Managing supply in the EU ETS: evaluating the key parameters of the Market Stability Reserve

• Florence School of Transnational Governance
• STG Climate

This session is part of the EUI Climate Week 2026

The Market Stability Reserve (MSR) has successfully fulfilled its original purpose of addressing the structural oversupply of allowances in the EU ETS. As the cap on emissions continues to decline, the MSR is well positioned to take on a new role in managing market liquidity. The European Commission’s recent proposal to stop the invalidation of allowances held in the MSR paves the way towards recalibration of its key parameters. With adjustments to its operational design, the MSR could transition from primarily absorbing surplus allowances to actively increasing supply at times of price spikes, acting as liquidity buffer.

This session as part of EUI Climate Week aims to address various technical issues of how the MSR should evolve—including whether to use a soft price‑cap trigger, how to design intake and release mechanisms and the invalidation rule, and whether it should also manage carbon removals or international credits as a central bank ‑ type function for the EU ETS.

Chair: Julia Michalak, European University Institute

Lead discussants:

• Marcus Ferdinand, Veyt
• Philipp Ruf, Transition Metrics
• Luca Taschini, University of Edinburgh Business School

Conclusion: Julia Michalak, European University Institute

Participation in this event is by invitation only and all deliberations will take place under the Chatham House rule (no views or positions may be attributed publicly to any participant).

More information and the full programme of the EUI Climate Week 2026 can be found here.