Future of Emissions Trading in the EU: Carbon Dioxide Removals (CDRs)

The report aims to provide analytical insights, identify challenges, and propose solutions for the evolution of the EU Emissions Trading System (EU ETS) and the potential employment of  CDRs during the second phase of Phase IV (2025–2030) and beyond.

Key takeaways: 

• CDRs should be introduced in both the ETS 1 and 2. A phased approach is recommended, with the initial integration in the ETS1 only, as it is a well-tested and better understood system;
• Only permanent CDRs should be integrated, until the system is well tested;
• The method of accounting used should allow for CDRs to be used in addition to the EUAs issued;
• A centralized system for acquiring and introducing CDRs in the EU ETS should be used initially to ensure high public oversight and ensure that all CDRs are of the highest quality. A modified MSR with new functions should be first tested as an option

This is the fourth in a series of seven reports planned under ERCST’s recently launched “Future of Emissions Trading in the EU” project. The project aims to examine the architecture, governance and role of emissions trading in meeting EU objectives in the European Climate Law during the second half of Phase IV (2025-2030) and beyond.

The initiative is being supported by: Cefic – CEMBUREAU – Cepi – EDF- Électricité de France – ENEL – EuLA – Eurelectric – Eurofer – Eurometaux – European Aluminium – ExxonMobil – Fertilizers Europe – FuelsEurope – PGE – Danish Ministry of Climate, Energy and Utilities – French Ministry of Ecological Transition – German Federal Ministry for Economic Affairs and Climate Action – Ministry of Climate and Environment of the Republic of Poland