Emissions trading reform approved by European Parliament committee

The European Parliament approved a deal on Tuesday to begin reforming the EU Emissions Trading System (ETS) from 2019.

MEPs voted in favour of the Market Stability Reserve (MSR) which is designed to remove some carbon allowances with a huge surplus having depressed the price of allowances on the system.

The proposed law would introduce a system that automatically withdraws some ETS allowances off the market and into a reserve if the surplus passes a set threshold.

The current surplus of emission allowances is estimated at over 2 billion.

The proposal still requires approval from a European Parliament session in July which officials expect to be a formality.

The scheme would start operating on January 1, 2019.

Under the proposed initiative, 900 million “backloaded” allowances would be withdrawn from the market and placed in the reserve.

The deal had been informally agreed with the Latvian Presidency of the Council of Ministers but has now been backed by the EUs Environment Committee with 49 voting in favour; eight voting against and two abstaining.