When COVID-19 met the EU ETS

The document analyzes the impact of the COVID-19 pandemic on the EU carbon market, noting a price drop of nearly 40% to just above €15/ton CO2 as of 25 March 2020. It argues that the current Market Stability Reserve (MSR) is unfit for handling sudden surpluses and proposes specific legislative reforms, including increasing the intake rate to 36% from 2024 and raising the linear reduction factor to at least 4.2%. The author warns against using the health crisis to weaken climate policies or provide unfounded subsidies to polluting sectors like aviation, steel, chemicals, and cement, urging governments to ensure post-pandemic recovery packages support the green transition.

• By 25 March 2020, EU carbon prices fell by nearly 40% to a level just above €15/ton CO2, down from approximately 25 euros per tonne two weeks prior, driven by economic shutdowns and market speculation.
• The price drop has increased the profitability of lignite plants and reduced the auctioning revenues available to EU member states.
• Lower carbon prices reduce the incentive for emission reductions in the aviation sector and large industrial sectors, specifically cement, chemicals, and steel, which partially offsets their negative economic impacts.
• The EU ETS Market Stability Reserve (MSR) is deemed unfit for managing current or future surpluses caused by the pandemic or financial downturns because it was designed for historical oversupply.
• To decarbonize power and industry by 2040, the document proposes increasing the MSR intake rate to 36% from 2024, adopting a declining threshold, implementing automatic cancellation for allowances held over five years, and raising the linear reduction factor (LRF) to at least 4.2%.
• The author recommends that EU governments implement national or regional carbon floor prices and cancel surplus allowances as power plants close to strengthen the system.
• The document criticizes attempts by some airlines to postpone green taxes and a proposal by a Polish government representative to scrap the EU carbon market entirely.

APA

Van den plas, S. (2020). When COVID-19 met the EU ETS. Carbon Market Watch. https://carbonmarketwatch.org/2020/03/26/when-covid-19-met-the-eu-ets/

Chicago

Van den plas, Sam. When COVID-19 met the EU ETS. Carbon Market Watch, 2020. https://carbonmarketwatch.org/2020/03/26/when-covid-19-met-the-eu-ets/.

Wikipedia

{{cite press release |last1=Van den plas |first1=Sam |title=When COVID-19 met the EU ETS |publisher=Carbon Market Watch |date=26 March 2020 |url=https://carbonmarketwatch.org/2020/03/26/when-covid-19-met-the-eu-ets/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{vandenplas2020when, author = {Van den plas, Sam}, title = {{When COVID-19 met the EU ETS}}, publisher = {Carbon Market Watch}, year = {2020}, month = mar, url = {https://carbonmarketwatch.org/2020/03/26/when-covid-19-met-the-eu-ets/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }