European Commission wants to turn captured CO2 into a tradable commodity

A European Commission document on industrial carbon management lays the groundwork for captured carbon dioxide to be “recycled” in chemical processes or used as marine and aviation fuel. A carbon trading mechanism would then take into account the carbon dioxide that was not emitted.

The European Commission is proposing a Europe-wide approach “to create a single European market for industrial carbon.” This is intended to help the Union meet its goal of achieving net-zero emissions by 2050. The contents of the leaked document were published by Euractiv.

The version published by the website contains no legal obligations for EU countries or businesses. However, it clearly shows what future EU climate policy could look like after 2030. The document is due to be presented on 6 February.

50 million tonnes of CO2 a year by 2030

According to the document, to achieve climate neutrality the EU will need to be ready to capture at least 50 million tonnes of CO2 a year by 2030, and as much as 450 million tonnes by 2050.

The Commission says these volumes will be needed to offset “residual emissions” in sectors such as agriculture, transport and industry, which are unlikely to achieve full decarbonisation by then, the document says.

After 2050, direct air capture will also be needed to achieve “negative emissions”, according to estimates. The Commission’s draft document sets out a clear end goal: to make CO2 a “tradable commodity”, like gas, oil, cotton, wheat or cocoa.

“By 2040, a number of regional value chains for carbon dioxide emissions should become economically viable to meet the EU’s climate goals, as CO2 becomes a tradable commodity for storage or use,” the Commission document says.

These are to be underpinned by transport and storage infrastructure across the EU, with pipelines expected to be the dominant mode of transport on land. This would enable the cross-border transport of captured CO2 for storage or further use.

Options for emissions trading policy

The most widespread form of carbon removal today involves planting trees, which absorb carbon dioxide from the atmosphere as they grow.

Industrial technologies are also being developed, however, such as Direct Air Capture and Storage (DACS), in which giant fans draw CO2 directly from the atmosphere for permanent storage, and Bioenergy with Carbon Capture and Storage (BECCS).

The European Commission has already begun laying the groundwork for these technologies, presenting a proposal last year to certify carbon removals using them. The proposal is now in the final stage of approval by EU lawmakers.

To speed up their deployment, the Commission is now looking at ways to incorporate carbon removal technologies into the EU Emissions Trading System (EU ETS), which requires more than 10,000 industrial installations in Europe to surrender emissions allowances for every tonne of CO2 they emit.

The revised EU ETS already introduces the possibility of not surrendering allowances for CO2 emissions deemed to have been permanently captured and used, the Commission points out in its document.

In addition, low-carbon fuels such as green hydrogen that meet EU standards under the Union’s updated Renewable Energy Directive should not be subject to allowance surrender requirements under the revised emissions trading system, to prevent double-counting of carbon.

Renewable synthetic fuels, for example, are expected to be particularly important in aviation and maritime transport, for which binding targets were set under the ReFuelEU Aviation and FuelEU Maritime regulations adopted last year.

Finally, the document says the Commission will consider the benefits of setting specific targets for carbon removals and assess by 2026 how these should be reflected and incorporated into the EU ETS.

This could be achieved either by fully integrating carbon capture into the EU ETS or by creating a separate compliance mechanism for capture directly or indirectly linked to the EU ETS.

Support with caveats

While environmental groups are not opposed to carbon capture and use in principle, they have many reservations about how these technologies could be incentivised in the future and warn of several pitfalls.

According to the environmental NGO Carbon Market Watch, a key issue for carbon utilisation techniques will be maintaining a high level of environmental integrity in terms of the “permanence” of CO2 stored in end products.

“Only carbon that is captured and used in such a way that it is permanently chemically bound and is not released during the product’s use or at the end of its life should be exempt from the obligation to surrender allowances,” said Wijnand Stoefs, Carbon Market Watch’s carbon removals policy lead.