🚨[BREAKING] European Union set to create >€50,000,000,000 compliance market for CDR 🚨

‼️ CLARIFICATION: the mechanism is more nuanced than I had initially understood. The Commission is not committing to 250Mt of CDR. It is suggesting to auction 250Mt (+10Mt contingency) of allowances "to generate revenues for the purchase of an equivalent amount of domestic permanent carbon removal units". Should the budget be insufficient (possible), it could simply buy less removals. I wrote an update here: https://lnkd.in/d6jUuJzm

🇪🇺 The European Commission’s long awaited proposal for revising the EU’s Emission Trading System just dropped. Overall it’s definitely a mixed package, but for removals It is a complete game changer.

What stood out to me from a quick first read:

1️⃣ The EU is looking to integrate permanent, domestic CDR, starting with only BioCCS and DACCS certified under the CRCF

2️⃣ The recommended volume is huge: 250Mt for the 2031 - 2040 period (+10Mt contingency) reaching 48Mt / year by 2040

3️⃣ Europe is planning to use a Removals Authority within the Commission to lead purchases of removals

4️⃣ Integration of CDR will happen on top of the cap, and not subject to the linear reduction factor

5️⃣ International credits also made it in: 260Mt between 2036-2040 pending a 2033 review

🤯 Let’s do some quick math: at €200/t - which is definitely on the low end here - this would create a €50b compliance market for domestic CDR, or almost €10b/year by 2040. Add on top potential non-EU removals through international credits and we might actually almost double that!

✅ So carbon removals, an industry which only emerged a few years ago, is now on a clear trajectory to be integrated into - by far - the world’s biggest compliance market for carbon, the EU ETS. This is huge!

🏛️ The transition from voluntary to compliance is finally here. For those less well versed in EU regulatory processes: this proposal marks the start of an intense negotiation with the other EU institutions, the Council and Parliament, which will likely take 12-18 months (although the Commission supposedly wants to wrap it up way quicker than that). Things can and will still change, but the Commission’s proposal represents the starting point and foundation on which will be built.

👀 Next week, we will have the pleasure of hosting Mette Quinn from the EU Commission - in charge of the CDR ETS integration - on the CDR Policy Scoop to dive much deeper into any big outstanding questions.

👉 Want to stay informed with all the important CDR developments in Europe and beyond? Be sure to subscribe to my monthly newsletter, the GigaTen: https://lnkd.in/d2BKe7gr

🖇️ Link to the full proposal: https://lnkd.in/dxMWTEQp

😍 Exciting times ahead for CDR!

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