Today's proposal from the European Commission on integrating carbon dioxide removal (CDR) into the EU Emissions Trading System (ETS) is the biggest demand signal for carbon removal to date and a precedent for countries around the world.
The purchase of 250 million tonnes between 2031 and 2040 will be a step change for the durable removals industry, which has delivered just over 1.6 million tonnes to date. This is a serious, credible proposal and an important first step for CDR into the world of compliance markets.
Previously, I set out the three main things I would be looking for from this proposal: that it goes ahead as soon as possible, that the quantities are ambitious enough, and that it is tech-neutral. Here is how it did.
1. Confirm integration will go ahead as soon as possible
CDR is being integrated into the EU ETS, the world’s most important carbon market. Five years ago, the industry was almost non-existent. Now there is a detailed and credible commitment to scale CDR so that it underpins the ETS and is its long-run future.
Integration will come online in 2031, which, for this market, is as soon as possible. The main legislation should be complete in 2027, with further implementation regulations in place in 2029, when contracts can be awarded, for deliveries from 2031 onwards. Given the time it takes to develop many CDR projects, this is not far off.
There were no surprises in the way the CDR will be integrated. The Commission will purchase a set quantity of CRCF credits, retire them, and create an equivalent number of ETS allowances which it sells into the market. The Commission knows there is a price gap, and is prepared to top it up using ETS revenues.
2. Purchase net-zero-consistent quantities of CDR
The Commission’s intention is to purchase 250 Mt of CDR over 2031–40, hitting 48 Mt per year by 2040. By the estimates in the Commission’s Impact Assessment, this will involve spending around €50 billion over the period. This is an order of magnitude greater than any other purchasing program, and will transform the CDR industry’s ability to scale, but we still need to carefully interrogate whether these numbers are ambitious enough.
The key question is whether these quantities scale the industry to the level needed to reach the EU’s ultimate 2050 net-zero target. The numbers are internally consistent in the Impact Assessment, but there are reasons to doubt whether they are enough in reality. I previously noted that independent assessments put the figure closer to 100 Mt per year by 2040. Other policies could be used to fill this gap, but there is no denying that, from the perspective of the climate, the volumes would ideally be higher.
3. Tech-neutral, not picking winners
The proposal is mixed on this front. The core proposal is to pick winners, specifically BioCCS and DACCS. Biochar is not eligible, despite having a permanent carbon removal methodology under the CRCF, and there is no clear pathway to include it. This is not science-based policymaking, nor is it economically efficient. However, there are two positive elements here.
First, the Impact Assessment (Annex 8) includes a thorough and logical assessment of different technologies, and it correctly concludes that biochar meets essentially all of the criteria that should be used to assess eligibility. Second, there is, in effect, a long-term commitment to tech neutrality, with nature-based solutions explicitly mentioned, dependent on methodological innovations around permanence. This is an encouraging sign of the direction of travel. It’s a shame that the review into these possibilities is set for 2034 (almost a decade away).
What comes next?
Next, the EU institutions (the Parliament and the Member States) will negotiate over the proposal, and some aspects could change. Then it will enter into law, likely early next year.
Overall, this is a serious package of reforms, reflecting the Commission’s impressive capacity to produce changes that take time but ultimately have significant impact. It will undoubtedly shape the carbon removal sector of the 2030s. There are elements that could be more ambitious, and hopefully these will improve over time, but this should not stop us celebrating the win that it is.
