From Targets to Tonnes - Exploring compliance Options for Carbon Removal in the EU

This report presents quantitative and qualitative insights based on modelling by CONCITO to derive key considerations for real-world policies. We present and analyse three policy design options for generating CDR demand up to 2050, each covering different demand sectors and both polluter-pays and ability-to-pay logics. By considering different obligation designs, our primary aim was to determine the levels of CDR demand generation and the cost of compliance for entities under these different designs and outline their wider policy implications.

Achieving the EU’s legally binding goals of net-zero greenhouse gas emissions (GHGs) by 2050, and net-negative emissions thereafter, requires a rapid scale-up of carbon dioxide removal (CDR). While deep emissions reductions across all sectors must remain the priority, permanent removals are essential to support mitigation efforts in the short term, balance residual emissions from hard-to-abate sectors and achieve net-negative emissions in the second half of the century.

Today, the absence of a reliable source of demand for CDR is the primary obstacle to scaling permanent removals. The EU is supporting the development of small-scale CDR technology through R&D funding, and a handful of first-of-a-kind (FOAK) mid- to larger-scale projects are in preparation to deliver permanent removals before 2030. Nevertheless, there is an urgent need for policies that bridge that gap from FOAK projects to a full-scale CDR sector able to deliver tonnes in line with the European climate goals. Closing this divide will require creating large-scale and long-lasting demand.

The main proposal currently under consideration for creating a CDR compliance mechanism in the EU is integration into the ETS, the EU’s flagship carbon pricing mechanism. However, given the current uncertainty on the progression of the ETS cap and the level of CDR demand that would be actually generated in case of integration, we felt the need to look at complementary policies beyond ETS integration that could generate long-lasting demand for removals up to 2050 and beyond. In this context, we have examined the ability of an EU Removal Compliance System (RCS) to drive significant volumes of high-quality permanent CDR by generating demand amongst market actors.

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