COP31: EU Should Develop Carbon Central Bank to Manage Prices, Experts Say
ANTALYA, Turkey – An independent “European Central Carbon Bank” to steer the EU Emissions Trading System and keep carbon prices stable should be developed, with the EU committing to it within 18 months, Andrei Marcu, director of the European Roundtable on Climate Change and Sustainable Transition (ERCST), told a COP31 side event on Monday.
“If we do a review of the ETS without this, the sky will not fall in the next 18 months, but I can guarantee you by 2030, 2035, the sky would begin to fall and you end up with one-off interventions,” Marcu said at the debate, hosted in Ukraine’s pavilion on the first day of the UN climate conference.
EU carbon allowance (EUA) prices reached a near ten-month high of €90.525 ($101.6)/metric ton on Nov. 4 before falling below the key €90/mt resistance level, OPIS data showed. The most recent OPIS-assessed benchmark December 2026 EUA price is €86.915/mt. Leading carbon analyst Mark Lewis called the pricing area above €90/mt “politically toxic” in an interview with Dow Jones Energy last month.
Until now, the Market Stability Reserve (MSR) has been the main instrument to manage EUA prices and prevent volatility and price shocks. Introduced in 2019, it was designed to take out EUA volumes and tighten supply in the event of a large surplus of EUAs. In April, however, following the closure of the Strait of Hormuz, industry concerns prompted the European Commission to propose changes that would allow the EU ETS to build a larger reserve of extra allowances.
“These automatic rules work on quantities and not directly on price, and we have seen that they adjust with some delays,” Simone Borghesi, who leads the research group on climate change at the Florence School of Regulation, told the audience. “There’s still a bit of a gap, a lag,” he said, arguing in favor of a European Carbon Central Bank. An independent body that can exercise some discretion, as opposed to the current volume-based MSR, could be a better solution, he said.
The European Commission, which is responsible for the overall EU ETS structure, had earlier responded that the creation of a central bank was “a long process” and could not be done in this review because it would involve creating a new institution, Marcu said.
However, Robert Jeszke, deputy director of KOBiZE, Poland’s competent authority for the ETS, gave a different account of the Commission’s position. There had been “a clear mark” from the Commission that it did not need a carbon bank “at this stage,” he said.
The European Council and Parliament reached a provisional deal on Oct. 20 to keep allowance invalidation but raise the threshold to 700 million allowances from 400 million.
A separate safeguard, Article 29a of the EU ETS Directive, allows 75 million allowances to be released from the Market Stability Reserve (MSR) if the average carbon price over six months exceeds 2.4 times its average over the preceding two years. The mechanism has never been triggered, and the Commission’s July proposal leaves it unchanged. European Parliament rapporteur Peter Liese has proposed strengthening Article 29a by allowing 25 million allowances to be released from or transferred into the MSR when carbon prices rise or fall sharply.
The Parliament is due to vote on the Commission’s July EU ETS reform proposal in December, with a Council common position also expected that month.
Turkey’s new Emissions Trading System
Kaan Morali, head of the carbon pricing department at Turkey’s ministry of environment, who also participated in the discussion, said the country would start its ETS with a carbon price corridor, not an MSR, because liquidity would be low. Only compliance entities would trade at first, with financial players admitted later, he said. The corridor will be set by the Carbon Market Board, which is chaired by environment minister and COP31 president Murat Kurum.
Turkey’s system, which is not yet operational, would cap emissions per unit of output, not total emissions, through 2035, with benchmarks almost identical to the EU’s, Morali said.
If Turkey later moves to a cap on total emissions, it will have to consider an MSR. Borghesi said Turkey’s price corridor would also tell potential partners which price range it could accept, which would matter if Turkey later linked its market with others.
The 2026 United Nations Climate Change Conference, COP31, runs from Nov. 9 to Nov. 20 in Antalya, Turkey.
Reporting by Nia Simeonova, nsimeonova@opisnet.com; Editing by Rob Sheridan, rsheridan@opisnet.com