EU Negotiations Reach a Provisional Deal on World’s First Carbon Removal Certification Framework

On February 20, 2024, European Union (EU) legislators reached a provisional political agreement on a world-first regulatory framework for the certification of carbon dioxide removals (CDR). CDR encompasses a wide range of nature- and technology-based activities that permanently or temporarily remove carbon dioxide from the atmosphere. While CDR is a part of the EU’s plan to reach net zero greenhouse gas emissions by 2050, it has not yet been incorporated into many of the EU’s climate policy vehicles, such as its Emissions Trading Scheme (EU ETS). The now-agreed upon Carbon Removal Certification Framework (CRCF) paves the way for the EU to incorporate CDR into its climate policies in practice, and to eventually establish a registry allowing a market-based trading of CDR “units.”

Scope of the CRCF

Under the CRCF, the proponent of the CDR activities must be able to quantify their actual carbon emission removals (“quantification“), must be able to demonstrate that those removals would not have happened in the absence of the activity (“additionality“), must be long-term and must have sustainability concerns taken into consideration. Together, these “Qu.A.L.ITY” criteria are meant to ensure the integrity and effectiveness of the CDR activity.

The regulation distinguishes between four types of CDR activities that will be eligible for certification under the CRCF:

1. Permanent carbon removal, which stores atmospheric or soil-based (i.e. “biogenic”) carbon for “several centuries.” This could include tech-based CDR such as direct air capture (DAC) and certain nature-based CDR (e.g. biochar).
2. Temporary carbon storage in long-lasting products, which must store carbon for at least 35 years and “can be monitored on-site during the entire monitoring period.” This includes activities like wood-based construction.
3. Temporary carbon storage from carbon farming, which must last at least five years. This includes activities like “restoring forests and soil, wetland management, [and] seagrass meadows.”
4. Soil emission reduction from carbon farming, which must last at least five years. This includes activities such as “carbon and nitrous oxide reductions from soil management,” albeit under certain land management conditions.

Importantly, the CRCF does not include activities such as renewable energy projects (e.g. solar panel development), avoidance projects (e.g. deforestation prevention) or “hydrocarbon recovery” projects (e.g. natural gas extraction). While only activities taking place in the EU will be eligible for certification, the deal’s announcement states that in the future the EU Commission must consider the “possibility of allowing geological carbon storage in neighbouring third countries, provided that those countries align with EU environmental and safety standards.”

Certification and Management of CDR Activities

The provisional political agreement does not provide details on how activities will be certified. It instead tasks the Commission to develop certification methodologies for the four types of CDR activities. Those methodologies must include a “two-step certification process” and be purely voluntary. For carbon farming activities in particular, the deal’s announcement states that a “carbon farming activity must always generate at least a biodiversity co-benefit” such as soil health or the avoidance of land degradation.

After certification, CDR activities may register on a future EU registry as units (measured in one ton of CO₂ removed) and will be subject to monitoring requirements. While the details remain unclear, the Commission must establish the registry within four years of the CRCF’s entry into force. It is understood that the registry may act as a market-based mechanism, by which entities may sell and buy CRCF-certified CDR units to achieve their carbon reduction goals.

Importantly, the deal’s announcement states that the units can “only be used for the EU’s climate objectives” and its nationally determined contribution (NDC), the EU’s climate commitment under the 2015 Paris Agreement. The units may not contribute to other countries’ NDCs or compliance schemes like ETSs. While the CRCF scheme is purely voluntary, this restriction will likely incentivize CDR companies hoping to sell CDR units in the EU to pursue certification.

Finally, the deal’s announcement makes clear that the operators of the CDR activities will be liable should their activity release CO₂ back into the atmosphere (“reversal“) and tasks the Commission to “include clear liability mechanisms when developing the certification methodologies.” Those mechanisms should address not only reversal but also incomplete monitoring and operator non-compliance, and it may include “collective buffers or accounts of carbon removal units, and up-front insurance mechanisms.”

Impact

The CRCF is expected to set the blueprint for which CDR activities will be eligible for integration into the EU’s wider climate policy, including its Green Claims Directive, Industrial Carbon Management Strategy, and more. CDR activities that are not CRCF-certified will possibly not be eligible to use under those schemes. These certified activities may also be integrated into climate policies at the EU member level. Finally, CRCF certification will likely be used as an indicator of high integrity within the voluntary carbon market (VCM), which has experienced setbacks in recent years due to questions over carbon credit quality. Companies seeking to voluntarily reach a net-zero target may be more willing to buy carbon credits generated from CRCF-certified CDR activities, as it provides reassurance that the activity meets the EU’s own “Qu.A.L.ITY” criteria.

Next Steps

The provisional political agreement must be formally adopted by the Council of the EU and the European Parliament. After acceptance, the regulation will enter into force upon publication in the EU’s Official Journal. This is expected to take place in the coming months, and likely before the European Parliament elections in June 2024. After entry into force, the EU Commission will get to work developing the certification methodologies and liability mechanisms, as well as establishing the EU registry for certification units.