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February: A busy month in EU carbon removal policy

By Christoph Beuttler, Chief Climate Policy Officer at Climeworks

February 2024 saw several key announcements in European climate policy, as negotiations and legislative deliberations are taking place in a somewhat shortened timeframe, ahead of EU elections this summer. Recent developments have been wide-ranging, including a climate target setting recommendation, new sustainability directives and the finalization of regulatory framework for carbon removals. Below, we take a more detailed look at the most significant recent updates, and their impact for the CDR industry. 

EU Commission Target setting: On February 6, the European Commission recommended a climate target of up to 90% of 1990 greenhouse gas emissions levels by 2040. While it does not set a separate target for carbon removals (and does not categorize different types of removals, as previously advocated for by Climeworks) the recommendation does state a need for a massive quantity of removals – up to 400Mt CO₂ – that will be necessary by 2040. This includes LULUCF (afforestation), BECCS and direct air capture and storage (DAC+S). While the integration of removals into the target-setting is a positive step, the Commission must focus on separated target-setting before this becomes law.  Read the full response from Climeworks here.

Industrial Carbon Management Strategy: Alongside its target setting recommendation, the EU released the Industrial Carbon Management Strategy (ICMS). If the target setting is the “what” and the “when,” this is essentially the “how” – a roadmap for scaling carbon capture in the EU. The ICMS states that up to 280 million tons of carbon will need to be “captured and stored” by 2040.

How is this different from the 400Mt CO₂ mentioned above? In the target-setting, the phrase “up to 400Mt CO₂” highlights a need for all types of carbon removals, including direct air capture and storage, as well as CDR methods that do not require geological storage, such as afforestation. The ICMS, however, refers to 280Mt, which includes carbon removal via direct air capture and storage, emissions avoidance via carbon capture & storage (where CO₂ is captured at a point source and subsequently stored) as well as carbon capture and utilization (where CO₂ is captured at a point source and subsequently used as a raw material). One specific chart in the strategy highlights that roughly 25% of the 280Mt CO₂ could come from direct air capture, or over 70Mt CO₂, by 2040.

Given the different terms and references employed, it is even more important to continue refining future target-setting and ensuring that the correct terminology is consistently applied. This includes clear separation of emissions reductions and removals, differentiating amongst removal types, and fine-tuning the difference between (point-source) carbon capture and storage and direct air capture, as shown in the image below.

Net Zero Industry Act: The European Council and European Parliament have also reached a provisional agreement on the Net Zero Industry Act (NZIA). The NZIA focuses on improving and increasing investment in green technologies within Europe, via streamlined permitting access, simplified procurement processes, fast-tracking strategic projects, and enhancing education via dedicated “net zero academies,” amongst other solutions.  The agreement also has some significance for carbon removals. The proposal sets a target for annual “injection capacity” within the EU of 50Mt tonnes of CO₂ by 2030, increasing to 280 million tonnes by 2040. This goal is significant in that it recognizes the near-term (2030) necessity of vast quantities of carbon dioxide to be stored, and does include direct air capture and bioenergy with carbon capture and storage (BECCS) within the broader term of “carbon capture and storage.”

High-level similarities: The different quantities, recommendations, and terms used in the NZIA, ICMS and target-setting may show mixed signals. However, one way to look at it is that all three ultimately send a positive message on direct air capture and carbon removals. Each initiative offers a picture of the massive quantity and scale of what will be needed within the European Union (and by extension, globally) in the coming decades. While numbers ranging from 50 to 400 Mt CO₂ may sound abstract now, they showcase a clear need to mobilize and deploy large-scale carbon removals solutions as quickly as possible.  

Regulatory frameworks: On the regulatory side, on February 14, internal committees adopted their position on the “Green Claims Directive.” This is a major piece of sustainability legislation, clarifying how terms such as “carbon neutral” and “Net Zero” can be used and applied to individual products and companies. It therefore has the power to potentially re-frame marketing claims and prevent greenwashing across the Continent, which could ultimately spur more powerful climate action.

The directive also has direct relevance for CDR. It requires companies to adopt the like-for-like principle, meaning that only permanent CDR can be used to neutralize fossil fuel emissions. To take care of their residual emissions, companies must also use “high-quality credits” as defined by the EU Carbon Removal Certification Framework (EU CRCF). This will help to ensure that a unified definition of high-quality credits is applied and can level the playing field with clearer definitions of what “high-quality” means.

The release of the Green Claims Directive aligns well with the provisional political agreement on the EU CRC-F, which was reached on February 20. The EU CRC-F defines and certifies permanent carbon removal, temporary carbon storage in long-lasting products, temporary carbon storage from carbon farming, and soil emission reduction from carbon farming. Certified carbon removals must demonstrate long-term storage, additionality, and sustainability, amongst other attributes.

This ambitious framework shows the EU’s commitment to getting carbon removals right, by providing a clear standard and definition of what constitutes high-quality carbon removal. As a next step, it will be important that the European Commission begins preparing resultant methodologies and its certification infrastructure, allowing projects to progress within the system’s certification pathway. As the framework moves towards operationalization, it will be even more important that a direct air capture-specific methodology is quickly developed, given the recent references to industrial scale removals. Check out our full response here.

How much can the private sector do: That the European government is not only signaling, but actively talking about large-scale quantities of CDR needed, alongside ambitious regulatory frameworks ensuring that these solutions are durable and permanent, places a rather large burden on project developers. With major projects launched in the private sector, massive investment – in terms of both capital and labor – will be needed in the coming years. It is uncertain if the private sector (and as we have recently discussed, voluntary markets) will be able to handle this. It thus begs the question of how much public funding will be available, and the role that dedicated government funding tracks will play. Including carbon removals in the European Emissions Trading Scheme (ETS) – which the Commission has said it may support via “policy options and support mechanisms” – could be a strong first step.

I believe that it is essential that the European Union actively supports the development, scale-up and deployment of CDR at large scale as soon as possible. It is imperative that the gap between targets and ambition and actual deployment/capacity does not continue to widen, but rather, that there is an “all hands on deck” approach to building and developing large-scale projects. The NZIA, mentioned above, is a good example of how legislation currently highlights the need for CDR but does not provide direct funding tracks for it – which should be changed in the future.

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