The Enchanted Path: Materialising a Provisional Carbon Removal Certification Framework

On 20 February 2024, the European Council and Parliament negotiators reached a provisional political agreement on a regulation that will establish a Carbon Removal Certification Framework in the EU (the “CRCF”). The CRCF is an EU-wide voluntary framework based on transparent carbon accounting. The underlying aims of the European Commission’s proposal are two-fold: 

1. to incentivise high-quality carbon removal and storage; and 
2. work towards the credible integration of carbon removals into EU climate policies.[1]

This marks a crucial milestone in assisting the EU reach its ambitious commitment to achieve climate neutrality by 2050. It is expected that the framework will combat greenwashing whilst promoting groundbreaking carbon removal technologies and sustainable carbon farming solutions. These include nature-based solutions, technologies like direct air carbon capture and storage (“DACCS”) and bioenergy with carbon capture and storage (“BECCS”), agro-forestry and other activities that enhance carbon capture in soil and long-lasting products and materials. Even though the CRCF is an independent legislative instrument and has not currently been incorporated into other existing frameworks for government support or market-based mechanisms, we envision that these are likely to become more intertwined in the future. 

Legislative Background

The need for an EU market for innovative technologies that capture, use, store and transport CO₂ was identified when the European Commission (the “EC”) published its communication on sustainable carbon cycles in 2021. Following this, in February 2022, the EC launched a public consultation on the development of a regulatory framework for certifying carbon removals. A proposal for regulation creating the CRCF (the “Regulation”) was published on 30 November 2022, and the following January the EC launched a public consultation on the proposal.

This proposal has now been provisionally agreed by negotiators for the European Parliament and EU Member States. If the provisional agreement is endorsed by the member states’ European Council representatives and the European Parliament’s Environmental Committee, it will be formally adopted. The EU Parliament plenary vote has been scheduled for 10 April 2024 and thus the final text is not currently available.

Aims

The CRCF was proposed as an effort to help “scale up and encourage the deployment of sustainable carbon removals from ecosystems and industrial solutions.”[2] The CRCF primarily aims, as stated in the framework’s proposal, to ensure that carbon removals in the EU are high quality, and to establish an EU governance certification system which avoids greenwashing by applying and enforcing the quality framework criteria in a reliable and harmonised way across the EU. 

Scope

Carbon dioxide removal (“CDR”), more commonly referred to as “GGR” or greenhouse gas removals in the UK, comprises technologies, practices, and approaches that (i) remove and (ii) durably store CO₂ from the atmosphere. According to the IPCC, it does not replace prompt and profound emissions reductions, but contributes to modelled scenarios that limit global warming.[3] CDR does not include natural CO₂ removal but does feature the durable storage of carbon after its extraction from the atmosphere. Carbon dioxide can be stored in manufactured products or in reservoirs like vegetation, soils, geological formations, or the ocean.

The CRCF relates to three CDR areas:

1. industrial carbon removals;
2. carbon farming; and
3. carbon storage in long-lasting products (for at least 35 years).

Under the CRCF, a carbon removal activity will have to:

1. quantify its carbon removals (Quantification);
2. demonstrate that the removal would not occur in the absence of the activity (Additionality);
3. prove that the removal is long-term; and 
4. must concern sustainability.

Together these are the QU.A.L.ITY criteria.

Operators will be required to apply to a public or private certification scheme approved by the Commission. Their activities will in turn be closely monitored by independent certification bodies that assess compliance with EU regulations. The outcome will be the issuing of certificates of compliance and the recording of carbon removal units in public registries. Beyond this, the carbon removals must entail climate benefits, prevent carbon leaks, promote sustainability, and seek to store carbon for a long period. 

The European Parliament[4] added an amendment stating that carbon farming sequestration and emission reduction units should be issued annually by 31 December and that monitoring checks should be conducted with trustworthy real-world data. This was coupled with the establishment of a certification audit to increase the information’s accuracy, with re-certification audits taking place every 5 years for carbon farming activities and at least 10 years for other sectors pursuant a risk-based approach. This third-party verification is designed to increase environmental integrity and public trust. 

Interaction with existing EU climate policies

The CRCF is likely to dictate which carbon removal methodologies will be integrated into EU climate policies like the EU Directive for Green Claims (the “Green Claims Directive”). The Green Claims Directive seeks to prevent greenwashing by setting the standard for companies making “eco” or “green” claims. The EC has previously claimed that “climate-related claims that are based on carbon offsets or carbon credits have been shown to be particularly prone to being unclear and ambiguous.”[5]

As a result, the Green Claims Directive requires that claims are verified and it establishes a minimum standard of integrity regarding carbon credits. Given the inclusion of the QU.A.L.ITY criteria and the strict requirement it imposes on activities for them to be eligible for certification under the CRCF, the CRCF is likely to create new forms of quality carbon credits which would stimulate finance and trading. Further than this, the CRCF is likely to be used to clarify what standards are expected under the Green Claims Directive.

Similarly, the certification under the CRCF is expected to be an indicator of high quality and credibility within the voluntary carbon markets. Carbon credits which are generated by CRCF certified activities will be required to meet the QU.A.L.ITY criteria. We anticipate that companies seeking voluntarily to reach a net-zero target will consequently prefer CRCF certified carbon credits.

Despite these potential positive outcomes, the EC does not directly address the interplay between the CRCF, the Emission Trading Scheme (the “ETS”) and other EU climate policies. The EC will need to assess the potential inclusion of carbon removals with permanent storage in the ETS before the first review of the CRCF in 2026, however, if it is integrated into the ETS this is unlikely to happen before the next trading phase at the start of 2031. More specifically, the CRCF does not currently clarify how the certificates should be utilised, but rather leaves this to the individual Member States’ discretion. They can, for instance, choose to use the certificates to finance and reward higher carbon removals. However, it is more likely that they will be traded and used for offsetting, which may undermine efforts to become carbon neutral.

Since the provisional agreement was reached, organisations including European Suppliers of Waste to Energy (“EWSET”) have called on the EU “to ensure that the Carbon Removals Certification Framework interacts with the ETS in a manner that provides incentive for industries to remove carbon and accelerates Europe’s path to net-zero.” [6]

The Committee on Agricultural and Rural Development has also flagged potential risks,[7] namely in the fields of double counting, additional administrative burdens, and low uptake by farmers if there is no guidance on price standards and auditing costs. Additionally, a more holistic approach to GHG emissions should be implemented, particularly regarding the applicability of methane and nitrous oxide to the agricultural sector.

Conclusion

The EU’s direction towards the harmonisation of the complex web of EU environmental policies is clear. The CRCF is a piece of the puzzle to achieve climate neutrality by 2050 due to its potential to combat greenwashing and boost innovative technologies. The conclusion that follows the development of a voluntary, reliable, and robust CRCF is that it will serve to recognise carbon removals and emissions reductions in the existing EU ETS framework[8] (expected by 2026), yet its actual integration remains to be seen. To ensure CRCF’s inclusion within the EU regulatory landscape, care must be taken to address new issues that could arise such as: (1) the challenges in comparing the quality of carbon removals, (2) barriers to access climate finance and (3) checking the reliability of the certification processes. The CRCF’s impact will hinge, ultimately, on how realistically the net zero aspirations themselves are met. 

[1] 89% of stakeholders that participated in a public consultation by the European Commission, which comprised of 400 replies and 140 position papers, agreed that creating a solid certification for carbon removals is vital to achieve a net contribution from carbon removals. 

[2] ‘Executive Summary of the Impact Assessment Report Accompanying the document – Proposal for a Regulation of the European Parliament and of the Council establishing a Union certification for carbon removals’, European Commission, 30 November 2022, Eur-Lex Europa

[3] ‘IPCC AR6 WGIII: CDR Factsheet’, IPCC, Working Group III – Mitigation of Climate Change

[4] ‘Union certification framework for carbon removals’, European Parliament’s Legislative Observatory, 21 November 2023, European Parliament

[5] ‘Questions and Answers on European Green Claims,’ European Commission, 22 March 2023, Questions and Answers on European Green Claims (europa.eu)

[6] ‘Waste-to-Energy is included in the Carbon Removals Certification Framework,’ EWSET, 20 February 2024, Waste-to-Energy is included in the Carbon Removals Certification Framework - ESWET - European Suppliers of Waste to Energy Technology

[7] ‘Opinion of the Committee on Agriculture and Rural Development for the Committee on the Environment, Public Health and Food Safety, European Parliament, 31 August 2023, European Parliament

[8] The EU Commission will evaluate the possible inclusion of carbon removals with permanent storage in the EU ETS in 2026. ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and Committee of the Regions – Towards an ambitious Industrial Carbon Management for the EU’, European Commission, 6 February 2024, European Commission