSR has been operational since 2019.  

The  reserve  functions  by  triggering  adjustments  to  the  annual  auction  volumes.  In  order  to 
preserve  a  maximum  degree  of  predictability,  Decision  (EU)  2015/1814  (MSR  Decision) 
established clear rules for placing allowances in the reserve and releasing them from it.  

These rules were amended by Directive (EU) 2018/410 of the European Parliament and of the 
Council8. Directive (EU) 2018/410 doubled until 2023 the intake rate (the percentage from the 
total number of allowances in circulation (TNAC) which is put in the reserve) from 12 % to 
24 %,  and  the  minimum  amount  to  be  placed  in  the  reserve  from  100  to  200  million 
allowances.  

It  should  be  noted  that  the  minimum  amount  of  allowances  to  be  placed  in  the  reserve 
determines indirectly the minimum TNAC necessary to trigger an intake of allowances in the 

5 

6 

7 

8 

Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing 
the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 
2018/1999 (‘European Climate Law’) (OJ L 243, 9.7.2021, p. 1). 
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a 
system  for  greenhouse  gas  emission  allowance  trading  within  the  Union  and  amending  Council 
Directive 96/61/EC (OJ L 275, 25.10.2003, p. 32). 
Decision (EU) 2015/1814 of the European Parliament and of the Council of 6 October 2015 concerning 
the  establishment  and  operation  of  a  market  stability  reserve  for  the  Union  greenhouse  gas  emission 
trading scheme and amending Directive 2003/87/EC (OJ L 264, 9.10.2015, p. 1–5). 
Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 amending 
Directive 2003/87/EC to enhance cost-effective  emission reductions and low-carbon  investments, and 
Decision (EU) 2015/1814 (OJ L 76, 19.3.2018, p. 3–27). 

EN 

2 

  EN 

                                                 
reserve (i.e. the upper threshold of the reserve). The TNAC needs to be at least 833 million so 
that 12 % of that amount entails placing at least 100 million allowances into the reserve. This 
minimum amount was doubled together with the doubling of the intake percentage so that the 
upper threshold of the reserve stayed the same (24 % of 833 being 200). 

The changes to the EU ETS to increase ambition for 2030, as well as the impact of external 
factors such as COVID-19 or national measures such as coal phase-outs, mean that the basic 
rules of the MSR must remain fit to  continue tackling structural  supply-demand imbalances 
throughout the decade. Moreover, Article 3 of the MSR Decision tasks the Commission with 
reviewing the functioning of the MSR before within three years of the start of its operation, on 
the basis of an analysis of the orderly functioning of the European carbon market. The review 
must pay particular attention to the MSR’s key numerical parameters and invalidation rule9, 
and look into the impact of the reserve on growth, jobs, the Union's industrial competitiveness 
and the risk of carbon leakage. 

The analysis carried out in the Impact Assessment, in the context of the review, shows that the 
MSR should be adapted to  the new policy  and market  conditions,  and shocks.  It  also  found 
that the MSR should include supply and demand from aviation. Another point resulting from 
the analysis was that the intake is prone to a threshold effect, which should be corrected10.  

The  review  of  these  elements  should  be  considered  together  with  the  effects  for  market 
stability of increasing the ambition of the EU ETS. As a result, it is being carried out as part 
of the proposal for a Directive of the European Parliament and the Council amending the EU 
ETS Directive and MSR Decision to strengthen the EU ETS11.  

According  to  Article  1(5)  of  the  MSR  Decision,  the  intake  rate  reverts  back  to  12 %  after 
2023. If the MSR parameters are not adjusted appropriately and in a timely manner, this risks 
resulting  in  a  potentially  harmful  increase  of  the  surplus.  Hence,  the  continuation  of  the 
current  parameters  of  the  MSR,  as  established  pursuant  to  Directive  (EU)  2018/410  (intake 
rate  of  24 %  and  minimum  amount  to  be  placed  in  the  reserve  of  200  million  allowances), 
should be adopted separately from the general review of the EU ETS as part of the “Fit for 
55” package to ensure market predictability. 

As  a  result,  the  MSR  Decision  should  be  amended  to  make  this  essential  adjustment  to 
maintain a well-functioning and ambitious EU ETS.  

• 

9 

10 

11 

Consistency with existing policy provisions  

The  invalidation  rule  is  set  out  in  Article  1(5a)  of  the  MSR  Decision.  It  states  that,  as  of  2023, 
allowances held in the reserve above the total number of allowances auctioned during the previous year 
will be invalidated. 
As an illustration for the threshold effect, if the TNAC is 834 million allowances, slightly higher than 
the upper threshold of 833 million, then according to the MSR rules, 24 %  % of the TNAC is put in the 
MSR. However, if the TNAC is just below the threshold, at 832 million allowances, then nothing is put 
in the MSR at all.  
Directive  (EU)  2021/…  of  …  of  the  European  Parliament  and  of  the  Council  amending  Directive 
2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union, and 
Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for 
the Union greenhouse gas emission trading scheme (OJ L […], […], p. […]). 

EN 

3 

  EN 

                                                 
The  MSR  is  a  tool  for  stability  of  the  market  established  by  the  EU  ETS.  As  such,  the 
consistency of the MSR with other Union policies is ensured mainly through the consistency 
of the EU ETS with other Union policies. As the current proposal only involves changes to 
the design features of the MSR, it does not affect other Union policies directly. 

Consistency  with  other  Union  policies  is  ensured  through  the  coherence  of  the  impact 
assessment for the EU ETS and MSR review with the remainder of the ‘fit for 55’ climate and 
energy package: notably the impacts assessments related to the ESR; the Land Use, Land Use 
Change and Forestry (LULUCF) Regulation; CO2 Emissions Performance Standards for Cars 
and Vans; the Renewable Energy Directive (RED II); the Energy Efficiency Directive (EED); 
and,  at  a  later  stage,  the  Energy  Performance  of  Buildings  Directive.  The  market  stability 
reserve captures changes in demand due to these complementary policies.  

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The  legal  basis  for  this  proposal  is  Article  192  TFEU.  In  accordance  with  Article  191  and 
192(1) TFEU, the European Union shall contribute to the pursuit, inter alia, of the following 
objectives:  preserving,  protecting  and  improving  the  quality  of  the  environment;  promoting 
measures  at  international  level  to  deal  with  regional  or  worldwide  environmental  problems, 
and in particular combating climate change. 

• 

Subsidiarity (for non-exclusive competence)  

The EU's right to act stems from the fact that the EU ETS operates as a Union-wide system in 
a  fully  harmonised  manner.  The  EU  ETS  Directive  is  an  existing  EU  policy  instrument 
introduced in 2003.  

Climate  change  is  a  trans-boundary  problem  and  both  international  and  EU  action  can 
effectively complement and reinforce regional, national and local action. Increasing the 2030 
target for EU greenhouse gas reductions will impact many sectors across the EU economy and 
coordinated action at the EU level is therefore indispensable and has a much bigger chance of 
leading to the necessary transformation, acting as a strong driver for cost-efficient change and 
upward convergence.  

The  objectives  of  the  EU  ETS  Directive  therefore  cannot  be  sufficiently  achieved  by  the 
Member States acting unilaterally, but  can  rather, by  reasons of the scale and effects of the 
Directive, be better achieved at Union level. By extension, as the MSR is a tool for stability of 
the  market  established  by  the  EU  ETS  Directive,  its  objective  also  cannot  be  sufficiently 
achieved  by  unilateral  action  by  the  Member  States.  It  is  an  existing  EU  policy  instrument 
adopted  in  2015.  In  accordance  with  the  principle  of  subsidiarity  set  out  in  Article  5  of  the 
TFEU, the objectives of the proposal amending this instrument can only be achieved through 
a proposal from the Commission at EU level. 

• 

Proportionality 

As  set  out  in  section  7  of  the  impact  assessment,  the  proposal  complies  with  the 
proportionality principle because it does not go beyond what is necessary in order to achieve 

EN 

4 

  EN 

the objectives of implementing the EU’s greenhouse gas emission reduction target for 2030 in 
a cost-effective manner while at the same time ensuring the proper functioning of the internal 
market.  

• 

Choice of the instrument 

A Decision is the appropriate instrument to amend the Decision establishing the MSR. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

There was  no ex-post evaluation  or fitness check related to  these proposals  due to  the early 
stage of implementation of existing legislation and, consequently, the limited data availability. 

• 

Stakeholder consultations 

The  general  consultation  on  the  revision  of  the  EU  ETS  gathered  stakeholder  views  on  the 
review of the MSR. 

The  Commission  first  invited  feedback  on  an  inception  impact  assessment,  outlining  the 
initial considerations and policy options of the review. The inception impact assessment was 
open  for  feedback  from  29  October  2020  to  26  November  2020  and  received  about  250 
contributions12.  The  Commission  then  organised  an  online  public  consultation  with  a 
questionnaire.  It  was  open  for  12  weeks  from  13  November  2020  to  5  February  2021  and 
received  almost  500  replies13.  The  Commission  also  instructed  the  contractor  Vivid 
Economics to organise two expert workshops14 on the review of the MSR. 

The MSR has wide support across stakeholder groups, however, there is no consensus about 
the necessary  changes  to  its parameters, in  particular its thresholds and its intake rate. Civil 
society  expressed relatively more support for a strengthening of the parameters of the MSR 
than the private sector.  The proposal  to  continue with  an intake rate of  24 % and minimum 
amount to be placed in the reserve of 200 million allowances beyond 2023 and until the end 
of Phase IV of the EU Emissions Trading System in 2030 strikes a reasonable balance, also 
reflecting that the MSR with its current parameters has worked well in the past. 

Collection and use of expertise 

• 
This  proposal  builds  upon  evidence  gathered  in  the  context  of  the  impact  assessment15 
accompanying  the  2030  Climate  Target  Plan.  It  makes  use  of  updated  EU  Reference 

12 

13 

14 

15 

the 

found  on 

found  on 

following  website:  https://ec.europa.eu/info/law/better-

The  outcome  can  be 
regulation/have-your-say/initiatives/12660-Updating-the-EU-Emissions-Trading-System 
The  outcome  can  be 
regulation/have-your-say/initiatives/12660-Updating-the-EU-Emissions-Trading-System/public-
consultation 
https://ec.europa.eu/clima/events/expert-workshop-market-stability-reserve_en, 
https://ec.europa.eu/clima/events/2nd-expert-workshop-market-stability-reserve_en. 
In  particular  Vivid  Economics,  (2021)  –  “Review  of  the  EU  ETS’  Market  Stability  Reserve”,  report 
prepared for DG CLIMA. 

following  website:  https://ec.europa.eu/info/law/better-

the 

EN 

5 

  EN 

                                                 
Scenario16, which includes COVID-19 impacts, and updated policy scenarios, building upon 
the scenarios developed for the 2030 Climate Target Plan.  

In  addition,  the  Commission  bases  itself  on  the  growing  body  of  peer-reviewed  empirical 
research  on  the  EU  ETS  and  makes  use  of  several  support  contracts.  Among  the  support 
contracts, Vivid Economics conducted a study to support the Commission in the review of the 
MSR17.  In  the  context  of  the  study,  two  expert  workshops  were  organised  by  Vivid 
Economics,  with  the  participation  of  analysts,  market  experts  and  stakeholders.  This  study 
supported maintaining the current intake rate after 2023. 

• 

Impact assessment 

The  proposal  is  accompanied  by  an  impact  assessment,  which  builds  on  the  findings  of  the 
comprehensive impact assessment on the 2030 Climate Target Plan18. It is based on integrated 
modelling  scenarios  that  reflect  the  interaction  of  different  policy  instruments  on  economic 
operators,  in  order  to  ensure  complementarity,  coherence  and  effectiveness  in  achieving  the 
2030  and  2050  climate  ambition.  An  executive  summary  and  the  positive  opinion  of  the 
regulatory scrutiny board will be made publicly available. Regarding this proposal, the impact 
assessment showed that, in order to maintain the good functioning of the EU ETS, the intake 
rate  should  not  be  allowed  to  return  to  12 %  after  2023,  but  should  be  maintained  at  24 %, 
until the full review can be implemented. 

• 

Regulatory fitness and simplification 

This proposal will imply no direct administrative burden to enterprises as it is implemented by 
the Commission.  

In  line  with  the  Commission’s  commitment  to  Better  Regulation,  the  proposal  has  been 
prepared 
transparency  and  continuous  engagement  with 
stakeholders, listening to external feedback and taking into account external scrutiny to ensure 
the proposal strikes the right balance (see also section on the collection and use of expertise).   

inclusively,  based  on  full 

• 

Fundamental rights 

The  proposal  respects  the  fundamental  rights  and  observes  the  principles  recognised  in 
particular  by  the  Charter  of  Fundamental  Rights  of  the  European  Union19.  In  particular,  it 
contributes to the objective of a high level of environmental protection in accordance with the 
principle of sustainable development as laid down in Article 37 of the Charter of Fundamental 
Rights of the European Union20. 

16 

17 

18 
19 
20 

Modelling-based projections of energy, transport and greenhouse gas emissions trends to 2050, building 
on  consistent  set  of  assumptions  across  EU,  Member  States  and  EU  policies,  Member  States  specific 
characteristics; and relying on the consultation of Member States experts. 
Vivid Economics, (2021) – “Review of the EU ETS’ Market Stability Reserve”, report prepared for DG 
CLIMA. 
SWD(2020)176. 
OJ C 326, 26.10.2012, p. 391. 
OJ C 326, 26.10.2012, p. 391. 

EN 

6 

  EN 

                                                 
4. 

BUDGETARY IMPLICATIONS 

The  EU  ETS  generates  significant  revenues  for  Member  States’  budgets.  Most  of  the 
auctioning  revenues  accrue  to  Member  States.  The  proposal  affects  national  budgets  and 
administrations primarily because of this link. Maintaining the current intake rate of the MSR 
will  reduce  the  auction  volumes  of  the  Member  States.  However,  this  is  expected  to  be 
compensated by the effect on the price of a reduced surplus of allowances in the market due to 
the increased ambition of the EU ETS, and by the proposed increase in the scope of the EU 
ETS Directive to cover maritime transport, and road transport and buildings. Adjustments to 
the EU budgetary framework will be presented by the Commission as part of the upcoming 
Own Resources package including a proposal to amend the multiannual financial framework. 

IT development and procurement choices will be performed according to the Communication 
on the guidelines on financing of information technology and cybersecurity, of 10 September 
202021. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The  Commission  will  continue  to  monitor  and  evaluate  the  functioning  of  the  EU  ETS, 
including the MSR, in its annual Carbon Market Report, as provided under Article 10(5) of 
the EU ETS Directive. The initiative builds on the process based on integrated national energy 
and climate plans and the robust transparency  framework for  greenhouse  gas  emissions and 
other  climate  information  that  is  contained  in  Regulation  (EU)  2018/1999  of  the  European 
Parliament  and  of  the  Council22.  The  Commission  will  use  inter  alia  the  information 
submitted and reported by Member States under the Governance Regulation as a basis for its 
regular  assessment  of  progress.  This  includes  information  on  greenhouse  gas  emissions, 
policies and measures, projections and adaptation. The Commission will also make use of this 
information  for  the  Environmental  Implementation  Reviews  and  the  monitoring  of  the 
Environment Action Programmes.  

Furthermore, evaluation of progress on the application of the EU ETS Directive is regulated 
in  Article  21  of  the  EU  ETS  Directive,  which  requires  Member  States  to  submit  to  the 
Commission an annual report paying particular attention to issues including the allocation of 
allowances,  operation  of  the  Registry,  application  of  monitoring  and  reporting,  verification 
and accreditation and issues relating to compliance. 

In addition, Article 3 of the MSR Decision requires the Commission to regularly review the 
MSR after this first review.  

21 
22 

C(2020) 6126. 
Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the 
Governance  of  the  Energy  Union  and  Climate  Action,  amending  Regulations  (EC)  No  663/2009  and 
(EC)  No  715/2009  of  the  European  Parliament  and  of  the  Council,  Directives  94/22/EC,  98/70/EC, 
2009/31/EC,  2009/73/EC,  2010/31/EU, 2012/27/EU  and  2013/30/EU of  the  European  Parliament  and 
of the Council, Council Directives 2009/119/EC and (EU) 2015/652 and repealing Regulation (EU) No 
525/2013 of the European Parliament and of the Council (OJ L 328, 21.12.2018, p. 1–77). 

EN 

7 

  EN 

                                                 
• 

Detailed explanation of the specific provisions of the proposal 

As  the  MSR  Decision  currently  stands,  the  24 %  intake  rate  of  the  MSR  and  the  minimum 
amount  to  be  placed  in  the  reserve  of  200  million  allowances  will  expire  in  2023.  As  from 
2024, the intake rate would become 12 %. The impact assessment has shown that 12 % intake 
rate would not be enough to ensure that the objectives of the MSR in terms of reducing the 
surplus and ensuring market resilience would still be fulfilled. The aim of this proposal is to 
ensure that the current parameters of the MSR (intake rate of 24 % and minimum amount to 
be placed in the reserve of 200 million allowances) are maintained beyond 2023 and until the 
end of Phase  IV of the  EU ETS  on 31 December 2030 to  ensure market  predictability. The 
MSR intake rate would revert to 12 % after 2030.  

EN 

8 

  EN 

2021/0202 (COD) 

Proposal for a 

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Decision (EU) 2015/1814 as regards the amount of allowances to be placed in 
the market stability reserve for the Union greenhouse gas emission trading scheme until 
2030 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 192(1) thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee1,  
Having regard to the opinion of the Committee of the Regions2,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

The  Paris  Agreement,  adopted  in  December  2015  under  the  United  Nations 
Framework  Convention  on  Climate  Change  (UNFCCC)  entered  into  force  in 
November  2016  (“the  Paris  Agreement”)3.  The  Parties  to  the  Paris  Agreement  have 
agreed to hold the increase in the global average temperature well below 2 °C above 
pre-industrial levels  and  to  pursue  efforts to  limit  the temperature increase to  1,5 °C 
above pre-industrial levels.  

Tackling climate and environmental-related challenges and reaching the objectives of 
the Paris Agreement are at  the core of the Communication on “The European Green 
Deal”, adopted by the Commission on 11 December 20194.  

The  European  Green  Deal  combines  a  comprehensive  set  of  mutually  reinforcing 
measures and initiatives aimed at achieving climate neutrality in the EU by 2050, and 
sets  out  a  new  growth  strategy  that  aims  to  transform  the  Union  into  a  fair  and 
prosperous society, with a modern, resource-efficient and competitive economy, where 
economic growth is decoupled from resource use. It also aims to protect, conserve and 
enhance the Union's natural capital,  and protect  the health and well-being of citizens 
from  environment-related  risks  and  impacts.  At the  same  time,  this  transition  affects 
women  and  men  differently  and  has  a  particular  impact  on  some  disadvantaged 
groups,  such  as  older  people,  persons  with  disabilities  and  persons  with  a  minority 
racial or ethnic background. It must therefore be ensured that the transition is just and 
inclusive, leaving no one behind. 

1 
2 
3 
4 

OJ C , , p. . 
OJ C , , p. . 
Paris Agreement (OJ L 282, 19.10.2016, p. 4). 
COM(2019)640 final. 

EN 

9 

  EN 

                                                 
(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

The necessity and value of the European Green Deal have only grown in light of the 
very  severe  effects  of  the  COVID-19  pandemic  on  the  health,  living  and  working 
conditions and well-being of the Union’s citizens, which have shown that our society 
and our economy need to improve their resilience to external shocks and act early to 
prevent or mitigate them. European citizens continue to express strong views that this 
applies in particular to climate change5. 

The  Union  committed  to  reduce  the  Union’s  economy-wide  net  greenhouse  gas 
emissions  by  at  least  55 %  by  2030  below  1990  levels  in  the  updated  nationally 
determined contribution submitted to the UNFCCC Secretariat on 17 December 20206. 
In  Regulation  (EU)  2021/1119  of  the  European  Parliament  and  of  the  Council7  the 
Union  has  enshrined  the  target  of  economy-wide  climate  neutrality  by  2050  in 
legislation.  That  Regulation  also  establishes  a  binding  Union  domestic  reduction 
commitment of net greenhouse gas emissions (emissions after deduction of removals) 
of at least 55 % below 1990 levels by 2030.  

All sectors of the economy need to contribute to achieving those emission reductions. 
Therefore, the ambition of the EU Emissions Trading  System (EU ETS), established 
by Directive 2003/87/EC of the European Parliament and of the Council8, should be 
adjusted to be in line with the economy-wide net greenhouse gas emissions reduction 
commitment for 2030. 

In order to address the structural imbalance between supply and demand of allowances 
in  the  market,  Decision  (EU)  2015/1814  of  the  European  Parliament  and  of  the 
Council9 established a market stability reserve (the ‘reserve’) in 2018, which has been 
operational since 2019.  

The reserve functions by triggering adjustments to the annual volumes of allowances 
to  be  auctioned.  In  order  to  preserve  a  maximum  degree  of  predictability,  Decision 
(EU)  2015/1814  established  clear  rules  for  placing  and  releasing  allowances  in  the 
reserve.  

(10)  Where  the  number  of  allowances  in  circulation  is  above  the  established  upper 
threshold,  an  amount  of  allowances  corresponding  to  a  given  percentage  of  these 
allowances is deducted from the volumes of allowances to be auctioned and placed in 
the  reserve.  Meanwhile,  a  corresponding  number  of  allowances  is  released  from  the 
reserve to Member States, and added to the volumes of the allowances to be auctioned, 
if  the  total  number  of  allowances  in  circulation  falls  below  the  established  lower 
threshold.  

5 
6

7 

8 

9 

Special Eurobarometer 513 on Climate Change, 2021 (https://ec.europa.eu/clima/citizens/support_en). 

https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/European %20Union %20First/

EU_NDC_Submission_December %202020.pdf   
Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing 
the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 
2018/1999 (‘European Climate Law’) (OJ L 243, 9.7.2021, p. 1). 
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a 
system  for  greenhouse  gas  emission  allowance  trading  within  the  Union  and  amending  Council 
Directive 96/61/EC (OJ L 275, 25.10.2003, p. 32). 
Decision (EU) 2015/1814 of the European Parliament and of the Council of 6 October 2015 concerning 
the  establishment  and  operation  of  a  market  stability  reserve  for  the  Union  greenhouse  gas  emission 
trading scheme and amending Directive 2003/87/EC (OJ L 264, 9.10.2015, p. 1). 

EN 

10 

  EN 

                                                 
 
(11)  Directive  (EU)  2018/410  of  the  European  Parliament  and  of  the  Council10  amended 
Decision (EU) 2015/1814 by doubling the percentage rate to be used for determining 
the number of allowances to be placed each year in the reserve from 12   % to 24  % 
until 31 December 2023. 

(12) 

In  accordance  with  Decision  (EU)  2015/1814,  within  three  years  of  the  start  of  the 
operation of the reserve, the Commission is to carry out its first review on the basis of 
an  analysis  of  the  orderly  functioning  of  the  European  carbon  market  and,  where 
appropriate, submit a proposal to the European Parliament and to the Council.  

(13)  The review paid particular attention to the percentage figure for the determination of 
the number of allowances to be placed in the reserve, as well as to the numerical value 
of  the  threshold  for  the  total  number  of  allowances  in  circulation  and  the  number  of 
allowances to be released from the reserve.   

(14)  The  analysis  carried  out  in  the  context  of  the  reserve’s  review  and  the  expected 
developments relevant to the carbon market demonstrate that a rate of 12 % of the total 
number of allowances in circulation to be placed in the reserve each year after 2023 is 
insufficient  to  prevent  a  significant  increase  of  the  surplus  of  allowances  in  the  EU 
ETS. Therefore, after 2023 the percentage figure should continue to be 24 %, and the 
minimum number of allowances to be placed in the reserve should also continue to be 
200 million.  

(15) 

If the rate of the total number of allowances in circulation to be placed in the reserve 
each year reverts to 12 % after 2023, a potentially harmful surplus of allowances in the 
EU ETS may disturb market stability. In addition, the rate of 24 % after 2023 should 
be  established  separately  from  the  general  review  of  Directive  2003/87/EC  and 
Decision (EU) 2015/1814 to strengthen the EU Emissions Trading System in line with 
the Union’s increased climate ambition for 2030 to ensure market predictability. 

(16)  Decision (EU) 2015/1814 should therefore be amended accordingly,  

HAVE ADOPTED THIS DECISION:  

Article 1 

Amendments to Decision (EU) 2015/1814 

In Article 1(5), first subparagraph, of Decision (EU) 2015/1814, the last sentence is replaced 
by the following: 

‘By  way  of  derogation  from  the  first  and  second  sentences,  until  31 December 2030,  the 
percentages and the 100 million allowances referred to in those sentences shall be doubled.’  

10 

Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 amending 
Directive 2003/87/EC to enhance cost-effective  emission reductions and low-carbon  investments, and 
Decision (EU) 2015/1814 (OJ L 76, 19.3.2018, p. 3). 

EN 

11 

  EN 

                                                 
Article 2 

Entry into force 

This Decision shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

EN 

12 

  EN