Press release: European Commission takes historic step to integrate permanent carbon removals into the EU ETS
Brussels, 17 July - The European Commission published its long-awaited legislative proposal to review the EU Emissions Trading System (ETS), the largest carbon market globally, marking an important moment for Europe's climate and industrial policy, and crucially the permanent carbon removal (CDR) sector. For the first time, permanent CDR will be integrated into the EU ETS from 2031.
Covering more than 40% of the EU's greenhouse gas emissions (rising to 75% with ETS II), ETS I has been the bloc's flagship climate instrument, driving emissions reductions across the power sector, manufacturing and aviation.
Permanent carbon removals will be needed to address residual emissions from hard-to-abate sectors where some emissions remain even after deep decarbonisation. The Intergovernmental Panel on Climate Change (IPCC) estimates that up to 10 gigatonnes of carbon removals per year will be required globally to limit warming to 1.5°C – equivalent to more than the combined annual emissions of Germany, France, Italy, Spain and Poland, the EU's five largest emitting economies. This means that CDR needs to grow at rates comparable to, or faster than, solar power and electric vehicles, alongside rapid emissions reductions.
A stronger ETS for a competitive net-zero Europe
The proposal is an important step towards creating properconditions for a competitive European carbon removal industry. With the right policy framework, permanent carbon removals can become a new pillar of Europe's net-zero economy, supporting up to 670,000 jobs by 2050 across engineering, construction, CO₂ transport and storage infrastructure, and other high-value industries across Europe.
Design of ETS integration
The European Commission is proposing to act as a purchaser of carbon removals through a centralised model. Instead of leaving companies to navigate a new and uncertain market on their own, the Commission would auction 250 million EU ETS allowances and use the revenues to buy permanent carbon removals."
Research on integrating carbon removals into European emissions trading, finds that dedicated minimum volumes would be needed to bring higher-cost removals into the market and identifies transitional public purchasing as a way to preserve the ETS cap. This would create a more predictable route to market for carbon removal providers while helping integrate removals into the ETS in a controlled and transparent way.
Maintaining the intermediary proposal is therefore essential to creating long-term market certainty. By contrast, allowing direct integration without a dedicated quota or sub-mandate would likely result in only a handful of hard-to-abate sectors purchasing permanent carbon removal voluntarily, making it essential to spread the cost across the wider ETS rather than concentrating it on a small number of buyers.
Addressing the price gap
There remains a significant price gap between the EU ETS carbon price and the current cost of permanent carbon removals. While the cost of these technologies is expected to fall as deployment scales and innovation continues, they are unlikely to reach cost parity with the ETS before the late 2030s. This creates a critical financing gap that market forces alone cannot bridge.
The EU is now entering a decisive period in which targeted public intervention is needed to unlock investment and scale the sector. Despite the vital role permanent carbon removals will play in achieving climate neutrality, the sector has received only around €300 million – approximately 0.1% of total EU funding – and remains largely absent from the EU's major funding programmes.
Making polluters pay
To address this challenge, the EU should establish a dedicated CDR Scale-Up Strategy covering the period to 2031. The Strategy should include earmarking a share of ETS revenues to purchase permanent carbon removals from 2027 onwards. Repurposing revenues from the EU's carbon market to fund the removal of residual emissions would reinforce the polluter pays principle, while reducing the need for direct taxpayer support.
Supporting permanent carbon removals today will accelerate deployment, help bring costs down over time and ensure Europe has the capacity it needs to meet its long-term climate objectives.
The European Commission’s proposal represents a major milestone in recognising the role of permanent carbon removals in Europe’s pathway to climate neutrality. By creating a route for their integration into the ETS, the EU is putting in place the tools needed to address unavoidable residual emissions, while setting an important precedent for carbon markets around the world.
About the Negative Emissions Platform (NEP)
The Negative Emissions Platform is a Brussels-based platform for clean tech companies working on permanent carbon removals (CDR). NEP engages with EU institutions and stakeholders to support policies that enable high-integrity, scalable carbon removals in Europe
Contacts
Alina Toporas, Communications Manager, Negative Emissions Platform: E: media@negative-emissions.org
Elisabeth Harding, Policy Manager, Negative Emissions Platform , E: elisabeth.harding@negative-emissions.org
Quotes
Chris Sherwood, Secretary-General, Negative Emissions Platform:
"Today's proposal is a landmark moment for Europe's climate policy. By bringing the ETS together with permanent carbon removals, the EU is recognisingthat reaching net zero requires both deep emissions reductions and the removal and permanent storage of atmospheric CO2. We commend Europe for its global leadership in this space. The challenge now is ensuring that the right policies and investment are in place to scale carbon removals over the coming decade.
