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The total number of allowances in circulation plays an important role for the operation of the Market Stability Reserve (MSR) of the EU Emissions Trading System (ETS), which will start operating in January 2019. It serves as the transparent and predictable indicator to determine how many allowances will be placed in the reserve as long as the surplus exceeds the level set in the legislation of some 833 million allowances.

Allowances will either be placed in or released from the reserve by increasing or decreasing the future amount of allowances that Member States auction.

This year's publication will for the first time lead to placing allowances in the Market Stability Reserve, thus reducing the auction volume over the first 8 months of 2019 starting 1 January.

The revised EU ETS Directive, establishing the architecture of the EU ETS for the next decade, provides for doubling the rate at which allowances will be placed in the reserve between 2019 and 2023. It also foresees that in 2019, reserve feeds for the first 8 months take place on the basis of the MSR indicator published today and later for the period between 1 September 2019 and 31 August 2020 on the basis of the MSR indicator to be published in May 2019.

Thus, on the basis of the indicator published today and the provisions of the revised legislation, next year's auction volumes will be reduced by close to 265 million allowances over the first 8 months of 2019, corresponding to 16% of the total number of allowances in circulation. This first MSR feed is thus calculated on the basis of the rate of 24% of the surplus applying over a 12-month period, corresponding to 16% for the actual 8-month period from January to August 2019 (if the first MSR feed had been for a full 12-month period, a full 24% of the surplus, i.e. some 397 million allowances, would have been placed in it).

The next publication of the total number of allowances in circulation will take place by 15 May 2019 to determine the reserve feeds taking place for the remainder of 2019 and the first eight months of 2020, i.e. from 1 September 2019 until 31 August 2020.

Read more:

• Market Stability Reserve
• Publication of the total number of allowances in circulation
• Revised ETS Directive