Pyseus: Modelling the Mechanisms of the EU ETS in the Decarbonisation of the European Electricity Market

This paper presents a model analyzing long-term impacts of the EU ETS I on the European power sector, focusing on how the Market Stability Reserve (MSR) shapes certificate availability. Based on a large-scale Mixed-Integer Linear Programming (MILP) approach, the model captures $\text{CO}_{2}$ constraints, price formation, and investment decisions. The detailed modeling covers country-specific spatial resolution and up to 500 time steps per period over 12 modeled periods up to 2050. An integrated time series aggregation ensures efficient computation despite high detail, while capturing seasonal effects. By showing that the MSR drastically reduces freely available allowances, the analysis reveals major implications for capacity expansion, system dispatch, and overall decarbonization pathways. The model provides robust insights into how regulatory adjustments shape future climate policies. As a specialized long-term tool, it opens new perspectives for effective decarbonization strategies and contributes to achieving climate targets.