The Council and the European Parliament reached a provisional agreement on the targeted reform of the ETS2 Market Stability Reserve (MSR). The outcome appears to confirm the core of the Commission proposal and, in our view, marks a significant moment for the file: the two key changes in the Parliament’s position – a phased cancellation of surplus allowances and a recital linking the ETS2 to the wider ETS Directive review – appear to have been left out of the operative text in favour of general, non-prescriptive review language. We had long held that two end-states remained plausible: an ETS2 launching in 2028 broadly on the Commission’s terms, or an ETS2 drawn into the wider Directive review where more fundamental changes could emerge. The trilogue outcome, as it is presented in the press release, shifts the balance decisively towards the first.
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