CARBON REMOVAL COMPLIANCE OPTIONS IN AVIATION AND MARITIME FUEL MANDATES

Governments could allow fuel suppliers, airlines or shipping companies to meet a defined part of their fuel-mandate obligations through verified carbon removals. Companies could then use qualifying removal credits where cleaner fuels are unavailable or particularly costly, within limits established by the legislation. Authorities would specify how removals count towards compliance, which methods qualify and how much of the obligation they can satisfy. A protected minimum requirement for cleaner fuels, increasing over time, would preserve investment in decarbonisation. This option could help maintain climate action when fuel production or infrastructure develops more slowly than expected, while creating potential demand for CDR. Direct air capture could support both industries, but CO₂ used to manufacture fuel would not qualify as removal because combustion releases it again.

Authorities should define the maximum share of the obligation that removals can satisfy and the minimum improvement that must come from cleaner fuels. For mandates expressed as fuel volumes, legislation must explain how removal credits count towards compliance without recording them as fuel supplied. Eligibility should require verified net removal, appropriate storage duration, protection against duplicate claims and responsibility for replacing failed or reversed removals. Companies need advance notice of limits, deadlines and any changes as fuel supply expands. The design should consider the availability and cost of both fuels and removals, while preserving a credible long-term market for cleaner-fuel producers.

A controlled compliance option can help companies meet their obligations when cleaner-fuel projects face delays or supply shortages. Where qualifying removals cost less, it could also reduce compliance costs and pressure for broader exemptions or weaker targets. Access to a regulated customer base can support CDR contracting and investment, although actual demand depends on companies choosing removals over other eligible options. Greater demand for direct-air-capture equipment and services could benefit both durable storage and synthetic-fuel production. Clear limits can give companies flexibility while maintaining a minimum market for cleaner fuels and encouraging both industries to expand.

If removals are cheaper or easier to obtain, companies may use them extensively and reduce purchases of cleaner fuels. This could weaken fuel producers’ revenues, delay investment and make future decarbonisation harder. Temporary flexibility may become a lasting exemption under industry pressure. Competition for clean electricity, equipment and captured CO₂ could also constrain supply. Fuel producers may oppose a policy that threatens their expected market, while customers may interpret it as a retreat from sustainable-fuel commitments or a return to disputed offset practices. Weak removal standards could create compliance on paper without equivalent climate benefits, and credible CDR supply may itself prove insufficient.

Authorities should report actual cleaner-fuel use, lifecycle fuel emissions, total sector emissions and removals used for compliance separately. Records should show whether companies respect removal limits and minimum fuel requirements, with verification of delivered removals, credit retirement and any reversals. Fuel-project investment, supply contracts, production delays and compliance costs should reveal whether flexibility is helping manage shortages or undermining decarbonisation. Reviews should also assess CDR availability, supplier concentration, customer charges and public understanding of claims. Findings should inform future limits, eligibility and supporting policies, with clear evidence required before extending any temporary flexibility.

Government should involve fuel producers, airlines, shipping companies and CDR developers in testing how the compliance option would affect purchasing and investment. Synthetic-fuel producers and their financiers should explain the demand commitments needed to build new capacity. Direct-air-capture developers should assess opportunities to supply both fuel production and durable storage, including competition for resources. Ports, airports and energy providers should identify infrastructure constraints. Scientists and verifiers should test whether the proposed crediting rules represent credible climate outcomes. Consumer representatives and transport companies should develop clear explanations of actual fuel improvements and removal use, without presenting regulatory compliance as eliminating every climate impact.

Governments can negotiate common compliance options through international aviation or maritime agreements, with participating states implementing them. Supranational lawmakers can amend shared fuel mandates, while national governments can amend rules within their jurisdiction. Regional or state governments can act where their fuel-regulation powers cover the relevant activity.