Call for Evidence: EU ETS and the Market Stability Reserve
Carbon Balance Initiative welcomes the opportunity to contribute to the revision of the EU Emissions Trading System (EU ETS) and Market Stability Reserve (MSR). Our evidence was submitted on 8 July 2025, alongside a consultation response.
Read the full submission here
We outline key recommendations across six priority areas:
If CDR integration into the ETS is pursued, we urge the Commission to adopt a phased, limited, and high-integrity approach to CDR integration, maintaining a gross emissions cap and introducing complementary policies such as carbon takeback obligations.
To improve transparency and climate effectiveness, we recommend establishing a central EU registry, requiring standardised public reporting, and strengthening oversight of how ETS revenues are spent.
Any linking of the EU ETS with other markets must safeguard climate ambition, with strong caps, high-quality credit standards, and alignment in scope and GHG coverage.
We recommend a phase-out of free allowances and indirect cost compensation, making any transitional support conditional on credible decarbonisation milestones.
The MSR should be strengthened to ensure price stability and surplus control, including faster response times and downward-adjusted thresholds.
Aviation must be brought fully in line with EU climate targets through expanded ETS coverage and support for permanent removals. CCU should not alter ETS surrender obligations unless permanent geological storage is ensured.