Integrating CDR into the ETS:
Negative Emissions Platform position paper
Executive Summary
Permanent carbon dioxide removal (CDR) is both a climate necessity and an industrial opportunity for the EU. The EU is well positioned to continue leading this emerging global industry. Nearly half of all permanent carbon removal credit projects worldwide are located in Europe, demonstrating the EU’s leadership and first-mover advantage. However, as seen with other clean technologies, early leadership is no guarantee of long-term competitiveness. Without a stable policy framework and sustained financial support, Europe risks losing its lead as investment shifts to jurisdictions offering stronger market incentives.
The proposed integration of permanent CDR into the EU Emissions Trading System (ETS) represents the most significant demand signal the sector has received to date. Project developers have relied primarily on a small number of voluntary early adopters willing to purchase permanent carbon removal credits, providing the revenue certainty needed to finance first-of-a-kind projects and scale deployment.
The European Commission's proposal is a major step towards providing long-term certainty for both the permanent CDR industry and the hard-to-abate sectors that will increasingly rely on high-quality carbon removals to achieve climate neutrality. However, the success of ETS integration will depend on several key design elements.
In particular, the legislative proposal should ensure that:
1. 250 million allowances deliver 250Mt of permanent carbon removals
The European Commission should guarantee that the proposed 250 million additional EU Allowances (EUAs) result in the procurement of an equivalent 250 million tonnes of permanent carbon removals. This should be done through:
Closing the price gap: The Commission’s proposal to use 10 million allowances from within the existing cap is unlikely to be sufficient to bridge the price gap between EUAs and permanent CDR, particularly during the first half of the 2030s. Additional funding measures will therefore be needed to close the gap.
Securing supply from 2031: Ensure that the first permanent CDR projects can deliver from 2031 by enabling the Commission to conclude long-term offtake agreements as early as 2027 and no later than 2029. Given that projects require several years to develop following the signing of an offtake agreement, early commitments will be essential to ensure sufficient supply is available when procurement begins.
2. The ETS supports a portfolio of permanent carbon removal methods
To reach climate targets, the EU will need to rely on a portfolio of permanent carbon removal methods. To realise this, EU policymakers must clearly define objective criteria for permanent carbon removal methods to be integrated into the ETS. EU policymakers should therefore consider either: i) aligning fully with the Carbon Removal and Carbon Farming Certification Framework (CRCF), whereby any method certified as permanent CDR would be automatically eligible under the ETS; or ii) if additional criteria are required, these criteria should be defined in a Delegated Act.
3. The Commission is the primary purchaser whilst also allowing direct voluntary carbon removal purchasing
We need to maintain the EU as the primary purchaser of permanent carbon removals, while allowing ETS-obligated companies to voluntarily purchase permanent CDR credits directly. These purchases should be aligned with the European Commission’s criteria, and can be used to reduce their ETS compliance obligations, while preserving the overall ETS gross cap.
These elements will be critical to ensuring that ETS integration delivers both environmental integrity and the market certainty needed to establish Europe as the global leader in permanent carbon removal.
Ensuring the 250Mt of permanent carbon removal is delivered
NEP calls on co-legislators to:
Enshrine in the final legislation the procurement of 250 million tonnes (Mt) of permanent carbon dioxide removals between 2031 and 2040.
Address the price gap between EUAs and the permanent CDR price by:
Setting the 10 million allowances already earmarked from the existing cap as a floor, with the Commission assessing at the latest in the 2034 review whether additional allowances within the cap should be earmarked for this purpose;
Making permanent CDR eligible as a priority activity for relevant Member States’ ETS revenues;
Including permanent CDR in Phases 1 & 2 of the Industrial Decarbonisation Bank, including through Carbon Contracts for Difference (CCfD).
Ensure that long-term offtake agreements can be concluded by 2029, creating the investment certainty required for first-of-a-kind projects to reach final investment decisions and begin delivering permanent carbon removals from 2031.
NEP welcomes the Commission’s proposal to earmark an additional 250 million allowances for the purchase of permanent carbon dioxide removal from 2031-2040. This represents an important first step in establishing a predictable long-term demand signal for the sector.
However, the climate integrity of the proposal depends on the 250 Mt of permanent CDR being procured in practice. The additional allowances introduced under the proposal are intended to be matched by corresponding permanent removals. If the Commission falls short on this, the additional allowances introduced under the proposal would not be fully offset by corresponding removals. This would increase the net emissions under the ETS and prevent the achievement of the EU's climate targets.
Closing the price gap
The cost of permanent carbon removals remains significantly above the cost of the ETS price. The Commission estimates the cost of Bioenergy Carbon Capture and Storage (BECCS) to be €167-261 per tonne, Direct Air Carbon Capture and Storage is estimated to be €288-567 per tonne, and Biochar Carbon Removal at €66-215 per tonne by 2030. However, these estimates appear to be at the lower end of market projections and are unlikely to fully reflect the costs of deploying these technologies at commercial scale.
Whilst the cost of permanent CDR is expected to fall as the sector scales and the ETS price is expected to rise in the 2030s and 2040s, the price gap will remain substantial during the period covered in the EU ETS proposal and therefore will require targeted financial support to enable market deployment.
The Commission's proposal partially addresses this challenge by allowing up to 10 million EUAs from the cap to be auctioned specifically to bridge the price gap. While this is a welcome recognition of the issue, these additional allowances represent only 4% of the 250 million allowances earmarked for permanent CDR. Given the expected cost differential, NEP has serious doubts that the 10 million allowances will be sufficient to guarantee the delivery of the full 250 million tonnes of permanent CDR. The EU therefore risks the integrity of the ETS by increasing net-emissions.
Given this, the EU must take measures to credibly address the price gap. Such measures can include a mixture of the following:
1. Ensure contingency of 10 million allowances is a minimum, not a ceiling
The 10 million allowances earmarked from the existing cap to help address the price gap should be treated as a minimum contingency rather than an upper limit. The European Commission should assess by 2034 at the latest whether additional allowances should be made available within the cap, taking into account updated cost projections, market conditions and the scale of permanent carbon removals being deployed.
2. Include carbon removals in Phase 1 and Phase 2 of the Industrial Decarbonisation Bank
Whilst the legislative proposal identifies permanent carbon removals as an activity eligible for support under the Industrial Decarbonisation Bank (IDB), eligibility appears to be limited to installations already covered by the ETS. Permanent CDR should be explicitly eligible under both Phase 1 (2028-2031) via technology-specific premiums, and Phase 2 (2031 onwards) of the IDB through Carbon Contracts for Difference (CCfD).
3. Include permanent carbon removals in the priority list for Member States’ ETS revenues
The European Commission should further incentivise Member States to invest in a portfolio of permanent carbon removals by explicitly including them among the priority areas for the use of ETS revenues under Article 10(3). This would enable Member States to direct a greater share of ETS revenues towards the development and deployment of permanent carbon removal projects.
Dedicated use of ETS revenues would provide an additional source of demand and investment for the sector, helping projects reach scale, drive down costs and strengthen the European permanent carbon removal market. It would also encourage Member States to develop their own national carbon removal strategies and build domestic capacity, complementing the EU-level procurement and support mechanisms proposed under the ETS revision.
Securing supply through offtake agreements
Long-term offtake agreements will be critical to provide the revenue certainty and demand visibility needed to unlock investment in permanent CDR capacity. In particular, the Commission should enter into offtake agreements with CDR suppliers no later than 2029.
These offtake agreements should last a minimum of 8 years to ensure project bankability, and be modelled on power purchase agreements. This would provide the revenue certainty needed to unlock investment in new capacity, enable projects to reach final investment decisions and ensure that sufficient supply is available to meet the planned ETS procurement volumes from 2031 onwards.
Relationship with the CRCF
NEP calls on the co-legislators to:
Ensure that a broad portfolio of permanent carbon removals is integrated into the EU ETS according to clear and objective criteria. EU policy makers should either fully align with what is certified as permanent under the Carbon Removal and Carbon Farming Certification Framework (CRCF) or clearly define any additional eligibility criteria for permanent carbon removal method integration in a delegated act.
Maintain the like-for-like principle, ensuring that only permanent carbon removals can compensate for permanent fossil emissions under the EU ETS. Carbon farming should therefore be outside the ETS compliance framework, while strengthening dedicated funding mechanisms for temporary removals through separate EU and national policy instruments.
All permanent CDR methods incorporated into the ETS must meet robust certification requirements to safeguard environmental integrity, maintain market confidence and ensure that only high-quality permanent removals enter the compliance market.
Additionally, to reach its climate targets and deploy carbon removals at the scale needed, the EU will require a diverse portfolio of permanent carbon removal methods. Each method offers distinct opportunities and strengths, while also relying on different resources and infrastructure. Developing a broad portfolio will ensure sufficient supply, diversify economic benefits geographically and in terms of the supplier base, manage resource and deployment risks including prices, and build a resilient permanent carbon removal sector capable of delivering at the scale required.
The EU should avoid locking key policies, including the ETS, into a limited selection of permanent carbon removal methods. The inclusion of only BioCCS and DACCS in Article 9c of the Commission’s proposal implies that the Commission has applied criteria that exclude other methods, but it does not provide a clear timeframe or explain the criteria for incorporating other forms of permanent CDR into the framework.
NEP calls on EU policymakers to address this lack of criteria for technology inclusion. and to consider either of the following options:
Fully align with the CRCF
The Commission has developed a robust certification framework through the Carbon Removal and Carbon Farming Certification Framework (CRCF). Methods certified as permanent under the CRCF will already be required to meet defined QU.A.L.ITY criteria. Currently, the CRCF certifies DACCS, BioCCS and biochar as permanent carbon removal, and consideration of other methods is in the pipeline.
Alignment with the CRCF would offer regulatory consistency and avoid creating parallel or layered certification requirements. For investors and buyers, this would provide a very clear and easy-to-understand framework, making CRCF certification a one-stop-shop for voluntary market certification and use in the context of regulatory compliance – thereby increasing liquidity and supporting the quickest possible scale-up of CDR.
Adopt a Delegated Act setting out additional eligibility criteria
If EU legislators consider that legal or technical standards in the CRCF need to be complemented with further criteria for inclusion in the ETS, the European Commission should establish these through a Delegated Act. This should be adopted no later than 12 months after the legislation enters into force.
The mandate for the Delegated Act should specify that the EU requires a broad portfolio of permanent carbon removals, and should require the Commission to ensure that a clear regulatory pathway is realistically available to the broadest possible range of methods. This would provide clarity and predictability for CDR project developers and enable the sector to plan investment accordingly.
Carbon farming should remain outside the EU ETS
NEP is concerned by the provision requiring the European Commission to assess, at the latest in its 2034 review of the EU ETS, whether nature-based removals and carbon farming sequestration units should contribute to permanent carbon removals. While NEP fully recognises the important role that these types of carbon removals will play in supporting climate mitigation, biodiversity and more resilient agricultural systems, temporary carbon removals should not be used to compensate for permanent fossil emissions.
Fossil emissions remain in the atmosphere for hundreds to thousands of years. The EU should therefore continue to apply the like-for-like principle, whereby permanent fossil emissions can only be compensated by permanent carbon removals. As such, introducing temporary removals into the EU ETS would weaken the environmental integrity of the system.
Model of integration
NEP calls on the co-legislators to:
Maintain the European Commission as the primary purchaser of permanent carbon removals during the initial phase of ETS integration.
Extend the Article 14(1a)right to use removals for fossil emissions to all ETS operators and all removal technologies integrated in the ETS
Allow carbon removal operators to access both compliance and voluntary carbon market revenues
Direct and indirect integration
NEP supports the proposal for an indirect integration with the European Commission acting as the central purchaser of permanent carbon removals during the initial phase of ETS integration. Such a model helps provide long-term revenue certainty for project developers and ensures that permanent removals entering the ETS are subject to consistent quality standards and procurement criteria.
At the same time, NEP supports complementary forms of direct integration to maximise the revenue support available to permanent carbon removal projects. This should enable operators to access additional ETS demand for permanent removals, while ensuring that any volumes procured through direct integration are drawn from the 250 million allowances allocated for permanent carbon removals and do not result in an increase in net ETS emissions, as already articulated in the legislative proposal.
Extending Article 14(1a) rights
NEP welcomes the introduction of Article 14(1a), which allows operators to use CRCF-certified BioCCS removals they generate to compensate for their fossil emissions. To maximise the impact of this provision and accelerate investment in permanent carbon removals, this right should be extended to all ETS operators and all certified permanent carbon removal technologies integrated into the ETS, rather than being limited to specific sectors or pathways.
To further incentivise uptake, permanent carbon removals voluntarily purchased under Article 14(1a) should be eligible for appropriate forms of public support and other aid mechanisms. Such support would help narrow the price gap between permanent removals and the ETS price, thereby reducing the cost to operators and increasing the likelihood of voluntary purchases under Article 14(1a).
Carbon removals beyond of the ETS
While the current proposal focuses on ETS 1, the European Commission should already begin assessing the future role of permanent CDR within ETS 2. The sectors covered by ETS 2 are also expected to retain residual emissions beyond 2050, making permanent removals an essential component of their decarbonisation pathway. Developing an early assessment of the potential demand for permanent CDR under ETS 2 would provide greater long-term visibility for both policymakers and industry and help ensure that sufficient supply can be developed in time to meet future compliance needs. We urge the European Commission to come forward with such an assessment and report by July 2033.
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Section
Recital (34)
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Legislative proposal
To facilitate the use of permanent carbon removals by operators, shipping companies and aircraft operators, these should be allowed to compensate their own fossil emissions with their biogenic CO2 emissions captured and permanently stored, which are certified as permanent carbon removal units in accordance with the methodologies for the certification of domestic permanent biogenic emissions capture with carbon storage (BioCCS) removals established under Regulation (EU) 2024/3012 of the European Parliament and of the Council18. To avoid double counting, carbon removals units used for the purpose of compensating own emissions should be cancelled from the Union Registry provided for in Article 12 of Regulation (EU) 2024/3012 of the European Parliament and of the Council19. This compensation mechanism cannot entail the generation of negative emissions or the of obtaining allowances. It should lead to an adjustment of the allowances assigned for the purchase of carbon removals and to the carbon removals that are to be purchased, to prevent the total emission space from increasing beyond the limit implied by the integration through the purchasing programme.
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Amendments
To facilitate the use of permanent carbon removals by operators, shipping companies and aircraft operators, these should be allowed to compensate their own fossil emissions with their biogenic CO2 emissions captured and permanently stored, which are certified as permanent carbon removal units generated under the scope of this Directive and certified in accordance with the methodologies for the certification of domestic permanent biogenic emissions capture with carbon storage (BioCCS) removals established under Regulation (EU) 2024/3012 of the European Parliament and of the Council18. To avoid double counting, carbon removals units used for the purpose of compensating own emissions should be cancelled from the Union Registry provided for in Article 12 of Regulation (EU) 2024/3012 of the European Parliament and of the Council19. This compensation mechanism cannot entail the generation of negative emissions or the of obtaining allowances. It should lead to an adjustment of the allowances assigned for the purchase of carbon removals and to the carbon removals that are to be purchased, to prevent the total emission space from increasing beyond the limit implied by the integration through the purchasing programme.
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Justification
Model of integration
The option for ETS operators to directly purchase and use eligible permanent carbon removal units is a welcome complementary source of demand. This article should be extended to allow all permanent CDR methods certified under the CRCF. This would give obligated companies an additional route to contribute to the deployment of permanent carbon removals, while creating greater flexibility for operators and helping to build a market for permanent carbon removals ahead of and alongside Commission purchasing.
Technology eligibility
To reach climate targets, the European Commission will need a portfolio of permanent CDR methods.
To realise this, EU policymakers must clearly define objective criteria for permanent carbon removal methods to be integrated into the ETS.
EU policymakers should therefore consider either:
1) Aligning fully with the Carbon Removal and Carbon Farming Certification Framework (CRCF), whereby any method certified as permanent CDR would be automatically eligible under the ETS; or
2) If additional criteria are required, these criteria should be defined in a Delegated Act, to be published no later than 12 months after the adoption of the ETS Directive.
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Section
Article 9c domestic permanent carbon removals (option 1 – full CRCF alignment)
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Legislative proposal
1. The Union-wide quantity of allowances referred to in Article 9 shall be increased by 250 million allowances. Those allowances shall be made available to the Commission to auction them from 2031 to 2040 to generate revenues for the purchase of an equivalent amount of domestic permanent carbon removal units generated by BioCCS and DACCS activities under Regulation (EU) 2024/3012 of the European Parliament and of the Council*. The Commission shall purchase those removals units prioritising a portfolio of cost-effective, high-integrity projects with payment upon delivery of the certified units.
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Amendments
1. The EU ETS shall deliver a volume of 250 Mt of domestic permanent carbon removals by 2040. To that end, the The Union-wide quantity of allowances referred to in Article 9 shall be increased by 250 million allowances. Those allowances shall be made available to the Commission to auction them from 2031 to 2040 to generate revenues for the purchase of an equivalent amount of domestic permanent carbon removal units generated by BioCCS and DACCS activities under Regulation (EU) 2024/3012 of the European Parliament and of the Council*. The Commission shall purchase those removals units prioritising a portfolio of cost-effective, high-integrity projects with payment upon
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Justification
Quantity
Whilst the legislative proposal refers to “an equivalent” amount of 250 million allowances to the purchase of permanent carbon removal, the language could be strengthened by being more explicit the auctioning of allowances will be used to purchase 250 million tonnes of permanent carbon removal. By strengthening this language, the EU will give greater clarity and direction for the CDR industry. The proposal needs coherence with existing legislation and should therefore include all permanent carbon removals according to the CRCF, and in the immediate term, the technologies that already have a methodology.
Technology eligibility
Please see above.
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Section
Article 9c domestic permanent carbon removals (option 2 – Delegated Act for method eligibility)
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Legislative proposal
1. The Union-wide quantity of allowances referred to in Article 9 shall be increased by 250 million allowances. Those allowances shall be made available to the Commission to auction them from 2031 to 2040 to generate revenues for the purchase of an equivalent amount of domestic permanent carbon removal units generated by BioCCS and DACCS activities under Regulation (EU) 2024/3012 of the European Parliament and of the Council*. The Commission shall purchase those removals units prioritising a portfolio of cost-effective, high-integrity projects with payment upon delivery of the certified units.
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Amendments
1. The EU ETS shall deliver a volume of 250 Mt of domestic permanent carbon removals by 2040. To that end, the The Union-wide quantity of allowances referred to in Article 9 shall be increased by 250 million allowances. Those allowances shall be made available to the Commission to auction them from 2031 to 2040 to generate revenues for the purchase of an equivalent amount of domestic permanent carbon removal units generated by BioCCS and DACCS activities under Regulation (EU) 2024/3012 of the European Parliament and of the Council* and that comply with Article 1a of this Directive.
The Commission shall purchase those removals units prioritising a portfolio of cost-effective, high-integrity projects with payment upon delivery of the certified units.
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Justification
Please see above for justification on quantity & on tech inclusion.
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Section
Article 9c paragraph 1a (new) – if option 2 (above) is selected
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Legislative proposal
N/A
2. An additional 10 million allowances from the Union-wide quantity of allowances referred to in Article 9 between 2031 and 2040 shall be made available to the Commission to auction them to generate revenues for the purchase of those permanent carbon removals units, in the event the revenues generated from the allowances under paragraph 1 would be insufficient for the purchase of the total amount of domestic permanent carbon removals units.
4. The Commission is empowered to adopt delegated acts in accordance with Article 23 to supplement this Directive concerning the detailed modalities for the purchase of the domestic permanent carbon removal units indicated under paragraph 1, including the timing of the auctioning of the allowances referred to in paragraphs 1 and 2; the forms of support, selection procedure and criteria, eligibility criteria and technological requirements for the different types of support and payment mechanisms, using competitive allocation where feasible and reporting transparently on the outcome of the procedures; as well as the financial rules to ensure an appropriate implementation of the purchase. Those delegated acts shall ensure that any early auctioning of the allowances referred to in paragraphs 1 and 2 is balanced out through the auctioning of the allowances under Article 10, to achieve the equivalent effect of a gradual integration of carbon removals towards the auctioning of 48 million of the allowances referred to in paragraphs 1 and 2 in 2040. Those delegated acts shall provide detailed modalities for the purchase of the domestic permanent carbon removals prioritising a portfolio of cost-effective, high-integrity projects with payment upon delivery of the certified units and aiming to limit fiscal exposure.
6. Any permanent carbon removal certified units generated by BioCCS and DACCS activities under Regulation (EU) 2024/3012 and purchased by the Commission in accordance with this Article shall be cancelled and no longer be allowed to account as negative emissions under Article 14(1a) of this Directive.
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Amendments
1a(new)
The Commission is empowered to adopt a Delegated Act in accordance with Article 23 to supplement this Directive that will determine the technical criteria and enforceable long-term monitoring, storage, and liability standards for additional domestic permanent carbon dioxide removal methods to become eligible for integration into the EU ETS. The Delegated Act should be published no later than 12 months after the adoption of this Directive.
Additional permanent carbon dioxide removal methods shall become eligible for integration into the EU ETS once a corresponding methodology has been established under Regulation (EU) 2024/3012 and the method has demonstrated compliance with the criteria and requirements established by the delegated act. The Commission shall ensure that eligible methods can be integrated into the EU ETS on a rolling basis.
2. An additional 10A minimum of 10 million allowances from the Union-wide quantity of allowances referred to in Article 9 between 2031 and 2040 shall be made available to the Commission to auction them to generate revenues for the purchase of those permanent carbon removals units, in the event the revenues generated from the allowances under paragraph 1 would be insufficient for the purchase of the total amount of domestic permanent carbon removals units. The Commission shall assess whether the Union-wide quantity of allowances referred to in Article 9 should be increased to address any remaining price gap by 2034 at the latest.
Additionally, the European Commission shall include permanent carbon removals in Phase 1 of the Industrial Decarbonisation Bank, from 2028, and in Phase 2, from 2031, including through Carbon Contracts for Difference.
4. Procurement of removals will be cost-effective, including the use of offtake agreements to contract removals in advance of delivery. These agreements will be offered as soon as possible, and no later than 2029. The Commission is empowered to adopt delegated acts no later than 12 months after the adoption of this Directive in accordance with Article 23 to supplement this Directive concerning the detailed modalities for the purchase of the domestic permanent carbon removal units indicated under paragraph 1, including the timing of the auctioning of the allowances referred to in paragraphs 1 and 2; the forms of support, selection procedure and criteria, eligibility criteria and technological requirements for the different types of support and payment mechanisms, using competitive allocation where feasible and reporting transparently on the outcome of the procedures; as well as the financial rules to ensure an appropriate implementation of the purchase. Those delegated acts shall ensure that any early auctioning of the allowances referred to in paragraphs 1 and 2 is balanced out through the auctioning of the allowances under Article 10, to achieve the equivalent effect of a gradual integration of carbon removals towards the auctioning of 48 million of the allowances referred to in paragraphs 1 and 2 in 2040. Those delegated acts shall provide detailed modalities for the purchase of the domestic permanent carbon removals prioritising a portfolio of cost-effective, high-integrity projects with payment upon delivery of the certified units and aiming to limit fiscal exposure.
6. Any permanent carbon removal certified units under this Directive generated by BioCCS and DACCS activities under Regulation (EU) 2024/3012 and purchased by the Commission in accordance with this Article shall be cancelled and no longer be allowed to account as negative emissions under Article 14(1a) of this Directive.
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Justification
Please see above for justification on tech inclusion.
Price gap
The European Commission’s proposal to make 10 million allowances available to help address the price gap between permanent carbon removals and EUAs is unlikely to be sufficient. The 10 million allowances should therefore be considered a minimum contingency rather than a ceiling, with the Commission assessing by 2034 at the latest whether additional allowances from within the cap may be needed in light of evolving market conditions, cost projections and deployment.
Addressing the price gap will require a combination of complementary measures, including ensuring that permanent carbon removals are eligible for support under the Industrial Decarbonisation Bank (IDB).
Offtake agreements
To ensure supply of permanent CDR from 2031, offtake agreements will need to be signed as soon as possible, and no later than 2029. Such offtake agreements, as well as the necessary public funding support, are needed for CDR providers to make Final Investment Decisions (FIDs).
Modalities of purchasing
To give certainty to the sector, the Delegated Act on the modalities of purchasing should be published no later than 12 months after the adoption of the ETS.
Amended for consistency regarding technology inclusion.
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Section
Article 10
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Legislative proposal
3. Member States shall determine the use of revenues generated from the auctioning of allowances referred to in paragraph 2 of this Article, except for the revenues established as own resources in accordance with Article 311, third paragraph, TFEU and entered in the Union budget. Member States shall use at least 50% of those revenues, with the exception of the revenues used for the compensation of indirect carbon costs referred to in Article 10a(6) of this Directive, or the equivalent in financial value of those revenues, to support the decarbonisation of ETS sectors, for one or more of the following priority purposes:
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Amendments
3. Member States shall determine the use of revenues generated from the auctioning of allowances referred to in paragraph 2 of this Article, except for the revenues established as own resources in accordance with Article 311, third paragraph, TFEU and entered in the Union budget. Member States shall use at least 50% of those revenues, with the exception of the revenues used for the compensation of indirect carbon costs referred to in Article 10a(6) of this Directive, or the equivalent in financial value of those revenues, to support the decarbonisation of ETS sectors, for one or more of the following priority purposes:
(k) (new) permanent carbon removal methods;
Notwithstanding the first subparagraph, Member States may use the remainder of those revenues for which they determine the use for the following purposes:
(a) permanent carbon removal methods, such as direct air capture and storage;
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Justification
Price gap
The European Commission should further incentivise Member States to invest in permanent carbon removals by explicitly including them among the priority areas for the use of ETS revenues under Article 10(3). This would enable Member States to direct a greater share of ETS revenues towards the development and deployment of permanent carbon removal projects.
Dedicated use of ETS revenues would provide an additional source of demand and investment for the sector, helping projects reach scale, drive down costs and strengthen the European permanent carbon removal market. It would also encourage Member States to develop their own national carbon removal strategies and build domestic capacity, complementing the EU-level procurement and support mechanisms proposed under the ETS revision.
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Section
Article 10cc – Industrial Decarbonisation Bank
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Legislative proposal
1. An instrument to support the scaling up and deployment of the technologies, processes and techniques to decarbonise industries (the ‘Industrial Decarbonisation Bank) is established starting from 2028. It shall accelerate industrial decarbonisation, including electrification, within the Union through supporting capital investment, including grid connection, storage and flexibility costs incurred by projects, and operational expenditure for emission reductions or removals in stationary installations carrying out or substituting industrial production processes referred to in Annex I of this Directive, including in installations for the incineration of waste.
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Amendments
1. An instrument to support the scaling up and deployment of the technologies, processes and techniques to decarbonise industries (the ‘Industrial Decarbonisation Bank) is established starting from 2028. It shall accelerate industrial decarbonisation, including electrification and permanent carbon removal, within the Union through supporting capital investment, including grid connection, storage and flexibility costs incurred by projects, and operational expenditure for emission reductions or removals in stationary installations carrying out or substituting industrial production processes referred to in Annex I of this Directive, including in installations for the incineration of waste, and any installation producing carbon removals under Regulation (EU) 2024/3012 of the European Parliament and of the Council.
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Justification
Price gap
Permanent carbon removal should be eligible in both Phase 1 & 2 of the Industrial Decarbonisation Bank to ensure both early stage and long-term revenue certainty for the sector
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Section
Article 14 (1a)
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Legislative proposal
1a. The acts referred to in paragraph 1 shall provide for the possibility for operators, aircraft operators and shipping companies to compensate their fossil emissions with domestic permanent carbon removal units generated from the storage of their biogenic emissions under the scope of this Directive and certified under Regulation (EU) 2024/3012, while avoiding the double counting of those negative emissions.
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Amendments
The acts referred to in paragraph 1 shall provide for the possibility for operators, aircraft operators and shipping companies to compensate their fossil emissions with domestic permanent carbon removal units generated from the storage of their biogenic emissions under the scope of this Directive and certified under Regulation (EU) 2024/3012, while avoiding the double counting of those negative emissions.
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Justification
Model of integration
The option for ETS operators to directly purchase and use eligible permanent carbon removal units is a welcome complementary source of demand. This article should be extended to allow all permanent CDR methods certified under the CRCF. This would give obligated companies an additional route to contribute to the deployment of permanent carbon removals, while creating greater flexibility for operators and helping to build a market for permanent carbon removals ahead of and alongside Commission purchasing.