The European Union is encouraging its carbon removal market with regulation rather than financial reinforcement, but experts believe the policy framework will establish trust in a market that could otherwise greenwash climate action.
In November, the EU announced a new regulatory framework for carbon removal companies called the Carbon Removal Certification Framework (CRCF). The aim is to provide a trustworthy certification process for all carbon removal technologies and help secure the science behind a growing market.
The framework proposal has been criticized for lacking detail and stringent definitions that would ensure technologies are removing what they say they are removing. But specialists are optimistic the final product will reflect the necessary changes and boost the market as a result.
"There’s a sense that regulation can be a barrier," said Josh Burke, a senior policy fellow at the Grantham Research Institute on Climate Change and the Environment. "But good regulation can be a driver of innovation and market creation."
The need to boost carbon removal
In January, a study showed that only a tiny fraction (0.1 percent) of carbon removal from the atmosphere is a result of new carbon dioxide removal (CDR) technologies. The rest (99.9 percent) comes from nature-based removal approaches linked to changes in land or forest management. Experts said a rigorous certification process such as the one proposed by the EU could be one ticket to boosting the industry.
The EU has a strong track record for creating climate-related regulatory frameworks. In 2005, it established the EU Emissions Trading System (EU-ETS), which requires European companies to purchase credits to emit, and it provides an overall cap on the continent’s emissions. Currently, carbon removals issued under the CRCF would not be tradeable under the EU-ETS, however, industry professionals see potential to connect those regulatory systems.
There’s a sense that regulation can be a barrier. But good regulation can be a driver of innovation and market creation.
"[The carbon removal market] could be part of ETS where removals are something that need to be bought by emitters," said Harald Bier, secretary-general of the European Biochar Industry Consortium (EBI), which supports companies using this type of carbon removal in Europe.
The European Commission has said that their goal is for the CRCF to "accelerate the deployment of high-quality carbon removals, build trust with stakeholders and industry by countering greenwashing and enable a wide variety of financing options," according to a spokesperson for climate action at the European Green Deal Team.
"They are using [CRCF] to establish more trust in the market," echoed Sebastian Manhart, senior policy adviser at Carbon Future, a company that tracks carbon removals and translates them into credits. "A key barrier is that there’s a lot of risk involved. The CRCF is allowing the carbon removal market to get out of the starting gates."
A need for clarity
Still, the framework is lacking in some crucial areas, according to experts. One main complaint is that the definition of carbon removal does not sufficiently differentiate between removal and reduction, according to Manhart. In order to account for approaches such as peatland restoration, which transitions from restoration to removal over time, the definition of removal is too broad, he said.
A second area in need of clarity is what qualifies as permanent. The CRCF creates three distinct categories: carbon storage in products, which include materials such as wood-based construction; carbon farming, which refers to natural solutions such as afforestation or reforestation; and permanent carbon storage, which encapsulates the industrial solutions.
All three categories fall under "carbon removal activity," defined in the CRCF as "practices or processes carried out by an operator resulting in permanent carbon storage." However, experts point out that carbon farming is not a permanent solution.
Manhart said the categories set out by CRCF are dangerous and arbitrary. Not only do they create a false assumption that naturally stored carbon is permanent, but they also don’t leave room for solutions that may not fit into these categories, Manhart said.
Currently, the CRCF proposal only approves two so-called "permanent" removal solutions: Bioenergy with carbon capture and storage (BECCS) and direct air capture with carbon storage (DACCS), which both store CO2 underground.
"The challenge people have — including myself — is that [the framework] is currently limited only to technologies storing CO2 in geological reservoirs or formations," Manhart said. "This is extremely limited as it only applies to BECCS and some forms of DACCS. It excludes other permanent [carbon dioxide removal], for example, all of the biochar carbon removal, which is the leading CDR method in the world, and enhanced rock weathering."
Nowhere in the world has anyone tried to define what high-quality removal is. It’s hard to do this, but done well it could be very, very powerful.
Manhart suggested that the CRCF categorize the methods of removal based on whether they can permanently remove carbon from the atmosphere, rather than the ways in which they remove.
Experts are also concerned with how carbon removal credits might be counted and used based on these vague definitions. Eli Mitchell-Larson, co-founder, chief science and advocacy officer for the NGO Carbon Gap, said if someone emits fossil fuels by flying a plane, for example, they shouldn’t be able to offset those fuels with an impermanent storage method such as planting a tree.
"It has to be like-for-like," said Mitchell-Larson. "If you’re emitting fossil fuels and you want to compensate for that by planting trees, that’s not fair compensation."
Experts and industry professionals see this oversight as a loophole for greenwashing, according to Johan Börje, who works in business development at carbon capture and storage company Stockholm Exergi. "There needs to be a credit for what is permanent and a credit for what is not permanent," he said. "If we start to mix that, we are on a very slippery slope where all claims could end up in the greenwashing bin."
Mitchell-Larson, Manhart and many other interested parties have sent recommendations for suggested changes to the European Commission.
Step in the right direction
Despite the criticisms, the EU’s attempt to define high-quality removal is unprecedented. "Nowhere in the world has anyone tried to define what high-quality removal is," Manhart said. "It’s hard to do this, but done well it could be very, very powerful."
Individual businesses reacted positively to the CRCF proposal, as well.
"We definitely saw a change in our company," said Hanna Ojanen, public policy lead at Carbo Culture, a biochar venture. "I was hired when the sustainable carbon cycles plan came out the December before last, which said that there would be a proposal for CRCF. It’s a work in progress, but we know that it pays off to invest in [regulations] rather than try to influence set legislation later."
Market-driven vs. regulation-driven
Carbon removal technologies will thrive off a competitive economic marketplace, but without regulation those technologies could be saying they do a lot more than they actually do, according to Burke.
"Governance of greenhouse gas removals is absolutely critical," Burke said. "It’s imperative to investors and the climate to ensure that there’s confidence in the market and that what you’re buying does what it says it does. The market will lack legitimacy if there are scandals."
One limitation to regulation in the European market is that it’s voluntary. No laws require companies to buy credits to offset emissions or for those credits to meet a certain standard. The voluntary nature also means there isn’t much of an incentive to scale up carbon removal startups, because emitters aren’t required to offset.
The challenge people have — including myself — is that [the framework] is currently limited only to technologies storing CO2 in geological reservoirs or formations.
Unlike in the United States and the United Kingdom, the EU does not have a generalized incentive structure. In the U.S., the Inflation Reduction Act has a tax credit called 45Q that incentivizes the use of carbon capture and storage by extending the window for when companies can begin construction for the next seven years, providing direct payment options, allowing for credit and payment transferability between companies and third parties, and broadening the definition of what facilities qualify. The U.K. started allocating subsidies to companies doing carbon removal in 2020. In March, Chancellor Jeremy Hunt announced that the government would commit $24 billion more over the next two decades for carbon capture and storage projects in the U.K. that put CO2 underground.
In Europe, businesses are optimistic about the potential for the CRCF to encourage individual countries to come up with their own incentives.
This is already happening in some places. Sweden is using reverse auctions to allocate public service contracts that deliver BECCS, Switzerland has come to an agreement with its waste incineration sector to implement a facility for CCS, and Luxembourg is proposing a direct tax incentive for carbon removal in which the government would pay for each ton of carbon removed.
The CRCF will take time, however. Mitchell-Larson expects to see the legislation finalized next year, adding that if it goes beyond April 2024, it will go into the next European Parliament and could be delayed even further.
The market is still new and while optimistic about the CRCF, companies are anxious to get financial support quickly.
Börje sees the CRCF as a necessary methodology to drive a global market, but is frustrated by how long it will take. "It is by necessity a slow-moving train," he said. "You have to go through a legislative process and consultation process with experts."
He expects to see some legislation by 2025 or 2026, but in the meantime, his company needs investment. "We have a décalage [gap] between the actual CRCF being available and the commercial reality happening right now that we have to bridge," he said.
Ojanen echoed this sentiment. "There’s a risk they’ll put perfection over progress," she said. "The legislation is making space for innovation and progress. We just want to grow and finetune the process. Give us the funding."