EU Commission wants captured CO2 to become ‘tradeable commodity’

A leaked European Commission paper on “industrial carbon management”, to be published on 6 February, lays the groundwork for captured carbon dioxide to be “recycled” in chemical processes or used as maritime and jet fuel, while accounting for non-emitted CO2 in the bloc’s carbon market.

An EU-wide approach is needed “to establish a European single market for industrial carbon management” and meet the Union’s objective of reaching net-zero emissions by 2050, according to the draft policy document, obtained by Euractiv.

The policy paper, which outlines future policy options and does not contain legal obligations for EU countries or businesses at this stage, is due to be presented on 6 February, alongside another policy document on the EU’s 2040 climate target.

It does make clear, however, what the EU’s future climate policy could look like beyond 2030.

To reach climate neutrality, “the EU will need to be ready to capture at least 50 million tonnes of CO2 per year by 2030” and “up to 450 million tonnes by 2050,” the document says.

This will be essential to counterbalance “residual emissions” in sectors like agriculture, transport and industry that are unlikely to achieve full decarbonisation by then, the document argues.

Moreover, carbon removals – sucking CO2 directly from atmosphere – will also be needed after 2050 in order “to achieve negative emissions thereafter,” it adds.

The end objective, according to the draft Commission paper, is clear: making CO2 a “tradeable commodity,” like gas, crude oil, cotton, wheat, or cocoa.

“By 2040, a number of regional carbon value chains should become economically viable to meet EU climate objectives, as CO2 will become a tradable commodity for storage or use,” the Commission paper says.

“These will rely on an EU-wide transport and storage infrastructure with pipelines as the dominant transport means on land,” allowing for cross-border transport of captured CO2 either for storage or use.”

Policy options for trading CO2 removals

Today’s most widespread form of carbon removals involves planting trees, which suck carbon dioxide from the atmosphere as they grow.

But there are also industrial technologies being developed, such as Direct Air Capture and Storage (DACS) where giant fans suck CO2 straight from the atmosphere and store it permanently, or Bioenergy with Carbon Capture and Storage (BECCS).

The European Commission has already started laying the groundwork for these technologies when it tabled a proposal last year to certify carbon removals coming from them. The proposal is now in the final stages of adoption between EU legislators.

To accelerate their deployment, the Commission is now looking for ways of integrating carbon removal technologies into the EU Emissions Trading Scheme (ETS), which obliges more than 10,000 industrial installations in Europe to surrender a permit for each tonne of CO2 they emit.

The revised ETS already “establishes the possibility of not surrendering allowances” for CO2 emissions that are “considered to have been permanently captured and utilised,” the Commission points out in its draft proposal for carbon management due on 6 February.

Moreover, low-carbon fuels such as green hydrogen that meet EU standards under the Union’s updated renewables directive “should not be subject to surrendering allowances” under the revised ETS in order “to avoid double counting of the embedded carbon,” the paper adds.

For instance, “renewable synthetic fuels” are expected to be of particular importance “notably in the aviation and maritime sectors” for which binding targets have been set under the ReFuelEU aviation and the FuelEU Maritime regulations adopted last year, it continues.

Finally, the document says “the Commission will consider the benefits of setting specific objectives for carbon removals” and consider “by 2026” how this should be “accounted for and covered by emissions trading”.

This could be done either by fully integrating removals under the EU ETS or by creating a “separate compliance mechanism for such removals connected directly or indirectly to the EU ETS,” the document says.

Reservations from green groups

Environmental groups, although not opposed in principle to carbon capture and utilisation, have plenty of reservations about how such technologies could be incentivised in the future, warning of several pitfalls.

Carbon Market Watch, a green NGO, says the crucial points about carbon utilisation techniques will be to maintain high levels of environmental integrity when it comes to the “permanence” of the CO2 stored in end products.

“Only carbon that is captured and utilised in such a way that it is permanently chemically bound and not released during the product’s use or its end of life should be discounted from surrendering obligations,” said Wijnand Stoefs, policy lead on carbon removals at CMW.

For instance, products that risk being burned in a waste incinerator or left to decompose in landfills should not be included, he pointed out, citing plastics, paper products or fuels as examples.

Such types of products “have no place in this discussion,” Stoefs insisted. “Otherwise, we risk enabling another loophole in the EU ETS where companies surrender less or no EUAs because they capture carbon for it to be released by someone else not covered by the scheme.”

When it comes to green hydrogen and low-carbon fuels, Stoefs said standards included in the EU’s Renewable Energy Directive are simply not strong enough to ensure high environmental integrity. “Any carbon released during the production of hydrogen should be accounted somewhere, and preferably priced.”

But the highest risk, according to CMW, would be to fully integrate carbon removals in the existing ETS – chiefly because it would increase the cap on emissions, allowing polluters to emit more, and deter real emissions reductions by opening the door to carbon offsetting.

Including removals in the existing ETS would also hinder the scale up of permanent removal technologies like Direct Air Capture and Storage, which tend to be costly, and favour “cheap” solutions like BECCS, Stoefs warned.

This is why he said an indirect linkage with the ETS would make more sense – to fund high-quality, sustainable and permanent removals using EU ETS revenues coming for instance from the innovation fund.

The safest option though, he said, would be to create a separate scheme altogether.

“We are strongly in favour of a separate mechanism,” Stoefs said, referring to suggestions for creating a separate carbon Removal Trading Scheme in addition to the EU ETS.

Cover photo: The end objective is clear: making CO2 a “tradeable commodity” – like gas or crude oil – thanks to "an EU-wide transport and storage infrastructure with pipelines as the dominant transport means on land". [Photo credit: Cobalt S-Elinoi / Shutterstock]