How the EU can utilize its carbon market to scale up carbon dioxide removal

[Geoengineering News]

https://www.cell.com/joule/fulltext/S2542-4351(26)00079-6

Authors: Darius Sultani, Sebastian Osorio, Claudia Günther, Michael Pahle, Katrin Sievert, Tobias S. Schmidt, Bjarne Steffen, Ottmar Edenhofer

31 March 2026

Context & scale

The upcoming European Union (EU) emissions trading system (ETS) revision is set to determine the extent to which novel carbon dioxide removal (CDR) technologies will be integrated into the scheme. However, to date, quantitative analyses of (1) CDR volumes that could be incentivized by an integration as well as (2) the corresponding effects on EU ETS prices are lacking. Deploying the EU ETS model LIMES-EU with recent cost projections for direct air capture technologies, this study investigates how the integration of permanent CDR into the EU ETS could impact both the ramp-up of novel CDR technologies and EU ETS price dynamics in the years to come. By mid-century, an integration of CDR into the EU ETS could incentivize 68–86 Mt CO2/year of bioenergy with carbon capture and storage (BECCS) and direct air carbon capture and storage (DACCS) combined. These volumes are sufficiently large to affect allowance prices, substantially moderating price spikes as the EU ETS cap tightens.

However, an integration also raises challenges. Over-reliance on expected future removals could undermine abatement if cost reductions fail to materialize, and low biomass prices could lead to excessive BECCS deployment with environmental impacts. These risks depend on technology learning, governance, and policy credibility over time. An integration of CDR into the EU ETS should begin with the target picture in mind (policy backward induction) and gradually build on the techno-economic and governance structures in place today (policy sequencing). Since the need for overshoot management will become more prevalent over the next decades, CDR integration should be seen as a starting point for transforming the ETS into a removals trading scheme in the long run. A reframing of the ETS “endgame” is therefore needed, and the system’s long-term potential to incentivize negative emissions at a large scale needs to be highlighted.

Highlights

• Integrates recent DACCS cost projections into the EU ETS model LIMES-EU

• Evaluates CDR volume and ETS price effects of integrating BECCS and DACCS into the EU ETS

• Assesses integration risks and discusses abatement deterrence in an EU ETS context

• EU ETS could incentivize combined BECCS and DACCS volumes of 68–86 Mt CO2/year by 2050

Summary

Novel carbon dioxide removal (CDR) technologies need to be ramped up rapidly to ensure the Paris goal can still be reached. Under the current geopolitical situation, many now expect the European Union (EU) to maintain and increase momentum in CDR deployment. While fiscal space is limited, the EU’s emissions trading system (ETS) offers a unique opportunity to provide CDR investors with long-term financial certainty. At the same time, CDR integration into the EU ETS comes with risks that may prevent the EU from taking this step. Using the numerical EU ETS model LIMES-EU, we show that the EU ETS could incentivize 68–86 Mt/year of bioenergy with carbon capture and storage (BECCS) and direct air carbon capture and storage (DACCS) combined by 2050. We discuss abatement deterrence in the context of an ETS and propose a sequencing approach for integration, which could minimize integrity risk while providing long-term prospects for CDR to scale.

Source: CellPress