February 03, 2023

Carbon removal is a perfect fit for the Green Deal Industrial Plan

But is it part of the plan?

Key Takeaways

  1. The Commission must ensure CDR is part of the Green Deal Industrial Plan and the initiatives that will stem from it.  
  2. Carbon removal perfectly fits the description of the strategic clean tech targeted by the Commission. 
  3. Competing incentives are a real consideration for carbon removal companies, as these are key to compensate for unconsolidated demand. 
  4. The Plan could address the fundamental needs of CDR, providing the financial and regulatory incentives needed to support its rapid upscaling in Europe. 
A view of tall pine trees looking to the sky

To accelerate Europe’s net-zero industrial transformation, the European Commission has presented a Communication on “A Green Deal Industrial Plan for the Net-Zero Age”. The plan sets out four pillars that, together, intend to speed up the net-zero industrial transformation and secure opportunities for the European industry in a net-zero age. The new plan could provide much needed support to technology intensive carbon dioxide removal approaches.

To deliver its goal of developing industrial manufacturing of “key technologies,” the upcoming Net-Zero Industry Act will aim to ensure a stable and simplified regulatory environment. To define the scope of the Act, the Commission will assess the relative strategic importance and investment needs of a range of technologies. As a key second pillar, the Commission is proposing faster access to finance for such technologies. It also envisages measures on skills development, and on trade and supply chains. 

Net-zero technologies will be key to reaching European climate goals. The Commission’s rapid and determined action to secure European leadership in net-zero technology and sharing in the benefits of innovation are encouraging. Given the stakes, the Commission should actively consider carbon dioxide removal (CDR) among the suite of key net-zero technologies in its upcoming proposals.  

Carbon removal perfectly fits the description of the strategic clean tech targeted by the Plan. Here’s why:

  • Carbon removal is a vital tool in the fight against climate change. Alongside dramatic emission cuts, large amounts of carbon removal are required to meet climate goals. We are now facing a challenge of rapidly scaling permanent removals from just thousands of tons of CO2 today, to billions needed to reach our net neutrality goals.  
  • Carbon removal can bring substantial economic opportunities in the coming decades. Innovation of novel carbon removal methods is expanding substantially, exemplified by R&D, in patents and capacity investment. By supporting the growth of the CDR ecosystem, Europe stands to attract industrial activity, generate income, and create new jobs and skills development opportunities across multiple sectors. 
  • But competing incentives are a real consideration for Europe’s burgeoning CDR ecosystem. It is important that Europe provide comparable incentives to level the playing field and make it possible for companies to grow in Europe. The US Inflation Reduction Ace, for example, has created significant opportunities for permanent removals (e.g., tax credits for permanent removals are increased from $50 to $180 per tonne). Some European climate tech companies are reconsidering their development to capture these incentives. Now is the time for the EU to properly support its own carbon removal ecosystem to secure its growth and capacity to deliver the amounts of removals Europe needs to reach net-zero and tackle historical emissions. 

The Net-Zero Industrial Plan could address the fundamental needs of CDR.

Europe’s CDR ecosystem urgently needs funding mechanisms that can support its development. Faster access to funding at Member State and EU levels announced in the Plan, as well as facilitating private financing, can unlock the right financial incentives needed to support the rapid upscaling of CDR in the EU and level the playing field with foreign competitors. 

The Net-Zero Industry Act’s aim of a stable and simplified regulatory environment could be key to providing the visibility and confidence required to make Member States more attractive to carbon removal investors and industrial stakeholders. The full carbon removal value chain includes the capture, transport and storage of carbon dioxide. In Europe this typically involves multiple countries. If carbon removal projects can qualify as “net-zero supply chain projects of strategic interest”, including “multi-country” projects, this would help ensure CDR deployment reaches all Member States and support the roll-out of the necessary CO2 infrastructure.  Establishing standards at the EU-level for different aspects of the CDR value chain can be key to attract investment and build credibility, as well as promote European values in this nascent industry and, ultimately, European global leadership.  

Tools outlined in the Plan, such as regulatory sandboxes, would allow supervised rapid experimentation and disruptive innovation that could help ensure that supply of carbon removal scales in line with exponential demand, while supporting the research and understanding of potential side-effects of CDR methods under development. 

CDR also needs the forward-looking approach set out in the Plan to grow its nascent workforce. Its inclusion in the Plan would help secure the skills development and job creation opportunities needed to retain and attract talent. 

The Commission must ensure CDR is part of the Green Deal Industrial Plan   

Europe has the potential to become a world leader in carbon removals, but it is at a turning point. European CDR must be included in the implementation of the Green Deal Industrial Plan, or Europe risks losing the opportunity to lead and ensure a positive innovation and investment environment

By Andrea Klaric, Sylvain Delerce, Kayla Cohen and Eloisa Viloria