💶📈 What could soaring EU ETS prices mean for carbon dioxide removal (hashtag#CDR)? 📈💶

😲 The European Emission Trading System (hashtag#EUETS) is the largest carbon market in the world. Its market value is around €750b, it provides the EU with over €30b in revenue/year, and covers 40% of the Union’s emissions and 10,000 installations. It is the engine of EU's path to net-zero.

💡 The EU ETS is a so-called cap and trade system functioning through allowances (EUAs) that will be gradually phased out by 2039. This decreasing supply inevitably leads to an increase in price and the cost of emitting a ton of carbon. The price has already increased from €10/EUA in 2017 to around €70/EUA today.

🏦 Just how high will prices get? Analyses by experts such as Luyue Tan and the LSEG (London Stock Exchange Group) indicate they could reach €150/ton by 2030, €300/t by 2035, and €400/t by 2040. These are incredibly high numbers that would completely transform the dynamics of Europe’s economy, particularly for heavy emitting industries.

🔎 At the same time, it is definitely possible that cost for durable CDR will reach sub-€200/ton, and for some methods such as biochar carbon removal (hashtag#BCR) even sub-€150/ton by 2030/35. Couple this with a potential inclusion of CDR into the EU ETS starting in 2031 (proposal coming in 2026), and we see a huge shift in ETS dynamics.

❗ Once the cost of EUAs becomes higher than the cost of [CRCF certified?] durable CDR, we could see an unprecedented demand-side pull for CDR. This will be reinforced as industries start running out of lower-cost decarbonisation options.

💚 We will need to make sure that the supply of durable CDR will be available at the (potentially huge) volumes needed. CDR could become essential in balancing prices within the ETS, with potentially devastating effects if we fail to do so.

⁉ What is your take? Does this seem like a realistic scenario? What am I missing?

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