Consultation response on the legislative proposal on carbon removals in the EU Emissions Trading System

The European Commission’s proposal to bring carbon dioxide removal (CDR) into the EU Emissions Trading System (ETS) is a promising start. But it will only deliver if the text is strengthened during negotiations between the European Parliament and Member States. In our response to the Commission’s public consultation, we update our initial reaction from July and set out what needs to change.

The proposal gets a lot right. It creates a purchasing programme for permanent CDR, funded mainly by polluters through earmarked ETS revenues. It implies a volume of 250 million tonnes (Mt) of removals, and limits eligibility to bioenergy with carbon capture and storage (BioCCS) and direct air carbon capture and storage (DACCS), the methods best suited to balancing fossil emissions.

However, more work is needed. The proposal should legally require delivery of 250 Mt of CDR, not just the auctioning of 250 million allowances. The Commission should be able to sign long-term purchase agreements by 2028 so that projects can start delivering in 2031. The use of international credits should also depend on an impact assessment and meet the same quality standards as domestic removals.

We also have three main concerns. First, funding falls short. Studies estimate a funding gap of EUR 20-40 billion between 2031 and 2040, so we recommend raising the allowances set aside to cover this gap from 10 million to at least 60 million.

Second, there is no protection if CDR under-delivers. Unused CDR allowances could return to the market, releasing up to 250 million allowances with no removals to balance them. The Commission needs powers to pause or cancel these allowances, regular reviews, and a clear roadmap to 250 Mt.

Third, nature-based removals and carbon farming should stay out of the ETS. Their storage is temporary, so they cannot credibly balance foss.

Find out more about the proposed EU ETS review here.