Assessing the implementation of the Market Stability Reserve
Anna Creti and
Energy Policy, 2018, vol. 118, issue C, 642-654
In October 2015 the European Parliament has established a Market Stability Reserve (MSR) in the Phase 4 of the EU-ETS, as part of the 2030 framework for climate policies. In this paper we model the EU-ETS in presence of the Market Stability Reserve (MSR) as it is defined by that decision and investigate the impact that such a measure has in terms of permits price, output production and banking strategies. To do so we build an inter-temporal model in which polluting firms competing in an homogeneous good market are price takers in a permits market and face an uncertain demand. Our main finding is that the MSR succeeds in increasing the permits' price correcting an excess supply (and conversely decreasing it in case of excess demand). However, when the output demand is stochastic, the MSR may alter the arbitrage conditions that determine permits' prices. In some cases which depend on the extend of the demand variation, unintended effects on the price pattern appear. This in turns may adversely affect welfare.
Keywords: ETS; Market Stability Reserve; MSR; Banking (search for similar items in EconPapers)
JEL-codes: D43 L13 Q2 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:118:y:2018:i:c:p:642-654
Access Statistics for this article
Energy Policy is currently edited by N. France
More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().