Carbon Dioxide Removal (CDR), encompassing a variety of methods for removing CO2 from the atmosphere, is essential in the fight against climate change. Current emission mitigation efforts are not sufficient to keep us within Paris Agreement boundaries, and even as we approach global net zero, hard-to-abate sectors such as steel, concrete and aviation will be left with residual emissions that must be compensated for. Furthermore, after net zero has been reached, we must ultimately reach global net negative, which can only be achieved with removals. To truly kickstart a global removal ecosystem, we all need to learn to talk about CDR.
Currently, CDR markets are based on voluntary purchases of CDR credits amounting to ~13 megatons of removed CO2 equivalents annually. Meanwhile, the global need for CDR to reach net zero by 2050 is estimated at up to 9 000 megatons (i.e. 9 Gt).1 This indicates a huge opportunity for forerunning businesses. The most feasible methods on the market are currently Bioenergy with Carbon Capture and Storage (BECCS), Biochar Carbon Removal (BCR) and Direct Air Capture (DAC), but these are also relatively expensive. The cost of storing one carbon ton sits between 200 and 800 euros while the price of one emission allowance in the EU ETS is well below 100. Consequently, governments must take an active role in market creation to scale up these technologies and pull down their costs.
Markets for CDR should be built gradually, and initially the most important step is scaling the technology through national and regional policy efforts. In Europe, this should be done by integrating removals into the EU Emission Trading System (ETS). Though the primary customers for CDR have been American tech companies, the EU has built effective carbon market structures that can be extended to support CDR. European countries, notably the Nordics, have good potential for carbon storage and utilization, and the EU policy environment is well suited for removals integration, which makes Europe a good starting point for a global transformation. At the same time, the EU ETS will run out of emission allowances by 2039, while some participating companies will still have residual emissions. Hereby, integrating CDR into the ETS would (1) create a stable market for CDR investments and (2) ensure that companies with remaining emissions can continue to counteract them in a predictable manner post-2039.
At the global level, we recommend the development of a dedicated market mechanism for net negativity. It must be ensured that incentives for continued CDR scaleup exist also after net zero is reached, and it is imperative to begin the development of a long-term mechanism within the next few years. Though the mechanism will likely need to be compliance-based, the current voluntary market should also remain a key component of the global CDR ecosystem. The dedicated mechanism should incentivize the transition from initial CDR development to tackling residual emissions and finally financing net-negativity. The role of governments and the EU is key in the beginning in terms of initial public funding and legally binding CDR targets for member states, but the success of the mechanism will ultimately depend on cooperation at the global level.
The additional carbon storage capacity provided by Carbon Capture and Utilization (CCU) -based products should also be explored. The storing potential of CCU rarely noted in climate policy, and thus incentives to develop the technologies are lacking. Non-fuel products and materials made from biogenic or atmospheric CO2 can offer short- and medium-term storage solutions to complement the wider removal ecosystem.
The big picture is that the global need for CDR is growing and should be met with policy action that drives investment decisions. The current framework, including the LULUCF regulation and Article 6 of the Paris Agreement as well as the Science-Based Targets initiative (SBTi) for businesses provide a good groundwork, but dedicated CDR measures are what will pave the way to net negative.
Climate Leadership Coalition has worked with Perspectives Climate Group, Stiftung Wissenschaft und Politik (SWP) and the Technical Research Centre of Finland (VTT) to outline each of the three actions we recommend:
- Removal integration into the EU ETS
Integrating high permanence CDR is a natural way forward for the EU ETS. The goal is to scale up removals and make them competitive with future emission allowances. Read more in our policy brief.
- Dedicated CDR market mechanism for net negative
A dedicated market mechanism is essential to ensure actors in the hard-to-abate sectors have incentives to deploy removals, both to reach net zero and afterwards. Policy brief forthcoming.
- Increasing storage capacity with CCU products and materials
Carbon is still a required input for many industries and utilizing captured biogenic and atmospheric carbon is a key component in the circular economy following net zero. Policy brief forthcoming.
The first of these briefs, Carbon dioxide removals integration into the EU Emission Trading System, was published end of March. The second brief on the dedicated CDR mechanism will be published during May, and the third paper on CCU will be out in June.
