Policy Brief: EU ETS Directive Review: A focus on the Article 29a.
The EU ETS Directive, as currently designed, provides two instruments to act when EUA prices fall outside what is perceived as acceptable boundaries: the Market Stability Reserve (MSR) , and the Art 29 of the EU ETS Directive addressing price imbalances. So far these instruments are not interlinked, being different from other jurisdictions under ETS regime.
Before any modifications to the current rules are implemented, the role of the EU policy maker is to understand the reasons why some sectors of the society are concerned about the current carbon price escalation. Being able to answer fundamental questions about the role of carbon prices, the right definition of market abuse, when intervention in the carbon market is justified, and the role of financial institutions in the carbon market and its impact on contributing or destroying decarbonisation value are a must if we are to come up with the best fit-for purpose design.