Martina Simpkins
What the revision of the EU ETS means for EU carbon removals
The European Commission's July 2026 proposal to revise the EU Emissions Trading System (EU ETS) for the post-2030 period marks a pivotal moment for carbon removals. For the first time, a regulated EU demand channel for permanent carbon removals certified under the EU Carbon Removal and Carbon Farming Regulation (CRCF) is set to open between 2031 and 2040. The EU is planning to purchase up to 250 million tons over that period. We covered the broader reform package in our overview post. This article takes a closer look at what the removals piece means for the market.
For comparison: as of August 2026, the entire durable CDR market has delivered around 1.7 million tons worldwide. A 250 Mt target by 2040 is a statement of intent – the Commission has recognized that the scale of permanent carbon removals required to hit Europe's 2040 and 2050 climate targets can’t be financed through voluntary demand alone. By committing ETS revenues to the purchase of removals, the EU is stepping in to help create and fund the demand needed to scale the market.
However, the key challenge may not be demand, but supply. While the proposal creates a strong long-term demand signal for permanent removals, Europe will need to rapidly scale project development to deliver the volumes envisioned by the Commission. Developers that secure supply chain robustness, certification pathways, financing, and partnerships early are likely to be best positioned as procurement mechanisms take shape.
Key Signals for Carbon Removals
- The EU will fund the purchase of up to 250 Mt of permanent CRCF-certified removals between 2031 and 2040, financed by auction revenues from up to 260 million ETS allowances.
- An EU central purchasing facility will be created to prioritize cost-effective, high-integrity projects, with payment upon delivery of certified units.
- Placing a premium on permanence, this new program is initially focused only on two types of carbon removals: BioCCS (Bioenergy Carbon Capture and Storage) and DACCS (Direct Air Capture and Storage).
- The future inclusion of highly durable nature-based removals, and direct purchasing of removals by companies, will be considered no later than 2034 – rather late.
A New Compliance Market for Carbon Removals in Europe – What Will That Look Like?
At launch, projects must be CRCF-certified, and only two technologies qualify: BioCCS (Bioenergy Carbon Capture and Storage) and DACCS (Direct Air Capture and Storage). Both rely on established monitoring and liability frameworks, which protects the integrity of the ETS cap. Biochar is not initially included, and nature-based removals will be considered in 2034, even though risk-reversal insurance mechanisms already exist for both.
Permanence is the principle driving that choice: the Commission wants to ensure that every funded ton of CO2 stays locked away but does not yet recognize durability mechanisms. That same caution could clash with financial reality — it may simply prove impossible for BioCCS, and especially DACCS, costs to fall far enough, fast enough, to be funded 1:1 by ETS allowances within the next 14 years.
That tension creates a financing question. The purchases will be funded by revenue from an equivalent amount of ETS allowances, through a new central purchasing facility – that pays only once removals are certified and delivered. The Commission’s Impact Assessment puts the resulting purchasing budget at up to €50 billion over the period — a significant shift from relying primarily on voluntary demand toward public funding to scale the market. But the math only works if ETS allowance prices rise substantially while BioCCS and DACCS costs fall in parallel. Member of European Parliament (MEP) Peter Liese, who leads the file through Parliament this fall, has already suggested including biochar from day one — a sign the eligibility list isn't final.
Why nature-based removals deserve an earlier look
In our view, highly durable nature-based removals deserve an earlier look as well. The proposal already opens that door for 2034; waiting that long looks overly cautious. Bringing highly durable nature-based removals into scope earlier — even in a limited way — would give the Commission a faster, more cost-effective route to 250 Mt. This can be done without weakening the permanence standard the ETS depends on, especially when combined with the implementation of the proposed permanence fund securing reversal-risk.
We will explore in more detail the benefit nature-based removals offer and why they should be eligible earlier than 2034 in a separate post.
What This Means for CDR Developers
CRCF certification is now the top priority. The Commission’s strong focus on BioCCS makes those projects front runners for early demand. Projects with real operational data — not just plans — will be best positioned as procurement criteria take shape.
BioCCS is also an ideal additional revenue stream for biogas and biomethane plant operators as CO2 is already captured as part of the upgrading process. Beyond biogas and biomethane facilities, the proposal creates a compelling long-term opportunity for other sectors with biogenic CO2 streams, including waste-to-energy, pulp and paper, cement, steel and bioenergy producers. Many of the projects needed to meet the Commission’s target are likely to come from these sectors.
Although procurement is expected to begin in 2031, developing a commercial-scale BioCCS project typically requires years of feasibility work, permitting, financing, value chain agreements, and certification planning. That means the projects that will supply this future demand need to be identified and developed today.
What This Means for EU Heavy Industry
For companies working to lower emissions, the proposal offers a practical signal:
- More flexibility as the cap tightens. Guaranteed EU offtake for CDR eases pressure on the shrinking allowance pool, giving companies with science-based targets more room to combine removals, credits, and low-carbon fuels for hard-to-eliminate emissions.
- A pathway for residual emissions. The proposal creates a mechanism for addressing emissions that remain after technically and economically feasible abatement measures have been implemented, while maintaining the incentive to reduce emissions directly.
- A clearer long-term price signal. A ten-year, EU-backed purchasing commitment gives businesses a firmer basis for planning residual-emissions strategies beyond 2030 — rather than relying only on volatile voluntary markets.
- Growing optionality. If nature-based removals are added earlier than 2034, industry buyers gain access to a wider, cost-efficient pool of high-integrity removals sooner.
What Happens Next
Parliament debate intensifies from September 2026, with the proposal entering formal negotiation between Parliament, Member States, and the Commission — a final version is targeted for Q1 2027. These negotiations may still bring changes. Stakeholders in the CDR market – developers of CDR projects and potential buyers alike – are encouraged to engage with the European institutions, while the direction of travel is still being set. Demonstrated expertise and experience in the field can help inform important decisions that are being made this fall and winter.
Permanent removals are moving from a technical side discussion into the future architecture of Europe's flagship carbon market. With commercial BECCS facilities already injecting CO2 and a growing nature-based removals pipeline in Europe, Anew is positioned to help both project developers and compliance buyers navigate this shift as the rules take shape.
Project developers, bioenergy operators, waste-to-energy facilities, and industrial companies like cement and steel evaluating carbon capture opportunities should begin assessing how their assets could fit within the evolving CRCF and ETS framework. If you're developing a BECCS project or evaluating a carbon capture opportunity, we'd be happy to discuss certification pathways, commercialization options, and market positioning.