Today the European Commission has published for the first time the total number of allowances in circulation on the European carbon market. It amounts to roughly 1.69 billion allowances.
The total number of allowances in circulation will play an important role for the Market Stability Reserve (MSR) for the EU Emissions Trading System (ETS), which will start operating in 2019. It will serve as the exclusive indicator to determine whether, and if so, how many allowances will be placed in the reserve, or whether allowances will be released from the reserve in tranches of 100 million allowances each year.
Allowances will either be placed in or released from the reserve by increasing or decreasing the future amount of allowances that Member States auction.
In accordance with the legislation establishing the MSR, the Commission has published the total number of allowances in circulation for the first time now, even though the MSR is not operational until January 2019. In order to provide utmost transparency on how the total number of allowances will be determined, the publication sets out the relevant input figures in detail.
If allowances were to be placed in the MSR on the basis of the indicator published today, next year's auction volumes would be reduced by around 203 million allowances, corresponding to 12% of the total number of allowances in circulation. In the context of the revision of the EU ETS, discussions are currently being held in the Council and the European Parliament on temporarily doubling the rate at which allowances will be placed in the MSR. If a corresponding amendment to the current legislation were to be adopted, on the basis of the indicator published today, around 406 million allowances would be placed in the MSR instead.
The next publication of the total number of allowances in circulation will take place by 15 May 2018. On the basis of that next publication, the MSR will start its operation as of January 2019.