The EU carbon market awaits clear emission-capture norms
Europe is making some headway on carbon-removal certification
The European Union (EU) is quietly setting the direction for the future of carbon markets, with two pieces of regulation clearing big hurdles in recent weeks. Watch closely, because these initiatives will reshape the industry.
On Tuesday, the European Commission and European Parliament struck a provisional deal to compile rules for certifying carbon-removal credits—the Carbon Removal Certification Framework (CRCF). “This is the first time in history that we have a policy which clearly defines quality carbon removal and seeks to quantify it,” Sebastian Manhart, senior policy advisor at removals marketplace Carbonfuture GmbH, told me. “Other nations will probably copy it.”
Carbon offsets are typically categorized either as avoidance credits (buy this, we won’t cut down this forest) or reduction credits (buy this, we’ll install some solar panels). In recent years, scandals ranging from human rights abuses to overstated climate benefits have raised questions over whether offsets are useful in the climate fight or whether they are just a cover for corporations and individuals to continue their polluting behaviour.
Carbon removals seek to suck carbon dioxide out of the atmosphere and store it, ideally permanently underground or in the ocean. While we currently rely on nature to perform that service, nascent technologies ranging from direct air capture (essentially big vacuums) to bio-char, a carbon-rich material made from heating biomass at high temperatures in low oxygen, which can then be added to soil or used in concrete, have the potential to assist. Removals currently make up only about 3% of the total carbon market.
These processes won’t be able to deliver without deep emissions cuts, which must come first. But they could help mop up the last dregs of greenhouse gases from hardto-abate sectors like cement and aviation. Plus, if we make it to net zero, removals offer the potential of reversing some of the damage we’ve done to the atmosphere.
The industry has been crying out for regulation, which stakeholders hope will distinguish future credits from existing poorquality products and help the market to grow by creating trust. These latest European developments mark a big step in setting the standards needed.
The CRCF categorizes carbon removals distinctly. It includes soil-emission reductions, and excludes activities like clean-energy projects and avoided deforestation. Manhart sees the framework shaping climate policy at both EU and national levels. If carbon removals were to be included in Europe’s Emissions Trading Scheme, they would likely need to be certified under the framework. The most immediate effect will be on purchasing behaviour; buyers will probably start to align acquisitions with the CRCF now to get ahead of the changes.
How the new rules would be used was previously unknown, which is where the other piece of regulation—The Green Claims Directive—comes into play. It seeks to stop greenwashing; under the draft law, companies must get approval for any environmental marketing claims before using them. Organizations breaking the rules may face fines of at least at 4% of their annual turnover.
The directive says companies can only make claims using offsets if they’ve already reduced their carbon footprints as much as possible and can only use such schemes for residual emissions (greenhouse gas emissions remaining in the atmosphere once reduction possibilities have been exhausted). Carbon credits must be certified under the CRCF. It includes a reference to the like-for-like principle, meaning that companies cannot claim fossil-fuel CO2 emissions (which remain in the atmosphere for centuries) have been offset by shortterm removals like planting trees. Only permanent carbon removal will be valid.
There are niggles: The Green Claims Directive doesn’t specify what counts as residual emissions, exposing the term to potential misuse. Also, only removal projects within the EU can be certified under the CRCF as it currently stands, which is limiting when the continent isn’t blessed with a lot of geological storage capacity.
There’s an optional element to these regulations and ignoring them will come with disadvantages. Companies can still buy avoided deforestation credits, as long as they don’t use them to make claims about their environmental virtues and carbon removal projects don’t have to get certified, but it would make their credits less valuable to purchasers.
There’s much work to do to get the CRCF operational. The Green Claims Directive needs to go through several more steps before it’s implemented. But the tone has been set and voluntary carbon markets are expected to match it.