Release the firepower: Tweaking the MSR to keep prices in check

The European Commission is increasingly signalling that the Market Stability Reserve (MSR) will be the primary lever to address carbon price volatility and short-term cost pressure in the EU ETS. Recent communication from Commission President Ursula von der Leyen points to a clear objective: deliver tangible near-term relief, while preserving the ETS as a market-based driver of decarbonisation.

This places policymakers in a difficult position — balancing industrial competitiveness concerns with the need to maintain a credible carbon price signal.

Veyt has assessed four potential MSR intervention pathways, quantifying their impact on supply, market balance, and EUA price trajectories.