In July, the European Commission published its proposal to revise the EU Emissions Trading System (ETS), the first part of a package aligning the ETS with the EU’s 2040 climate target.
Included within the proposal is Article 9c: a mechanism to bring carbon removal – specifically biogenic carbon capture and storage (BioCCS) and direct air capture with storage (DACCS) – into the ETS for the first time. This marks a significant milestone for the industry, and the first time carbon removal has been given a fixed volume and a delivery mechanism inside a compliance market.
Underpinning this change is a significant change in mindset, detailed in the Commission’s Impact Assessment: the EU Commission will now treat carbon removals as equivalent to emissions reductions, and not just for hard-to-abate emissions. While to begin with it is only the Commission who can take advantage of this exchangeability, it sets a precedent which will likely be extended later.
Key dates:
How does the mechanism work?
Between 2031 and 2040, the Commission proposes to add 250 million allowances to the ETS cap, auctioned to fund the purchase of an equivalent volume of CRCF-certified BioCCS and DACCS removals. If auction revenue proves insufficient to buy the full 250 megatonnes at the prevailing removals price, the Commission can auction a further 10 million allowances to close the gap.
The Commission will act as the central buyer, contracting suppliers directly and paying on delivery of certified tonnes. Removals used against fossil emissions must match fossil carbon's durability: since fossil CO₂ warms the atmosphere for centuries, whatever removal offsets it needs to store carbon on a comparable timescale.
Operators, shipping companies, and aircraft operators also gain a narrower route to offset their own fossil emissions with BioCCS removals they generate themselves (Article 14, 1a), though this cannot create negative emissions or additional EUAs.
The ClimeFi view
Here is what it means in practice for buyers already active, or looking to take their first steps, in the market:
1. The proposal could meaningfully grow the supply pool in the long-term, but create competition in the near-sterm
A well funded, long-term buyer entering the market is one of the strongest signals that the market has received, giving developers the demand certainty to go ahead with new projects. In the near-term however, before that supply comes online, buyers securing offtakes today will still be competing with the Commission for early 2030s supply.
2. The proposal hints that the Commission expects EUA prices to rise
The Commission is funding an expensive purchase (carbon removals) with the proceeds of a cheaper one (EUA auctions), backed only by a modest 10 MT buffer if that gap doesn't close. This design only works comfortably if EUA prices rise substantially during the 2030s, suggesting that the Commission expects the current price to rise well beyond where it sits today.
3. The purchasing format could change supplier behaviour
If reverse auctions are the chosen format, lower-cost BioCCS projects may hold back capacity from the voluntary market in the hope of winning Commission contracts. This would tighten near-term availability and potentially increase the price of what remains. Buyers who have already contracted can avoid that uncertainty.
4. The voluntary market will be strengthened alongside the compliance market
Voluntary demand, including from buyers acting ahead of any mandate, remains a core part of how supply gets built in the first place. The Commission's parallel work on the EU Buyer's Club should help to clarify how voluntary corporate procurement sits alongside this new compliance driven demand.
What next?
As it stands, this is just a legislative proposal, not law. It now enters 18 months of negotiation with the Parliament and Member States, during which a lot could still shift.
Buyers, however, do not need to wait for that process to conclude before acting. Regardless of how the remaining details land, one thing is already settled: durable carbon removal now has a formal seat inside one of the world’s largest compliance markets, a development that is likely to shape the sector’s growth trajectory.
If you would like to discuss what this means for your removals strategy, reach out to us at procure@climefi.com.
