👀 ETS Proposal: Are these realistic CDR costs? 👀

🤷‍♂️ Here we go again: wild CDR costs in an official EU proposal (the Commission's Impact Assessment for the ETS Review, Annex 8 on Removals specifically). Only problem: this time it looks like the entire CDR integration into the ETS rests on these assumptions…

💶 Here is why: the EU is planning to sell 250 million EUAs to buy 250 million tons of CDR. As per the impact assessment, they assume that - by 2036 - the cost of an EUA will reach around €200 and the cost of CDR (especially BioCCS) will drop below the same amount.

🧮 As such, selling an EUA will be sufficient to buy a ton of CDR - one in one out. They then foresee an extra 10 million EUAs to cover the gap pre-2036. And that is how the math adds up.

Time to get real: every single number in this table is problematic:

➡️ #BioCCS: currently costs €300-400/t unsubsidised. Given the large scale of these projects, the economies of scale are not huge, and price reductions will be marginal. Sub-€200/t, even sub-€250/t is difficult to imagine in the next 15 years. 

➡️ #DACCS: currently costs well above €500/t unsubsidised. I don’t see sub €300/t DACCS in Europe unless we experience an energy miracle.

➡️ #Biochar: currently costs €150-€250/t unsubsidised. Here we have the inverted issue. Costs are expected to go up, not down. At below €150/t, producers will simply sell the biochar into non-CDR use cases, e.g. metallurgy.

⁉️ Based on the above, I do not see how the EU will be able to buy 250Mt of CDR in the 2030s. Now you could say, well, let’s just buy what we can with this budget of about €50b.

👎 That, however, would create misalignment with the 2040 Climate Target and rightly be criticised heavily, as we would de facto create an emission surplus here.

🔦 So why is this happening? This is a recurring issue: someone models some wild costs somewhere, and those numbers get used and referenced over and over again - I’ve written on this before - see comments . That is the most likely explanation.

💡 Another, at least for the BioCCS costs - which this proposal relies on more than anything else - there could be the assumption of only buying CDR that has been subsidised nationally, e.g. what is happening in the Nordics. But that would be very limiting and still not explain some of the DACCS and biochar numbers.

🤔 To me, this is one of the biggest question marks in this proposal and I really hope I missed something.

🗣️ So over to you: is this fair? Do you agree? What am I missing?

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