Market stability reserve for emissions trading to improve competitiveness of Nordic electricity

Government Communications Department 29.6.2015 14.08
Press release 353/2015

The new market stability reserve for the EU's emissions trading scheme (ETS) will bridge the gap between Finnish and other Nordic electricity wholesale prices. In addition, the relative competitiveness of Nordic electricity in the export market will improve in comparison to European electricity as the market stability reserve will raise the price of electricity produced in Central Europe more than in the Nordic electricity market. In the Nordic market, a larger proportion of electricity is produced by using renewable, emission-free energy sources.

This is one of the conclusions of a report published on 29 June that assessed the effects of the ETS Market Stability Reserve on the wholesale prices of Finnish electricity. The Market Stability Reserve is to be launched as from the start of 2019 with an aim of stabilising the prices of emissions trade. Emissions trading is an EU scheme aiming to the reduction of carbon emissions in a cost-effective way.   

The Market Stability Reserve will raise wholesale electricity prices in Finland. However, the costs of the price raise will, according to the report, remain EUR 1.5 billion lower now that the Market Stability Reserve will be introduced only in 2019 and not in 2017 as some Member States proposed. In Finland, industry is the largest consumer of electricity. The report says that, after industry, the extra costs will for the most part affect households and agriculture. Factors influencing electricity's price formation include, in addition to emission credit prices, electricity production costs, increase of electricity transmission lines from Finland to neighbouring countries, and the proportion of emission-free electricity production.

The report is the first survey included in the intensified impact assessment of EU legislation which started in the Prime Minister's Office this year. Impact assessment makes part of Finland's EU policy aiming to reduce and improve regulation.

The survey was carried out as part of the implementation of the Government's 2014 plan for analysis, assessment and research.

Report on the effects of the market stability reserve for emissions trading on wholesale electricity prices (in Finnish only)

Report summary

Inquiries: Juha Forsström, Senior Scientist, tel. +358 40 593 6973, VTT Technical Research Centre of Finland, Pekka Sulamaa, Managing Director, tel. +358 50 583 8597, Sulamaa Consulting Ltd and Toivo Hurme, Counsellor, EU Affairs, tel. +358 295 160 345 and Sari Löytökorpi, Project Manager (Government analysis, assessment and research activities), tel. +358 295 160 187, Prime Minister’s Office   

English translation of the press release published on 30 June 2015