Managing market tightness in the EU-ETS on the path to net-zero

This research project examines how the Market Stability Reserve (MSR) can be reformed to remain effective as the EU ETS moves towards structural market scarcity. While the MSR has addressed historical surplus and restored market confidence, its current design—based on backward-looking, quantity-based triggers—may become less suited to the evolving needs of a tightening system.

The study explores the practical feasibility of introducing forward-looking, price-based triggers to improve the MSR’s responsiveness and support market stability as the ETS tightens through 2030 and beyond. It focuses on identifying and discussing the key design and implementation trade-offs involved in making price-responsive supply adjustment triggers work in practice.