Summary of the ERCST Roundtable – Brussels, June 26, 2025
On Thursday, June 26, 2025, the European Roundtable on Climate Change and Sustainable Transition (ERCST) hosted a high-level roundtable exploring one of the most critical next frontiers in EU climate policy: the integration of Carbon Dioxide Removals (CDRs) into the EU Emissions Trading System (EU ETS). This discussion, under the Future of EU ETS project, brought together regulators, market experts, academics, and private sector stakeholders to assess whether and how CDRs could be made part of the EU’s flagship carbon market.
With the EU legally bound to achieve climate neutrality by 2050, and emissions targets tightening for 2030 and 2040, the spotlight is now turning to negative emissions. But can the EU ETS accommodate CDRs—and if so, under what conditions?
Why Carbon Removals Now?
The European Climate Law enshrines a net-zero emissions goal by 2050. Reaching that goal requires more than reducing current emissions—it also demands the active removal of CO₂ from the atmosphere.
Technologies such as Direct Air Carbon Capture and Storage (DACCS) and Bioenergy with Carbon Capture and Storage (BECCS) are gaining traction but remain expensive. Including these technologies in the EU ETS could unlock economies of scale, boost investor confidence, and allow removals to compete fairly with traditional abatement solutions—thus ensuring a technology-neutral decarbonisation pathway.
ERCST emphasized that this isn’t just a climate imperative—it’s also a strategic opportunity for the EU to lead globally in setting rules and standards for CDR markets.
Understanding Carbon Removals: A Fragmented Landscape
Carbon Dioxide Removals are diverse and complex. ERCST classifies them across four dimensions:
Type:
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- Technology-based: DACCS, BECCS, Biochar, Enhanced Weathering
- Nature-based: Afforestation, Soil Carbon Sequestration
Durability:
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- Permanent: Storage for centuries (e.g., geological)
- Non-permanent: Decades (e.g., soil or forest-based)
Geography:
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- Domestic vs. International deployments
Policy Framework:
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- EU ETS, LULUCF, Voluntary Carbon Markets, or public procurement systems
Not all CDR methods are equally suitable for market inclusion. Permanent, technologically verifiable removals—especially DACCS and BECCS—currently stand out as the most viable options for EU ETS integration.
Three Integration Models on the Table
ERCST outlined three possible approaches to integrating CDRs into EU carbon markets:
1. Full Integration into ETS1 and ETS2
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- CDRs become fully tradable compliance units—similar to EUAs—within existing systems.
2. Separate CDR Market
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- A parallel carbon removals trading system, distinct but possibly linked to the EU ETS.
3. Hybrid Central Procurement
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- A central body procures and supplies certified CDRs to the ETS or to obligated entities.
The full integration model offers the most efficiency and liquidity—but requires strong safeguards and careful design, particularly concerning cap integrity and credit quality.
Credit Issuance: Ex-ante or Ex-post?
One of the most debated design questions is how to issue carbon removal credits:
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Ex-ante: Credits are issued upfront to enable project financing. This model carries risks if promised removals fail to materialize.
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Ex-post: Credits are only issued after verified removal—more secure but slower to scale.
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ERCST recommends a mixed model: ex-ante issuance with institutional guarantees to de-risk early investments, especially for capital-intensive projects like DACCS.
Market Limits: A Phased and Cautious Approach
To safeguard environmental integrity, ERCST proposes a phased integration:
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Initially allow only permanent, MRV-compliant removals
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Apply qualitative and quantitative caps on CDR usage
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Expand eligibility as methodologies and standards evolve (e.g., via CRCF Delegated Acts)
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This allows innovation to grow while protecting the ETS from low-quality or reversible credits.
The Cap Dilemma: Expand, Replace, or Adjust?
Three scenarios were discussed regarding how CDRs relate to the EU ETS cap:
1. Increase the Cap: Add CDRs on top of existing allowances, increasing total supply.
2. Maintain the Cap: Introduce CDRs but withdraw an equivalent number of EUAs.
3. Reduce the Cap: Anticipate CDR availability and pre-emptively reduce EUA issuance.
Option 2 is considered the most neutral and balanced, keeping overall supply stable while acknowledging removals’ role in reducing atmospheric CO₂.
Who Manages the Integration?
ERCST explored two governance options:
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Reforming the Market Stability Reserve (MSR) to handle removals alongside existing price volatility controls
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Creating a Carbon Central Bank to oversee procurement, credit issuance, and price management
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Both would require regulatory reforms but could ensure early-stage market trust, credit integrity, and price stability.
Financial Gap: EUA Prices vs. CDR Costs
As of mid-2025, EUA prices hover between €60–€80, while high-durability CDRs cost anywhere from €150 to €300/tCO₂.
Solutions to bridge this gap include:
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Contracts for Difference (CCfDs)
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Public procurement programs
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Differentiated exchange rates for removals based on permanence
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Voluntary market pathways leading into compliance use
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Domestic vs. International Removals
ERCST highlighted trade-offs between domestic and international removals:
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Domestic: Better public trust, oversight, and traceability—but limited by high costs and infrastructure constraints
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International: Lower costs, larger scale (e.g., Brazil, Iceland), but more political and governance risks
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ERCST supports international removals once Article 6.4 of the Paris Agreement is operational.
Designing a Smart, Trustworthy System
The ERCST roundtable made clear that carbon removals are no longer a hypothetical concept, but an inevitable component of a net-zero Europe. Integrating them into the EU ETS offers an opportunity to pioneer a global gold standard—but only if the system is built on credibility, transparency, and careful market logic.
As the Commission prepares its 2026 assessment on the role of CDRs in EU carbon markets, the outcomes of this roundtable will undoubtedly shape the path ahead.
This article is based on the ERCST Roundtable “Can Carbon Removals Strengthen the EU ETS?”, held on June 27, 2025, in Brussels.
