The long-term impact of the market stability reserve on the EU emission trading system
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The linear reduction factor and cumulative emissions are positively correlated, meaning that decreasing the long-run supply of allowances increases invalidation volumes.
“As a result, the linear reduction factor and cumulative emissions are positively correlated, meaning that decreasing the long-run supply of allowances increases invalidation volumes19.”
From COVID-19, Green Deal and recovery plan permanently change emissions and prices in EU ETS Phase IV (2022) · cites this paper as [19]
Section 5.2.1 (page unavailable) says increasing the linear reduction factor reduces cumulative emissions, contrary to the claimed positive correlation. Section 5.1.1 (page unavailable) supports the second part: a higher factor can increase the volume of allowances cancelled by the reserve. (LLM, conf=0.90)
Checked by a reasoning model — may be wrong.
Experimental — accuracy not yet measuredConcave marginal abatement costs provide less incentive for abatement and banking early-on, hence lead to less invalidation, whereas strongly convex marginal abatement costs motivate abatement early-on, hence prolong the waterbed puncture, increase invalidation and lower cumulative emissions.
“Note that this self-reinforcing effect also explains the variation in emissions within each scenario: concave marginal abatement costs provide less incentive for abatement and banking early-on, hence, lead to less invalidation, whereas strongly convex marginal abatement costs motivate abatement early-on, hence, prolong the waterbed puncture, increase invalidation and lower cumulative emissions”
From COVID-19, Green Deal and recovery plan permanently change emissions and prices in EU ETS Phase IV (2022) · cites this paper as [19]
Split into 2 atoms — 1 confirmed, 1 partially supported, 0 disputed, 0 misattributed, 0 unverifiable. Expand the claim to see per-atom verdicts.
Experimental — accuracy not yet measuredThe design of the invalidation rule implies a counter-intuitive, self-reinforcing relation between the future cost of abatement and the invalidation volume, making the invalidation rule more stringent when the cost of compliance is higher.
“The design of the invalidation rule thus implies a counter-intuitive, self-reinforcing relation between the future cost of abatement and the invalidation volume, making the invalidation rule more stringent when the cost of compliance is higher—an effect first discussed by Bruninx et al.19.”
From COVID-19, Green Deal and recovery plan permanently change emissions and prices in EU ETS Phase IV (2022) · cites this paper as [19]
Section 5.2 describes a self-reinforcing feedback effect: higher future abatement costs encourage banking, increasing the surplus and the volume of allowances cancelled by the MSR. The paper supports the claimed relationship, but repeatedly credits the effect to Bruninx et al. (2019), so it does not support saying this 2020 paper first discussed it. (LLM, conf=0.86)
Experimental — accuracy not yet measuredIn Bruninx et al.'s framework assuming perfect foresight and rational agent behavior, increasing the linear reduction factor is the most cost-effective way of raising ambition in the EU ETS.
“In their framework assuming perfect foresight and rational agent behavior, 5 Bruninx et al. find that increasing the linear reduction factor is the most cost-effective way of raising ambition in the EU ETS.”
From The Market Stability Reserve in the EU Emissions Trading System: A Critical Review (2023) · cites this paper as Bruninx et al. (2020)
Section 3.1.3 (Assumptions; page unavailable) confirms that the model assumes rational agents with perfect foresight. Section 5.2.1 finds that increasing the linear reduction factor reduces the emissions cap, and Section 6 (Policy implications) suggests a stronger factor could provide a clearer, more certain cap. Neither section establishes that increasing it is the most cost-effective way to raise EU ETS ambition; the paper emphasizes the combined effect of the factor and the reserve’s cancellation policy. (LLM, conf=0.88)
Experimental — accuracy not yet measuredEven holding EU ETS and MSR parameters fixed at the 2018 reform levels, Bruninx et al. find cancellations by the MSR spanning 5.6 to 17.8 GtCO2 for different demand trajectories.
“But even holding EU ETS and MSR parameters fixed at the 2018 reform levels, they find cancellations by the MSR spanning 5.6 to 17.8 GtCO2 for different demand trajectories.”
From The Market Stability Reserve in the EU Emissions Trading System: A Critical Review (2023) · cites this paper as Bruninx et al. (2020)
The paper reports MSR cancellation volumes of 5.6–17.8 GtCO₂, but not as a range produced by different demand trajectories alone. Section 5.2.1 attributes the high end to a lower discount rate and says changes in electricity-demand growth have limited impact on cancellations; it reports a narrower 12.2–13.3 GtCO₂ range when discount-rate variations are excluded. Page numbers are unavailable in our copy. (LLM, conf=0.90)
Experimental — accuracy not yet measured
Any measure that increases perceived abatement costs in the future encourages banking of allowances now, which may prolong the duration of the waterbed puncture because the TNAC increases.
“Generally, any measure that increases perceived abatement costs in the future, encourages banking of allowances now, which may prolong the duration of the waterbed puncture, because the TNAC increases and vice versa”
From COVID-19, Green Deal and recovery plan permanently change emissions and prices in EU ETS Phase IV (2022) · cites this paper as [19]
The increase in invalidation from raising ambition to −55% is driven by a counter-intuitive self-reinforcing effect: any measure that makes it more costly to meet the emission cap incentivizes abatement early-on and banking, which increases the TNAC and invalidation.
“This is driven by a counter-intuitive self-reinforcing effect19: any measure that makes it more costly to meet the emission cap (here: reducing the supply of allowances) incentivizes abatement early-on and banking, which increases the TNAC and, hence, invalidation.”
From COVID-19, Green Deal and recovery plan permanently change emissions and prices in EU ETS Phase IV (2022) · cites this paper as [19]
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- Authors
- Bruninx, K., Ovaere, M., & Delarue, E.
- Affiliations
- IMEC (BE)
- Yale University (US)
- Corresponding author
- Bruninx, Kenneth
- Venue
- Energy Economics
- Publisher
- Elsevier BV
- Published
- 2020-06
- Volume
- 89
- Pages
- 104746
- ISSN
- 0140-9883 (ISSN-L)
- OpenAlex
- W3026924519
- Cited by
- 96
- References
- 37
- Citations by year
- 2026: 13 · 2025: 15 · 2024: 9 · 2023: 27 · 2022: 16 · 2021: 10 · 2020: 5 · 2019: 1
- FWCI
- 12.33
- Type
- journal article
- Language
- en
- Open access
- bronze
- doi.org
- Locations
- Energy Economics (publishedVersion)
- Lirias (KU Leuven) (acceptedVersion)
- Lirias (KU Leuven) (submittedVersion, other-oa)
- RePEc: Research Papers in Economics (submittedVersion)
- Ghent University Academic Bibliography (Ghent University) (submittedVersion)
- Lirias (submittedVersion)
- Funders
- Fonds Wetenschappelijk Onderzoek
- KU Leuven (12J3317N)
- Vlaamse Instelling voor Technologisch Onderzoek (12J3320N)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Physical Sciences › Energy › Renewable Energy, Sustainability and the Environment › Renewable energy and sustainable power systems
- Physical Sciences › Engineering › Electrical and Electronic Engineering › Integrated Energy Systems Optimization
- Keywords
- Market Stability Reserve, EU Emissions Trading System, greenhouse gas emissions reduction, renewable energy targets, coal phase-out
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