European CDR industry joint statement on CDR inclusion into the ETS
The European Commission’s proposal to integrate permanent carbon removals into the EU Emissions Trading System (ETS) represents a major step forward for Europe’s emerging carbon removal industry and could provide a significant new demand signal for the sector.
But for this opportunity to translate into real investment and deployment, Europe needs to get the framework right.
In a new joint position paper, European carbon removal trade associations representing more than 170 companies and organisations welcome the Commission’s proposal while calling for stronger measures to ensure the ETS can deliver the scale of permanent carbon removal Europe will need.
Europe is already home to almost half of the world’s carbon removal projects, and the sector could generate up to 405,000 jobs and €100 billion in economic potential by 2040. The proposed ETS framework could help turn this early lead into industrial scale, giving companies and investors the certainty they need to develop projects and build capacity in Europe.
However, the proposed 250 Mt of permanent carbon removal between 2031 and 2040 will only become a credible market signal if it is backed by the right funding and purchasing mechanisms.
The position paper therefore focuses on three key areas that need to be addressed:
Closing the price gap: the EU needs to ensure sufficient funding is available to bridge the cost difference between permanent carbon removals and EU allowances. NEP estimates an additional €16–20 billion funding gap beyond the allowances currently proposed by the Commission.
Supporting early offtake: carbon removal projects take years to develop, finance and build. Long-term purchase commitments, agreed as early as possible and no later than 2029, would give investors the confidence to start building the supply Europe will need.
Enabling direct purchasing: allowing ETS operators to purchase permanent carbon removals directly, under appropriate conditions, would create an additional source of demand and help bring more private investment into the sector.
These measures are essential to ensure that the ETS does not only establish demand on paper, but creates the conditions for projects to be financed, built and scaled in Europe.
The proposal is an important step. Now, EU policymakers need to ensure that the framework is strong enough to deliver on its ambition.
Europe has an opportunity to turn its early leadership in carbon removal into a globally competitive industry. Delivering the right demand, funding and investment conditions will be critical to making that happen.
