The Review of the Market Stability Reserve (MSR)

The Review of the Market Stability Reserve (MSR)

AUTHOR(S): ANDREI MARCU, JEAN-YVES CANEILL AND FEDERICO CECCHETTI


The report is intended as a ‘mock’ review of the MSR in which its track-record and potential issues and options for the review are modelled and assessed. This report is the continuation and implementation of ERCST 2019 report ‘Preparing for the Review of the MSR‘ in which the main building blocks of a MSR review were outlined.

The paper outlines a set of scenarios for a potential review while showing the implications they would have for the market using a modelling exercise. It aims to promote a debate on what the role of the MSR in the EU climate policy architecture and what the MSR is and is not supposed to do. It ultimately tries to answer the question why the MSR is, or is not, fit for purpose in its current design and how it could be improved in the context of the upcoming revision.