EU Climate Framework for 2040: How to Incentivise Carbon Removals?
Carbon removal is a double-edged sword. On the one hand, the EU cannot achieve its climate neutrality target and net negative emissions without carbon removals. On the other hand, carbon removals can delay and deter emission reductions. Certain carbon removal technologies require substantial amounts of renewable electricity and can divert significant financial resources away from direct emissions' reduction efforts. Technologies such as BECCS and biochar production can pose serious risks to ecosystems, compromise food security, and may even exacerbate climate impacts. Policies and measures to scale up and incentivise carbon removals must take account of the ambivalent nature of each type of carbon removal.
A new paper by the Ecologic Institute and Oeko-Institut explores how to incentivise carbon removals. It discusses selected measures that could help incentivise carbon removals at larger scale:
- establishing a removal trading scheme (RTS),
- removals as a requirement for granting permits,
- integration of carbon removals into the EU Effort Sharing Regulation,
- Feed-in-Tariffs for carbon removals,
- contracts for difference for carbon removals and
- competitive bidding or auctioning for removals.
The paper is part of a research project funded by the German Federal Ministry for Economic Affairs and Climate Action. The paper is available for download.