On February 20, 2024, the European Union (EU) announced a provisional political agreement to establish an EU-wide framework for voluntary certification of carbon dioxide removal (CDR) projects. This announcement, which marks a major step forward in governmental regulation of the CDR sector, has the potential to help legitimize and bolster the industry. It may also foreshadow increased regulation of CDR in other regions, including the United States.
The Framework
The regulatory framework, first proposed in 2022, divides CDR activities into four categories:
- Permanent carbon removal: activities that store atmospheric or biogenic carbon for several centuries, such as bioenergy generation with carbon capture and storage (CCS), as well as direct air capture (DAC) and storage.
- Temporary carbon storage in long-lasting products: activities that bind atmospheric and biogenic carbon in products or materials, such as wood-based construction products or biochar.
- Temporary carbon storage from carbon farming: activities such as forest and soil restoration and wetlands management.
- Soil emission reduction from carbon farming: soil management practices that reduce carbon and nitrous oxide emissions, such as no-till cover crop practices and reduced fertilizer use.
Notably, this framework does not apply to avoided deforestation, renewable energy projects, or enhanced hydrocarbon recovery projects. And it will only apply to activities that take place within the EU.
To be certified, carbon removal projects will need to meet four overarching criteria: First, they must be capable of accurate quantification. Second, they must result in long-term storage of carbon (e.g., a minimum of 35 years for carbon stored in products). Third, they must be able to show additionality, meaning that the carbon removals would not otherwise have occurred. And fourth, they must contribute to the EU's broader sustainability goals, including biodiversity.
Under the agreement, the European Commission will develop methodologies for voluntary certification of CDR activities based on these criteria in each of the four CDR categories above. Once final, the certification process will support an EU-wide registry for trading carbon removal "units" (with one unit being equal to one metric ton of removed CO2-equivalent). The registry will open four years after the regulations enter into force and provide a marketplace for entities to buy and sell certified carbon removal units to meet their carbon reduction goals. Certified units will only be applied to the EU's climate objectives and carbon reduction commitment under the 2015 Paris Agreement.
Notably, operators of CDR activities will be liable for "reversal," meaning the release of CO2 back into the atmosphere from a certified activity. The agreement charges the Commission with establishing "liability mechanisms" in the certification methodologies, such as "collective buffers or accounts of carbon removal units, and up-front insurance mechanisms." The provisional agreement also references "direct cancellation of units" as a possible "last resort" liability mechanism, although the details of what such cancellation would entail (e.g., the effect on unit holders versus operators) are still to be determined.
The provisional agreement must now be formally approved by EU-member states' European Council representatives and the European Parliament's environment committee. Once approved, the regulations will be published in the Official Journal of the European Union and enter into force.
Takeaways
As we've previously discussed, the EU's carbon removal certification framework is the leading effort in what promises to be a larger trend of regulation around monitoring, reporting, and verification of CDR activities. Independent certification frameworks have existed for years, and the EU's proposed framework shares many of the same principles. However, increased governmental oversight of CDR activities likely will bring new legitimacy to the sector, boosting public confidence in CDR's ability to meaningfully reduce emissions. For example, by promising liability for CO2 "reversal," the EU's framework signals real consequences for ineffective projects—something independent frameworks could not do—though the extent of those consequences remains to be seen.
While this framework is limited to the EU, how it is implemented and received could influence similar efforts elsewhere, including in the US. Pressure to establish a regulatory framework for CDR could increase in the coming months and years. Many experts—including the drafters of the latest Intergovernmental Panel on Climate Change report—argue that CDR will be a necessary part of an all-hands-on-deck approach to mitigating climate impacts. The CDR industry continues to grow in response to such calls. And, as more mandatory emissions reduction targets are introduced, demand for verified carbon credits, like the EU's CDR "units," will also increase. Regulatory oversight will be key to ensuring a supply of high-quality CDR solutions capable of meeting the moment.
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