The Revision of the European Union Emissions Trading System Directive: Assessing Cap and Market Stability Reserve Reform Options

May 2022

The main objective of this study is to assess as reliably as possible whether the emission reduction target for 2030 can be achieved or exceeded, taking into account the corresponding uncertainties. The analysis is carried out for different options for cap and Market Stability Reserve (MSR) provisions. Chapter 2 discusses a range of baseline emission trends. Chapter 3.1 discusses the current legislative proposals for adjusting the cap of the EU ETS in the context of the new emission reduction target of 55% for the total greenhouse gas emissions of the EU 27. Chapter 3.2 examines the changes to the Market Stability Reserve (MSR) that were proposed. In chapter 4 options for a more stringent design of the EU ETS provisions for the cap (chapter 4.1) as well as the MSR (chapter 4.2) are analysed and discussed. In chapter 0, key conclusions from the structural and numerical analysis are drawn.