Emissions trading with rolling horizons

In this paper the authors develop a model to evaluate first, the market developments in the European Union emissions trading scheme (EU ETS) over 2008–2017 ex-post and second, the performances of main features of the EU ETS reforms that took place in 2018, ex-ante. These developments include the market stability reserve (MSR), a rule-based supply-side control unique of its kind: effective from January 2019, the MSR automatically adjusts the volume of annual allowance auctions based on the past market-wide allowance bank, the so-called total number of allowances in circulation.

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