EU Carbon Market Total Number of Allowances in Circulation Shrinks; Corrected Notice (2)

May 15-16, 2022:

EU carbon allowances rose after allowances in circulation shrinks 8.2%, indicating the market is tighter. EU carbon rose over 90 euros a ton.

Corrected version: https://ec.europa.eu/clima/news-your-voice/news/ets-market-stability-reserve-reduce-auction-volume-over-347-million-allowances-between-september-2022-05-12_en

See notice for the corrections (reproduced below without editing)

NEWS ARTICLE 12 May 2022 Directorate-General for Climate Action

ETS Market Stability Reserve to reduce auction volume by over 347 million allowances between September 2022 and August 2023 (update)

The European Commission published today (May 12) the total number of allowances in circulation on the European carbon market. It amounts to 1 449 214 182 allowances. At the same time last year the amount was 1 578 772 426 allowances.

The total number of allowances in circulation plays an important role for the operation of the Market Stability Reserve (MSR)Search for available translations of the preceding linkEN••• of the EU Emissions Trading System (ETS), which began operating in January 2019. This indicator shows the amount of allowances in circulation in a transparent and predictable manner.

As long as the indicator exceeds the threshold set in the legislation of 833 million allowances, a certain share of the total number of allowances in circulation is placed in the MSR each year. For the years 2019 to 2023, this share is set at 24% of the total number of allowances in circulation. Allowances are placed in the MSR by decreasing the amount of allowances that Member States auction.

Based on the indicator published today and on the provisions of the legislation (Decision 2015/1814, the MSR Decision), auction volumes from September 2022 to August 2023 will be reduced by 347 811 404  allowances, which will be placed in the MSR.

The total quantity of allowances in the MSR also includes unused allowances from the new entrants reserve for the period 2013-2020, and allowances not allocated to installations due to reduced activity. In total, the number of unallocated allowances added to the MSR at the end of 2020 was 886 806 455. It should be noted that these unallocated allowances do not have an impact on the total number of allowances in circulation and therefore do not affect the amount of allowances to be auctioned.  

50 million allowances from MSR holdings were auctioned for the Innovation Fund in 2020, and 200 million allowances were placed in the new entrants reserve in 2021.

On 31 December 2021, there were 2 632 682 071 allowances in the Market Stability Reserve, which includes unused allowances from the new entrants reserve for the period 2013-2020, and allowances not allocated to installations due to reduced activity.

The next time the total number of allowances in circulation will be published is by 15 May 2023.

In 2021, the European Commission adopted a series of legislative proposals setting out how it intends to achieve climate neutrality in the EU by 2050, including the intermediate target of an at least 55% net reduction in greenhouse gas emissions by 2030. This series of legislative proposals known as the Fit for 55 package also proposes to revise the Market Stability ReserveSearch for available translations of the preceding linkEN•••.

*Corrigendum

Correction to the references in the Communication to the number of allowances auctioned between 1 January 2013 and 31 December 2021, including the early auctions, is envisaged to be made (on pages 5 and 7). The number should read as 6­ 591 205 500 instead of 6 598 419 287. This number incorrectly already included allowances used for the flexibility, as set out in the Effort Sharing Regulation (According to article 6(2) of Regulation (EU) 2018/842, the allowances taken into account under this Effort Sharing Regulation flexibility shall be considered as allowances in circulation for the purposes of the determination of the total number of allowances in circulation). This does not affect the published total number of allowances in circulation, where it was correctly accounted. 

Read more:

Previous version of CarrZee story highlighting error:

See this tweet thread, confidential document accidently (?) published — see below; it might be incorrect; European Commission do you want to comment? — mathew@carrzee.net :

If the numbers are correct (and I’m not confirming they are), the document below shows the total number of allowances in circulation is 1.45 billion tons, 8.2% less than a year earlier. That indicates a tighter market (yet the market is designed to get tighter every year, boosting the incentive to cut emissions).

“In line with Decision (EU) 2015/1814, over a 12-month period – from 1 September 2022 to
31 August 2023 –, a total of 347,811,404 allowances will be placed in the Market Stability
Reserve,” it says.

Human Error 404 by Mike Dziambor is licensed under CC-BY-NC-ND 4.0
Photo by eberhard grossgasteiger on Pexels.com

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