The National Centre for Emissions Management (KOBiZE) has presented new recommendations on incorporating Carbon Dioxide Removal (CDR) mechanisms into the European Union Emissions Trading System (EU ETS). During COP29 in Azerbaijan, Robert Jeszke, Deputy Director for Emissions Management at IOŚ-PIB, emphasized that integrating CDR, including the use of technologies like DACCS (Direct Air Carbon Capture and Storage) and BECCS (Bioenergy with Carbon Capture and Storage), could become a key element in the European Union’s strategy to achieve climate neutrality by 2050. Experts point out that fully integrating CDR units with the EU ETS could provide the system with greater flexibility and efficiency, and establishing a dedicated European Central Carbon Bank would support price stability and the energy transition in the EU.
On the first day of COP29 in Azerbaijan, during a panel organized by the European University Institute (EUI) and the International Carbon Action Partnership (ICAP), Robert Jeszke highlighted the need to introduce negative emissions into the EU ETS. This is critical, especially given the projected depletion of emissions allowances (the “cap”) around 2040 and the difficulties in further reducing emissions in certain industrial sectors.
Three scenarios for integrating CDR with EU ETS
KOBiZE experts are considering three scenarios for integrating CDR units with the EU ETS:
- Full integration of removals with the EU ETS what means making CDR units equal to EUA allowances. CRDs could then be used within the EU ETS, i.e. held in reserve and added to the auction pool if the situation required it.
- Creating a separate system for CDR units and combining it with the EU ETS – e.g. by introducing a separate removal target, where CDR units would be directed to industrial sectors that have exhausted all other possibilities to reduce their emissions.
- The EU ETS and the market for removals remain separate (EU ETS does not use any CRD).
Among these options, Robert Jeszke identified full integration of CDR units with the EU ETS as the most efficient, which would provide the system with greater flexibility in the coming decades. He also proposed establishing a European Central Carbon Bank (ECCB), an independent institution responsible for managing CDR and regulating the supply of EUA allowances. Operating similarly to a central bank, the ECCB could stabilize allowance prices and replace current stabilization mechanisms in the EU ETS, such as the Market Stability Reserve (MSR), which would simplify and increase the system’s efficiency.
Support for the energy transition
Additionally, it is anticipated that by managing CDR unit integration, the ECCB could generate revenue from their sale, supporting the EU’s energy transition and sectors with hard-to-abate emissions. CDR units could be integrated with ETS1, ETS2, and non-ETS systems, as well as linked to international offset mechanisms, providing even greater system flexibility.
The new proposals and recommendations aim to prepare the EU ETS for future challenges and ensure that the emissions trading system effectively supports the EU’s long-term climate goals.
