Integrating Permanent Carbon Removals Into the EU ETS is Not a Silver Bullet, but a Balancing Act – CATF, CONCITO Report

Permanent carbon removals are needed as a complement to deep and rapid emissions reductions. Policymakers will assess by 2026 whether and how permanent carbon removals could be integrated into the EU Emissions Trading System (EU ETS). According to a new report by Clean Air Task Force (CATF) and CONCITO, such integration would require a careful balancing of trade-offs between environmental integrity, cost-effectiveness, and administrative and fiscal impacts.   

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Permanent carbon removal methods that remove CO2 from the atmosphere are necessary to achieve both climate neutrality and net-negative emissions. However, the policies needed to ensure sustainable deployment of a portfolio of permanent carbon removals in the EU are currently lacking.  

The report, first-of-its-kind, examines four policy options for integration of permanent carbon removals into the EU ETS, highlighting the benefits and risks of each. It focuses on the possible integration of Biogenic Carbon Capture and Storage (BioCCS) and Direct Air Carbon Capture and Storage (DACCS) into the system, with biochar included as a sensitivity analysis. 

Main findings include: 

• Cheapest removals incentivised first: Direct integration into the EU ETS will initially help create demand for lower-cost technologies like BioCCS, potentially neglecting currently high-cost options like DACCS without additional support. 

• Risk of abatement deterrence: Without safeguards, integration risks lowering the incentives for emissions reductions, potentially causing companies to emit more by substituting carbon removals for direct emissions reductions. 

• Sustainability risks: Safeguards and supporting policies are essential to mitigate the risk of unsustainable use of biomass for BioCCS. 

• Safeguards: Safeguards may, in some instances, negatively impact cost-effectiveness and liquidity, influence demand for certain carbon removals, and have differing effects on EU ETS revenues. 

With these findings in hand, CATF and CONCITO call for a careful and gradual integration, if permanent carbon removals are integrated as part of the 2026 system review. The report emphasises that robust safeguards, new design features, and a review are necessary.  

“If permanent carbon removals are integrated into the EU ETS, it would entail a careful balancing of trade-offs. In this balancing act, we should not compromise the system’s core function in delivering a strong and credible incentive for emissions reductions or risk an unsustainable use of biomass,” said Martin Birk Rasmussen, Project Manager, CONCITO. 

Key recommendations from the report: 

• Maintain the gross emissions cap for initial integration to prevent abatement deterrence and preserve the core function of the EU ETS. 

• Implement supply controls to manage the risks of unsustainable biomass use and potential fiscal impacts. 

• Introduce rules on permanence and differentiate traditional emissions allowances and allowances granted for different removals to enable regulatory distinctions. 

• Include a review clause to assess integration impacts and adjust safeguards as needed and in light of other policies. 

• Carefully analyse the impacts of biochar on the environmental integrity of the system, the deployment of other permanent carbon removals, and demand for biomass resources before any integration.  

Additionally, the report highlights the importance of supporting policies ahead of and alongside EU ETS integration. This includes additional EU and Member State funding mechanisms to bridge the cost gap (especially for DACCS) and stronger regulation to address the rising and competing use of biomass and biogenic CO2, such as through better carbon pricing and incentives in the land sector.  

“There is a massive gap between the permanent carbon removals needed and what is currently being deployed in the EU. But an ETS integration is not the silver bullet some claim—we need additional policies to scale all necessary technologies, including high-cost options like DACCS,” said Codie Rossi, Europe Policy Manager, Carbon Capture, Clean Air Task Force. 

The report highlights that a final decision on regulating permanent carbon removals would require analysis of other policy options such as a separate compliance mechanism for carbon removals. Beyond climate neutrality, the EU will need additional policies and measures to achieve net-negative emissions—such as Member States obligations, a net-negative emissions cap in the EU ETS, a separate compliance mechanism etc., — all of which require further research.   

About Clean Air Task Force 

Clean Air Task Force (CATF) is a global nonprofit organization working to safeguard against the worst impacts of climate change by catalyzing the rapid development and deployment of low-carbon energy and other climate-protecting technologies. With more than 25 years of internationally recognized expertise on climate policy and a fierce commitment to exploring all potential solutions, CATF is a pragmatic, non-ideological advocacy group with the bold ideas needed to address climate change. Visit cleanairtaskforce.org and follow @cleanaircatf 

About CONCITO 

CONCITO is a leading climate think tank. We aim to translate relevant knowledge into climate action and thereby accelerate the green transition in Denmark and internationally. Through scientific and knowledge-based analyses and information, the aim is to show how it is possible to create a climate-neutral and climate-resilient society.