December 16, 2021

Sustainable Carbon Cycles for Europe – what the Commission’s vision means for carbon removal

Carbon Gap comments on a new European Commission communication on Sustainable Carbon Cycles.

The 15th of December marked the official release by the European Commission (EC) of an important Communication on “Sustainable Carbon Cycles”. The document maps out how the removal, capture, re-use, and storage of carbon in service of Europe’s goal of Climate Neutrality by 2050 and achieving net negative emissions thereafter will be advanced, and how these climate solutions and sub-goals fit in with the many other EU policies, programs, targets, and priorities. Carbon Gap welcomes the announcement, and looks forward to working with the Commission to help advance common goals of scaling up all responsible methods for removing carbon from our oceans and atmosphere. We examine the key guidelines for deploying carbon removal in the Sustainable Carbon Cycles Communication and what we feel the Communication gets right, and areas where the Communication indicates a need for further engagement with the Commission by the carbon removal community.

Why is introducing carbon removal in the Sustainable Carbon Cycles Communication important?

The Communication lays out a vision for policy, market-making, and certification for a host of critical climate solutions that allow for the management of carbon flows and stocks. These include Carbon Dioxide Removal (CDR), Carbon Capture and Utilization (CCU), and Carbon Capture and Storage (CCS), as well as “Carbon Farming”, the EC’s term for all land management activities that result in more carbon removed and stored in trees, other vegetation, and soils (and which also falls under carbon dioxide removal), and Blue Carbon (sequestration in coastal ecosystems). It establishes priorities, preferred policy approaches, and a framework for policymaking. Note that the Communication is not a law or policy pronouncement, but rather a baseline that the European Commission, European Parliament, and other EU institutions, as well as member states, will use as guidance and input while amending or developing laws and rules.

What does the Sustainable Carbon Cycles Communication say?

Overarching message – The EC clearly recognizes the need for both land-based and industrial removals to achieve the 2050 climate neutrality target set out in the European Climate Law, and to deliver net negative emissions thereafter. The communication identifies three key actions: prioritizing the absolute elimination of emissions where possible, replacing fossil carbon with sustainably recycled carbon (captured from waste streams, biomass, and from the atmosphere) in sectors that remain ‘carbon dependent,’ and direct removal of carbon from the atmosphere into safe storage in ecosystems and geological reservoirs alike.

Carbon Farming goals – The EC reaffirms Europe’s ambitious goal of 310 MtCO2/yr of carbon removal by the land sector by 2030, and commits to form an expert group to standardize monitoring, reporting & verification for land-based carbon management. The Communication also proposes the formation of new funding sources for land-based carbon removal, and the creation of a host of other support mechanisms for research, digital tracking resources, and stakeholder knowledge sharing around Carbon Farming practices.

Industrial capture, use, removal and storage of carbon – High-level goals include distinguishing industrially-managed CO2 according to its origin (biogenic, fossil, atmospheric) by 2028, increasing the non-fossil carbon mix in chemicals and plastics industries to 20% by 2030, and scaling “technological” carbon removal such as Direct Air Capture and Storage (DACS) to 5 million tonnes CO2 per year by 2030. Additionally, the Communication acknowledges the need to support the “industrial” family of carbon removal solutions by developing clear methodologies, providing more support from the Innovation Fund, implementing programs like Carbon Contracts for Difference), commissioning studies on the development of a CO2 transport network, and continuing funding for transport and storage infrastructure under the TEN-E regulation. The EC makes clear the need for an international market for technologically-mediated carbon removal with high-durability storage, and the importance of developing a multi-national and open-access CO2 transport and storage network.

Carbon Removal Certification Scheme – The Communication makes clear that a regulatory framework and the certification of carbon removals is a critical step to implementing carbon removal policy and an international market for removals. It is the EC’s goal to pilot a Certification Scheme for many forms of carbon removal, deployed first in the voluntary market and eventually integrated into the EU compliance markets. As building blocks toward this Certification Scheme, the EC is calling for an EU standard for monitoring, reporting, and verification of carbon removal both on land (e.g. farms & forests) and directly from the atmosphere (e.g. direct air capture), as well as a regulatory framework for accounting for and certifying these carbon removals. This process is intended to be open and consultative, with calls for evidence launched in January and a yearly conference to convene key stakeholders in the second half of the year.

What does the Communication get right?

Ambition – the scope of the Communication demonstrates that the EC is taking carbon removal seriously. The important and growing role for carbon removal is clearly recognized, and the acknowledgement of eventual net negative emissions indicates an appreciation of the fact that, once carbon neutrality is achieved mostly through emissions reductions, carbon removal will become the main focus for climate action. We also appreciate the rigour with which the EC is approaching accounting for carbon removal, setting out processes to ensure that a certification scheme is developed for different removal techniques that considers a variety of criteria, “such as the duration of the storage, the risk of reversal, the uncertainty of the measurement or the risk of carbon leakages increasing GHG emissions elsewhere.”

Breadth – the Communication is a dizzying tour through a wide variety of climate solutions, from soil carbon sequestration and reforestation and blue carbon (managing coastal and ocean ecosystems to remove and store more carbon) to direct air capture. This breadth is encouraging, because Europe will need to deploy a portfolio of carbon removal solutions in order to reach its own climate goals and scale these solutions to the levels required to hold warming to 1.5 degrees. In order to reduce, manage, and eliminate the unsustainable flow of carbon into the atmosphere, we must pursue all available solutions whose safety, lifecycle climate impacts, and public acceptability have been demonstrated, and we hope that the EC continues to incorporate more carbon removal techniques into its Sustainable Carbon Cycles vision as they emerge from universities, research institutions, and local communities.

We encourage policymakers to establish funding pools and policy incentives for both established and emerging carbon removal techniques. As was raised at a convening of carbon removal leaders hosted by Carbon Gap at COP26, we believe policy should define what removal activities are in or out of scope based on the benefits they reliably deliver (e.g. carbon storage for over 1,000 years, specific non-carbon co-benefits to biodiversity or ecosystem resilience), not on the nature of the technique or technology employed. The “carbon farming” versus “industrial” categorization risks missing some critical emerging carbon removal techniques, such as the direct mineralization of CO2 into stable forms aboveground, direct removal of carbon from the ocean, and many more.

Distinguishing carbon sources – The Commission calls for traceability of the source of carbon that is to be captured or removed, which can be fossil (extracted from the geosphere), biogenic (removed from the atmosphere by organisms and stored in organic matter), or atmospheric (taken directly from the air). This is a critical step in establishing a cohesive carbon management framework. We need to know where carbon comes from before we can design policies that translate the usage, storage, or re-release of that carbon into a clearly defined climate outcome (e.g. an avoided emission vs. carbon removal) and apply crediting and funding accordingly. With such distinctions, we can build toward a world in which we balance the extraction from each particular carbon reservoir. This traceability must be extended to all forms of carbon used in the economy (fuels, materials), not just the raw CO2 that is transported, used or stored. That way, organizations can appropriately match specific emissions (biogenic or fossil) with corresponding removals that store carbon back into those same corresponding reservoirs.

Which priorities for further engagement emerge from the Communication?

We recognize the Communication as a critical step toward a cohesive carbon management policy suite for Europe, and the culmination of months of intensive work at the Commission and aligned institutions. What follows are three areas where, based on the Communication, additional policy research and engagement with the Commission is needed.

Higher-cost removals need sustained policy support now

The Communication makes clear that, as of now, there are no plans to integrate carbon removal into the EU compliance frameworks before 2030. This makes sense vis-a-vis carbon removal techniques with costs much higher than EU ETS price points, for example, which are for the moment too low to trigger investments in DACS, for example. For other carbon removal pathways with intermediate costs, the EU ETS could provide the bulk of an incentive stack to make projects pencil out. Regardless, without integration into EU compliance frameworks and absent additional policy incentives, carbon removal will need to rely heavily on the voluntary carbon market for financing over the next 8 years. This will make meeting, and ideally exceeding, the goal of 5 million tonnes per year of “technological” removals by 2030 difficult absent additional policy incentives (described below).

Emerging carbon removal techniques with ultra-high-durability carbon storage such as Direct Air Capture and Storage (DACS), some forms of Biomass Carbon Removal & Storage (BiCRS), and accelerated mineralization will need clear policy support and funding now to start to bring down costs. As the evolution of solar & wind energy taught us, climate solutions need stable, sustained, and predictable financial incentives, typically from governments, in order to bring down costs and accelerate widespread deployment in a virtuous, self-reinforcing cycle. Carbon removal solutions involving engineering and industrial integration, particularly those that are modularized as with many direct air capture techniques, are no different.

Can we integrate some forms of carbon removal into the compliance frameworks sooner than 2030? Carbon Gap appreciates the benefits of taking time to learn lessons from the voluntary market, as well as the importance of approaching changes to a large and successful cap-and-trade scheme with caution. When carbon credits from the Clean Development Mechanism were initially allowed in the EU-ETS, the flood of cheap and often low-quality carbon credits contributed to an oversupply crisis that was part of a confluence of factors that caused the price to crash and led to painstaking reform. However, thoughtful rules can smooth the process of integrating carbon removal into the system earlier without less risk of adverse effects. Many emitters regulated under the EU ETS are from industries that have long been classified as difficult-to-abate, and are prime candidates for using high-quality, durable removals to neutralize their most expensive-to-eliminate emissions as a waypoint on a longer journey to absolute-zero emissions of carbon. By introducing only those carbon removal techniques that have a price point well above the expected range of ETS allowances prices, the EU could begin integrating high-quality carbon removal without risking over-supply and falling prices as a result.

The voluntary carbon market can provide some initial momentum, but we cannot rely on these early, ambitious commitments which come primarily from companies with unusually high-profit margins and low relative emissions. We cannot wait eight years for governments to begin funding the deployment of critical carbon removal techniques. This is why the Communication’s mention of funding Carbon Contracts for Difference — a policy mechanism that purchases goods and services important for climate action that governments want to see develop faster — is so exciting and critical. Such a policy will require careful design, but in principle would provide the stable incentive necessary for carbon removal projects to attract project financing and start to snowball.

The Innovation Fund has already started providing critical funding to get first-of-a-kind projects off the ground, with one dedicated carbon removal project awarded with EU Innovation Fund support in the most funding recent announcement for large-scale projects. In addition to dramatically scaling up support for such pilots, demonstrations, and first-of-a-kind projects, we also need dedicated deployment incentives for high-durability carbon removal techniques that are ready for project finance and for next-of-a-kind projects, in the tradition of the Feed-in-Tariffs (Germany), Contracts for Difference (UK), and long-term tax credits (US) which allowed for the dramatic scale-up and cost reduction of renewable energy technologies.

Carbon Gap looks forward to exploring these opportunities in greater depth in future work and conversations with EC policymakers. 

Land-based carbon accounting needs to be cohesive

Nature is among our most important allies as we work to restore ecosystems and the atmosphere alike. “Carbon farming” which includes all land and ecosystem-management activities that remove carbon from the atmosphere (forestation, peatlands, regenerative agriculture, and even some types of blue carbon) must play a major role over the next three decades, and we’re pleased to see the EC’s ambitious plans on this front and its inclusion of a wide variety of approaches. We agree with the focus on developing tools and standards for monitoring, reporting, and verification, but think it important to highlight further the challenges of accounting for removals with inherently higher-risk storage of carbon, as will be the case for many Carbon Farming removal techniques. The good news is that there is ample reason to incentivize these actions, which lead to healthier forests, soils, and communities, regardless of the precise amount of carbon they store over the long term.

Firstly, we agree with the comments made by Bellona about the durability of stored carbon, and their call for “substantial clarification to ensure that such activities do not interfere with the overall aim of climate neutrality.” Careful attention from experts and independent stakeholders will be required to develop clear rules and ensure that any removals via carbon farming are accounted for appropriately.

More broadly, land-based carbon removal presents unique challenges in the form of indirect carbon leakage that need to be recognized and addressed. Using European land for carbon removal means that the production of food and fibre will shift elsewhere, unless we are able to either increase the efficiency of production on remaining land, or reduce overall demand. As a result, any conversation about using EU land resources to remove carbon must account for and address the impacts of dedicating productive farmland to carbon removal, in those cases where land conversion is envisaged.

At COP26, world leaders committed to halting and reversing global forest loss by 2030. If achieved, that would help address some of the indirect leakage issues for land-based European carbon removal. Until then, the conversion of productive lands in Europe for carbon removal risks contributing to the destruction of highly biodiverse, sensitive, and rich ecosystems around the world, and we hope to see greater acknowledgement of this risk in future communications.

The EU should strengthen its commitment to net-negative emissions

The Communication provides the basis for a roadmap for using carbon removal to deliver on Europe’s existing climate goal of Climate Neutrality by 2050. This vision is understandably anchored in the scale of removals required to achieve net zero within the EU by mid-century, but the Communication also refers to the European Union’s aim to achieve net negative emissions thereafter. This acknowledgement of the importance of net-negative emissions is important, because it begins to engage with a critical issue of climate justice: the fact that Europe, alongside a small number of wealthy countries in the Global North, holds both an outsized share of the historical responsibility for warming the planet, and the vast majority of financial, human, and technological capital needed to scale-up critical, higher-cost climate solutions like high-durability carbon removal.

Despite Europe’s significant emissions cuts and climate leadership in many areas, the European Union still expects to add 40-50 billion tonnes of carbon dioxide to the atmosphere from now until Europe reaches net zero around 2050. Even setting aside emissions since earlier “start dates” of the climate crisis, such as 1850, when emissions began to rise rapidly with the growth of industry, or 1992, when climate change was first widely recognized at the Rio Earth Summit, those 40-50 billion tonnes represent a significant claim on the carbon budget if we are to remain under 1.5°C of warming. In a world where climate change already causes dramatic damage and loss of life in Europe and around the world, climate leadership will increasingly require acknowledgment of responsibility for emissions past, present, and future, and will mean removing those ongoing emissions faster and earlier. We expect more explicit and ambitious net-negative targets to be set in the coming years.

As a result, policymakers must lay the groundwork now such that removal techniques of all kinds are ready to fill whatever removals gap exists in the 2030s, 40s, and beyond. At Carbon Gap, we’re pleased with the thoughtful approach that the European Commission is taking to carbon removal, and are looking forward to working with policymakers to ensure that the European Union is able to achieve and surpass its climate targets by growing the carbon removal sector safely, quickly, and sustainably.