In a Nutshell

The Just Transition Mechanism is the European Union’s main tool to ensure that the transition to a climate-neutral economy happens in a fair and just way. Through its three pillars, it aims to mobilise an estimated EUR 55 billion over 2021-2027 to support the European regions, sectors and workers most affected by the transition.

The EU regions identified as most at risk or overburdened by the transition, and thus most in need of justice-oriented policies, are those whose economies rely heavily on fossil fuel extraction and production, particularly coal. Poland, Germany, Romania, Bulgaria, the Czech Republic and Spain face the greatest potential job losses in this sector.

The policy establishes three financial mechanisms to work towards a Europe-wide just transition: the Just Transition Fund (JTF), a dedicated transition scheme under InvestEU, and a loan facility provided by the European Investment Bank. Respectively, they offer grants, mobilise private investments and leverage public finance. Whereas the eligibility criteria for the JTF promote the diversification and modernisation of economies and the reskilling of workers, the other mechanisms are broader in scope and include a wide range of sectors.

As a nascent sector set to grow in scale and importance in the coming decades, carbon dioxide removal falls under the scope of the Just Transition Mechanism. To function, the EU CDR industry will need a large workforce, making it a natural candidate for reskilling programmes across multiple sectors, including academic research, engineering and technical jobs.

What's on the Horizon?

By June 2025, the Commission will need to review the implementation of the Joint Transition Fund.

Each member state has a national share reserved under the Public Sector Loan Facility until 31 December 2025. There are regular deadlines to apply for grants under the facility, with the next one on 17 January 2024.

The territorial Just Transition plans cover the period up to 2030.

Deep Dive

The Just Transition Fund

The JTF is the first pillar of the Just Transition Mechanism. The fund primarily supports the economic diversification and reconversion of the most affected regions through grants. EUR 17.5 billion was attributed to the fund through a regulation, with EUR 7.5 billion coming from the Multiannual Financial Framework for the period 2021-2027 (MFF) and EUR 10 billion from the NextGenerationEU for the period 2021-2023.

To access allocated funds, member states must prepare territorial just transition plans covering territories “most negatively affected based on the economic and social impacts resulting from the transition”. Special consideration should be given to islands and outermost regions.

The InvestEU “Just Transition” scheme

The second pillar of the JTM provides budgetary guarantees to ‘implementing partners’ that the EU Commission will provide direct or indirect financing. It can support investments detailed in national territorial just transition plans spanning a wide range of projects, including energy and transport infrastructure decarbonisation, economic diversification and social infrastructure. This scheme is expected to mobilise EUR 10-15 billion, coming mostly from the private sector, with some support from InvestEU implementing partners such as the European Investment Bank.

The public sector loan facility with the European Investment Bank

The third pillar of the JTM and its accompanying regulation provides a mix of EUR 1.5 billion in grants from the EU budget and approximately EUR 10 billion of loans from the European Investment Bank. A further EUR 18-25 billion of public investments is expected to be mobilised. The loan facility mainly targets energy and transport infrastructure, district heating networks, energy efficiency measures and social infrastructure. Applications must be linked to the relevant territorial just transition plan to demonstrate how the project supports specific national ‘green transitions’. Each member state is reserved a part of the budget under the facility until 2025, after which any unused amount will be made available to projects across the entire EU.

While the two other pillars of the JTM provide rather broad requirements, the Just Transition Fund outlines a specific list of actions and sectors that can be supported. CDR in its broadest sense could directly or indirectly fall under multiple categories. For example, it could help funnel productive investments in SMEs and investments in the creation of new firms. On the research side, CDR can be a destination for investments in research and innovation activities. On the social side, it could accompany the upskilling and reskilling of workers and job seekers. Finally, on the infrastructure side, it could be applied to upgrade district heating networks, especially combined heat and power plants, to unlock investments in the deployment of climate technology and systems, and for investments in renewable energy.

Evaluating the Just Transition Mechanism

Being the EU’s flagship mechanism to ensure no one is left behind in the green transition, the JTM’s main lever consists of requiring the development of territorial just transition plans. These are intended to ensure a high level of ambition whilst allowing civil society and the affected publics to have visibility over the just transition plan. There is also a certain degree of technical assistance provided for local public authorities, mostly through the Just Transition Platform, a one-stop shop platform providing information on all aspects of the JTM.

However, the JTM has several potential drawbacks. Firstly, the JTM might inadvertently reward countries that have delayed climate action by providing funds to member states with carbon-intensive industries that would not have decarbonisation plans otherwise. Secondly, the initial budget of the JTF was set at about EUR 44 billion, whereas it has now been downsized to EUR 17.5 billion, which will inevitably mean that fewer projects will be supported. Thirdly, the vision of fairness set out in the JTM and the European Green Deal in general has been criticised as a short-term, dirigiste solution to systemic challenges. Only specific sectors and regions are included, whereas other meaningful activities involving other types of actors and regions are left out of the JTM. Finally, the JTM’s operationalisation of climate justice is focused on those who are adversely affected by the transition, rather than on those who are adversely affected by climate change at large.

Timeline

11 December 2019
14 January 2020
28 May 2020
29 June - 3 July 2020
9 March 2021
July 2021
August 2021
11 December 2019

European Green Deal communication and announcement of the Just Transition Mechanism

14 January 2020

Commission adopts the Just Transition Fund Proposal

28 May 2020

Commission adopts the Public Sector Loan Facility Proposal

29 June - 3 July 2020

Launch of the Just Transition Platform

9 March 2021

Adoption of the InvestEU Guidelines, including guidelines for the Just Transition Special Scheme

July 2021

Entry into force of the Just Transition Fund Regulation

August 2021

Entry into force of the Public Sector Loan Facility Regulation

Unofficial Title

Just Transition Mechanism

Year

2021

In a Nutshell

Horizon Europe is the European Union’s key funding programme for research and innovation. It follows and builds upon Horizon 2020. Totalling a budget of €95.5 billion for the period spanning from 2021 to 2027, it is a key instrument in tackling climate change, helping achieve the UN Sustainable Development Goals and incentivising the competitiveness and growth of the EU.  

Beyond EU members, the programme is a strong strategic tool for international cooperation in research and innovation. It opens the window for researchers across the world to team up with the EU through different forms of cooperation, including the association of three non-EU countries. 18 countries have association agreements, including New Zealand and the UK as the newest addition with reached political agreements (still pending formal adoption).

Substantive and welltargeted research and innovation support is key to fostering the maturation of nascent removal methods and to underpinning the progression towards the scale-up needed to reach climate neutrality goals in the EU. Carbon removal projects have received funding from Horizon Europe, especially within Pillar II (see Deep Dive section below). The support has been predominantly indirect and provided through calls with potential spillovers into removals, with a lower share of funding support for CDR directly. Broadening the understanding of removal methods and providing more targeted and sufficient support that strengthens the diverse family of removal methods will form a crucial part of Horizon’s approach to CDR in forthcoming work programmes.  

What's on the Horizon?

  • More countries are likely to finalise association agreements with Horizon Europe in the future. Negotiations with Morocco, Canada, the Republic of Korea, and Japan are at various stages of advancement. The UK and the EU have reached a political agreement on the UK’s association to the programme starting 1 January 2024. However, it is still pending for Council approval before it is formally adopted by the EU-UK Specialised Committee on Participation in Union Programmes. The same is true for New Zealand which is still pending Parliamentary consent 
  • Building on the public consultation launched back in November 2022, the Commission will publish the Horizon Europe interim evaluation and consultation to inform the Horizon Europe Strategic Plan 2025-2027.  
  • In parallel, the expert group formed by the Commission’s latest call in May 2023 will meet between Q4 2023 – Q4 2024 and is expected to provide input on the programme’s evaluation. They will subsequently publish a report on how to amplify the impact of EU research and innovation programs and build on the conclusions of Horizon 2020. 
  • Further details on calls that are still open or yet-to-be-opened within the work programme 2023-2024 should be expected, as well as information on specific projects taken forward under each call. The work programmes for the following period should also be forthcoming.  

Deep Dive

A look at the various funding programmes of Horizon Europe

The program consists of four main pillars, each having dedicated funding and established working programmes that guide priorities for research and funding support:  

A table showing the main programs and total budgets for individual pillars of Horizon Europe
Adapted from Horizon Europe: Investing to shape our future (2021)

  • Pillar I – Excellent Science: aimed at strengthening the excellence and competitiveness of the EU’s scientific base. Three initiatives take the work forward:  
    • European Research Council: provides funding to researchers and their teams working on frontier science topics, with an emphasis on early-stage researchers.  
    • Marie Skłodowska-Curie Actions: focuses on enhancing the knowledge and skills of researchers through mobility and training.  
    • Research infrastructures: ensures world-class research infrastructure in Europe that is integrated, interconnected, and available to the top researchers in Europe and across the world.  
  • Pilar II – Global Challenges and European Industrial Competitiveness: centred around 6 clusters that tackle key global challenges underpinning EU policies and the Sustainable Development Goals, with a total of €53.5 billion. The launch of “Missions”- specified in the main work programme – is also part of the strategic planning process. Each cluster publishes a number of projects and calls within the main work programme for the relevant year, following priorities in R&I for the EU. Horizon Europe sets out its own Technology Readiness Level (TRL) scale, and projects are set to support the path towards different stages of maturity through a diverse range of actions including Research & Innovation Actions (RIA), Innovation Actions (IA) and Coordination and Support Actions (CSA).  
  • Pilar III – Innovative Europe:  
    • European Innovation Council (EIC): promotes breakthroughs, deep tech and disruptive innovation with scale-up potential at the global level through all stages of innovation.  It has two operating modes, an “Open” fund, holding no thematic preferences, and a “Challenge” fund, with specific thematic areas. Different technology readiness levels (TRL) are covered throughout its programmes:  A table of the total funding for programs in pillar three of Horizon Europe
    • European Innovation Ecosystems (EIE): supports the creation of better-connected innovation ecosystems across Europe, at both national and regional levels.  
    • European Institute of Innovation & Technology (EIT): brings together business, education and research organisations. 
  • Widening Participation & Strengthening the European Research Area (ERA): composed of two initiatives:

A look at carbon removal in Horizon Europe

Horizon Europe’s work programmes benefit a wide range of topics and technologies, especially in the six clusters of Pillar II. A close look at these programmes shows Horizon Europe has committed funding to CDRrelated topics (directly and indirectly, including calls with a high potential for spillovers), with the majority being clustered in three areas ( 8 Climate, Energy and Mobility; 9 Food, Bioeconomy, Natural Resources, Agriculture and Environment; and 12 Missions) in both the 2021-2022 and 2023-2024 work programmes.  

A table showing the various budgets available for CDR both directly and indirectly in Horizon Europe

The number of calls indirectly related to carbon removals found in both periods, – ranging from CCS and CO2 infrastructure projects to digital solutions and Monitoring, Reporting and Verification (MRV) – is higher than those with a direct link to CDR, such as blue carbon, carbon sequestration and BECCS projects.  For context, the funding allocated directly to CDR projects amounted to about 1.1% of the total budget for 2021-2022 and 0.9% of the 2023-2024 total budget. Direct and indirect funding for CDR reached 2.6% of the total 2023-2024 budget, instead of the 1.78% for 2021-2022.  

Research & Innovation actions (RIA) are dominant for the first period, while both RIA and Innovation Actions (IA) lead within the latest work programme, although RIA are slightly more present (65.73% of all projects) in direct CDR funding. RIA projects have 100% of costs covered by the EU and are directed to new knowledge and exploration of technologies. IA projects are covered until 70% of costs and focus more on prototyping, testing, piloting, and large-scale product validation, and marker replication.  

Knowledge and targeted funding

A number of projects in Horizon Europe can provide simultaneous benefits to Carbon Capture and Storage (CCS), Carbon Capture and Utilisation (CCU), and Carbon Removal (CDR). While there are sometimes overlaps between these families of methods – for example, shared CO2 transport and storage infrastructure – CDR is a much broader field and a set of methods on its own. The main work programme for 2023-2024, especially in Cluster 6, features more explicit mentions of carbon removals in the expected outcomes or scopes of the topics. However, the calls do not solely focus on CDR in most cases and are more likely to produce spillover effects that benefit CDR, such as providing CO2 transport infrastructure.  

It is a positive step that the Commission has progressively included mentions of CDR within Horizon’s work programmes. To ensure that Horizon Europe delivers the appropriate support for CDR solutions going forward, a more sophisticated approach must be introduced that differentiates between CCUS and CDR methods, providing dedicated funding for different types of CDR as part of a portfolio approach. 

Means in line with targets

There is substantial support for different types of removals given CDR’s status as a nascent field. Despite this support, the amount currently allocated to research into carbon removals is not nearly enough to meet the needs for accelerated development and deployment of CDR in light of the EU climate goals and the ambition for the EU to take the lead in this space globally. To deliver on these goals, the EU must commit to a significantly expanded budget for carbon removal, in line with the goals set out for the Green Deal, such as 310 MtCO2e of removals from the LULUCF sector, 55% emissions reductions by 2030, and climate neutrality by 2050.  

Diverse and precise support

Horizon Europe strategic plans guide the direction of the investments in research and innovation. Ahead of the next iteration, the Strategic Plan 2025-2027 analysis looks at changes in EU policy and how the global context has changed since the first Plan (2021-2024), to determine if adjustments in terms of priority, directions and actions need to be made for this period. The analysis states that significant research is needed to bring down the cost of nature-based and industrial removals and further identifies areas where the current efforts need to be reinforced, for example:  

  1. Sustainable economic models that incorporate ways to measure and incentivise the co-benefits of carbon removal; 
  2. Addressing challenges in soil, water, nutrient and biodiversity through e.g, carbon removal; 
  3. The removal potential of bio-based economies and bio-based value chains; 

Beyond these suggestions, directing calls for projects based on a diverse portfolio of CDR methods will be necessary to help the industry bridge the research and innovation gap and ensure the maturity of all removal technologies. This approach requires that Horizon Europe ensure there are sufficient calls for all levels of maturity (TRL levels) and types of actions (Research & Innovation, Innovation and Coordination & Support Actions), since carbon removal requires both early-stage research capacity and support for deployment. 

Timeline

7 June 2018
April 2019
11 December 2020
28 April 2021
29 July 2022
23 February 2023
15 May - 7 June 2023
Q2 2023
9 July 2023
7 September 2023
December 2023
Q4 2023
Q4 2023 - Q4 2024
06 May 2024
Q4 2024
28 April 2021

Regulation (EU) 2021/695 of the European Parliament and of the Council establishing Horizon Europe

29 July 2022

Deadline for the Feedback Period – Horizon Europe – Interim Evaluation

23 February 2023

Deadline for the Public Consultation period

Q2 2023

Publication of factual summary reports from the public consultation

December 2023

Horizon 2020 ex-post evaluation report (staff working document)

Q4 2023 - Q4 2024

High Level Expert Group work

06 May 2024

Opportunity to provide feedback on the Horizon Work Programme 2025 open until 6 May 2024

Q4 2024

High Level Expert Group Report publication

Further reading

A new horizon for Europe – Impact Assessment for Horizon Europe 2021-2027  

Horizon Europe budget breakdown  

Evidence Framework on monitoring and evaluation of Horizon Europe – focusing on the measurement of impact for Horizon, including the introduction of Key Impact Pathways.  

Funding and Tenders Portal 

Horizon Europe Strategic Plan 2021-2024 

Horizon Europe Strategic Plan 2025-2027 Analysis   

Horizon Work Programmes  

Countries

Since 1 August 2022, the following countries have association agreements in place: Albania, Armenia, Bosnia and Herzegovina, the Faroe Islands, Georgia, Iceland, Israel, Kosovo, Moldova, Montenegro, North Macedonia, Norway, Serbia, Tunisia, Turkey, Ukraine.  

Status

Policy Type

Unofficial Title

Horizon Europe

Year

2021

Official Document

Last Updated

31/07/2023

In a Nutshell

Article 6.4 of the Paris Agreement establishes the Article 6.4 mechanism, a market-based instrument that countries can voluntarily use to trade credits from emission reduction and removal projects. Under the mechanism, reducing emission levels in one country can be used by another country to fulfill its climate target, Nationally Determined Contribution (NDC).

Often seen as a tool to help countries achieve their climate targets cost-effectively, its real goal is to bring about higher ambition – enabling countries to do more than they could without using it. It’s built to incentivise and facilitate the participation of authorised public and private entities by crediting their emission reduction and removal activities. The projects need to deliver an overall mitigation in global emissions.

It’s a centralised UN crediting mechanism governed by Article 6.4 Supervisory Body. Being a successor of the Clean Development Mechanism (CDM) under the Kyoto Protocol, it will operate under the Paris Agreement, where all countries have climate targets. This means that the host countries need to know that they can still meet their climate targets when selling credits via the Article 6.4 mechanism, and double counting of the same emission reductions or removals must be avoided through the double-entry bookkeeping for emissions accounting (“corresponding adjustments”).

Among its other work in setting up the instrument, the Supervisory Body is preparing the foundation for how the Article 6.4 mechanism will apply to removals. There is a growing ecosystem of novel removal methods, and many of these are poised to be used by countries in their climate targets. Given the lack of broadly accepted international accounting rules for a range of removal methods, the decisions taken under Article 6.4, and the methodologies approved under it, are bound to have an outsized impact on carbon markets globally.

What's on the Horizon?

  • The Article 6.4 Supervisory Body has prepared recommendations on methodologies and removals. These recommendations have been sent for approval and were reviewed at the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA5 – during COP28). If the recommendations are approved, Article 6.4 will become operational in principle. More recommendations from the SB will be needed to make Article 6.4 fully operational.
  • The Subsidiary Body for Scientific and Technological Advice (SBSTA) is preparing recommendations on including emission avoidance and conservation enhancement activities in the scope of Article 6.4 mechanism, authorisation of credits, and connection between registries for adoption at CMA5 (during COP28).

 Getting the Article 6.4 mechanism up and running will take a few years. 

Deep Dive

How will it work? 

The Article 6.4 Supervisory Body is responsible for establishing guidance and procedures, approving methodologies, registering projects, issuing credits, and more.

Methodologies may be developed by project participants, host countries, stakeholders, or the Supervisory Body.

The credits are called the Article 6.4 Emission Reductions (A6.4ERs). These are used for both emission reductions and carbon removal. The host country will have to authorise A6.4ERs and account for these by applying corresponding adjustments unless the A6.4 ERs contribute to the national target in the host country (mitigation contribution A6.4ERs). 

Removal activities get a maximum of 15-year crediting periods, renewable twice. The mechanism credits emission reductions and removals by public and private sector actors.

2% of Article 6.4 credits are subject to cancellation (“Overall Mitigation in Global Emissions” clause), 5% of credits are dedicated to the Adaptation Fund (“Share of Proceeds for Adaptation”) and other fees for registration, inclusion, issuance, renewal, and post-registration apply as well (“Share of Proceeds for Administrative Expenses”).  

Many other details are yet to be ironed out, listed in the “Open elements” section below. 

How will removals be covered? 

Whilst the mechanism covers emission reductions and removals, it will likely focus on emission reductions in the coming decade, with interest in removals growing as climate targets get closer to net zero and beyond. 

The Supervisory Body has been tasked with preparing a general framework for including the full spectrum of carbon removal methods under Article 6.4, called “recommendations”, to be approved at CMA5 during COP28.  

For the first time, novel carbon removal methods will be tackled under the Paris Agreement, and the recommendations will set a precedent by establishing broad removals-specific rules under the UN crediting mechanism. 

Open elements 

Two separate ongoing work streams are ironing out the details of the mechanism – (1) the Supervisory Body and (2) the Subsidiary Body for Scientific and Technological Advice (SBSTA) where international climate negotiations under the Paris Agreement are ongoing on the technical elements. 

The Supervisory Body has a busy work program for 2023 and has been tasked to prepare several deliverables for adoption for CMA5 (during COP28). This includes recommendations on methodologies (baseline, monitoring methodologies, methodology development process, review), recommendations on activities involving removals (monitoring, reporting, accounting for removals and crediting periods, addressing reversals, avoidance of leakage), transitioning the Clean Development Mechanism into the Article 6.4 mechanism, developing accreditation standard, and designing project activity cycle.

SBSTA is negotiating recommendations on including emission avoidance1 and conservation enhancement activities in the scope of Article 6.4 mechanism, authorisation of credits by host countries, and work on the registry. These discussions are very technical, have continued throughout the Bonn Climate Conference in June 2023, and will be submitted for adoption at CMA5 during COP28.

1 Emission avoidance in this context mainly refers narrowly to reducing emissions from deforestation and forest degradation (REDD+ projects), not to be confused with how the term “emission avoidance” is used in the voluntary carbon markets where some stakeholders use it as a blanket term for emission reductions and avoidance. 

How can stakeholders engage with the Article 6.4 process?   

Documents for stakeholder input will be published at least a week before each Supervisory Body meeting. Any organisation can provide written input before meetings, but only UNFCCC-accredited observer organisations can attend the Supervisory Body meetings. Everyone can follow the live stream and watch recordings of past sessions.

 

Meeting number  Meeting dates  Deadline for registering as an observer  Deadline for submitting public comments on the meeting agenda 
SB 006  10-13 July 2023  19 June  3 July 
SB 007  11-14 September 2023  21 August  4 September 
SB 008  10 October to 2 November 2023  9 October  23 October 

In June 2023, the UNFCCC launched a dedicated Article 6.4 newsletter covering the latest news, calls for inputs and other announcements from the Supervisory Body. 

The negotiations under SBSTA take place in 2-week sessions twice a year during the Bonn Climate Conference and COP. 

 

Timeline

12 December 2015
4 November 2016
November 2021
November 2022
19 November 2022 - 15 March 2023
7-10 March 2023
16 March - 11 April 2023
18-25 May 2023
31 May - 3 June 2023
5-15 June 2023
5-19 June 2023
23 June 2023
10-13 July 2023
11-14 September 2023
Until 19 September 2023
30 October - 2 November 2023
Before SBSTA29/COP28
18 November 2023
30 November - 12 December 2023
12 December 2015

The Paris Agreement is adopted

4 November 2016

The Paris Agreement enters into force 

November 2021

CMA3/COP26 Glasgow – Adoption of the rules, modalities and procedures for Article 6.4 mechanism 

November 2022

Adoption of guidance on Article 6.4, elaborating on key processes and principles, providing SBSTA to work on remaining elements, and mandating the Supervisory Body to operationalise the mechanism 

19 November 2022 - 15 March 2023

Request for submissions by Parties and admitted observer organisations to submit their views on activities involving removals via the submission portal

23 June 2023

Article 6.4 Supervisory Body stakeholder webinar

Until 19 September 2023

Public consultation on the three SBSTA working areas on Article 6.4 (inclusion of emission avoidance and conservation enhancement, registries, authorisation of credits) 

Before SBSTA29/COP28

Technical expert dialogue on the three SBSTA working areas on Article 6.4 (inclusion of emission avoidance and conservation enhancement, registries, authorisation of credits) 

18 November 2023

The SB has approved the long-awaited recommendations on activities involving carbon dioxide removal and Article 6.4 mechanism methodologies.

30 November - 12 December 2023

CMA5/COP28 in Dubai.The Article 6.4 Supervisory Body’s recommendations on removals and methodologies have been sent for approval to CMA5. 

Unofficial Title

Article 6.4

Year

2015

Last Updated

23/06/2023

In a Nutshell

On 19 February 2024, the European Commission reached a provisional political agreement on the Carbon Removal Certification Framework (CRCF), a voluntary regulatory framework for the certification of permanent carbon removals, carbon farming and carbon storage in products. The Framework has been developed to  facilitate and speed up the deployment of  permanent carbon removal, carbon farming and carbon storage in products activities, as a complement to sustained emission reductions, fight greenwashing and harmonise carbon removal market conditions.

The provisional agreement distinguishes four types of certified activities: (1) carbon farming (which includes (a) temporary carbon storage activities and (b) soil emission reduction activities), (2) temporary carbon storage in long-lasting products, and (3) permanent carbon removal. In order to ensure the quality of carbon removals certified under the framework, removals need to meet several quality criteria (so-called “QU.A.L.ITY” criteria), covering the aspects of quantification, additionality, long-term storage, and sustainability.

Under the framework, the European Commission, assisted by an Expert Group, will develop methodologies for the certification of a range of carbon removal methods and recognise certification schemes. The certification schemes will be responsible for setting up and maintaining interoperable public registries to track and control the carbon removal units certified under the Framework. Within four years, these will be replaced by a common, Union-wide registry. Meanwhile, certification bodies, supervised by member states, will carry out certification audits and the issuing of certificates.

The provisional agreement has made important strides compared with the Commission’s first proposal, namely by aligning the definition of carbon removal with that of the IPCC; clarifying the distinction between carbon removal and emissions reductions; and defining certified activities (e.g., permanent carbon removal, carbon storage in long-lasting products) in a more inclusive and future-proof way. Other areas of progress include improved liability requirements in the event of reversal, and improved transparency and accountability through a comprehensive Union-wide registry requiring disclosure of essential information (e.g., expected duration of carbon storage, quantity and status of certified units, etc.). However, the agreed text provides only limited guardrails for how the carbon removal units generated under the framework could or should be used, indicating that other EU legislation should fill in this gap.

What's on the Horizon?

2024: In the next steps, the provisional agreement will be submitted for endorsement to member state representatives at Council level and to the European Parliament.

  • Following the last trilogue, a provisional agreement on the file was found on 19 February 2024.
  • The preliminary agreement was approved by the Council’s COREPER on 6 March and by the European Parliament’s ENVI Committee on 11 March.
  • The European Parliament plenary adopted the final text of the CRCF on 10 April 2024. The Council will need to adopt the agreement before the CRCF is published in the Official Journal of the EU.

Expert Group: The Expert Group on carbon removal kicked off their work in March 2023. Among other tasks, the group will provide technical advice to the Commission on the development of the methodologies under the CRCF. The next meeting will take in October.

Methodologies: In parallel to the legislative process, work has started on detailed methodologies for different carbon removal activities that will be set out in separate Commission delegated acts. The first methodologies are expected to be ready in 2026, while certification of the first units under the CRCF is expected in 2026/2027.

Within one year of the implementation of CRCF, the Commission will have to assess the potential inclusion of carbon storage in products in the scope of the LULUCF Regulation.

Deep Dive

Aim of the file

The stated goal of the CRCF is to facilitate the uptake of high-quality carbon removals to support the achievement of EU climate commitments, such as those under the Paris Agreement and the Climate Law. The Framework aims to create trust in carbon removals, by setting strong requirements on aspects such as monitoring and liability, and ensuring key ‘quality’ criteria are met – namely ensuring accurate quantification, additionality, long-term storage, and sustainability of certified activities. The Framework also aims to increase transparency by creating a public registry to document the generation, trading, and use of certified carbon removal units.

Meaning for climate goals

By establishing this Framework, the European Union works towards reaching its goal of climate neutrality in 2050 and net negative emissions thereafter, both of which will rely heavily on significantly upscaling carbon removal. As the first legislative file focusing primarily on carbon removal, it also enshrines at a definition for carbon removal that is aligned with scientific consensus (i.e. with IPCC) at the policy level.

By setting strong criteria around quantification, additionality, long-term storage, and sustainability, the Framework further supports a robust approach to governing carbon removal activities, which will be further supported by activity-level methodologies.

Despite these strong criteria on the supply side, the Framework does not provide a comprehensive set of guardrails around the use of units. The way carbon removal activities and units are adopted by public and private actors in their climate change mitigation strategies will strongly inform their . The Framework only states that certified units can solely be used for the EU’s climate objectives and nationally determined contribution (NDC) and should not contribute to third countries’ NDCs and international compliance schemes (e.g., CORSIA). These rules, including on the corresponding adjustments, will be reviewed in 2026. While the CRCF requirement that the four different types of units remain distinct from each other is an important step in ensuring that the greenwashing practices in the voluntary carbon market do not continue, it still leaves room for ambiguity. Strong guardrails on use are needed to simultaneously limit greenwashing and mitigation deterrence, while promoting the adoption of carbon removal by a range of actors in different sectors and activities, channelling a range of revenue streams to scaling up CDR activities.

Interaction with other legislative files

The Framework is expected to work hand-in-hand with other EU instruments to support the sustainable integration of carbon removal into climate change mitigation activities in the Union. The Framework has emerged in tandem with significant EU climate policies, namely communications on . The CRCF preamble references the CDR-supporting actions foreseen in the ICMS, and additionally highlights that ‘it is appropriate for the Commission to assess options for Union targets for carbon removals, including clearly distinguishing a separate target for permanent carbon removals’ – going further than the 2040 targets communication in terms of laying out the need to define the role of permanent CDR.

With respect to corporate claims, the CRCF will interact with the Corporate Sustainability Reporting Directive and the upcoming Green Claims Directive, which respectively set rules on how corporates report their climate action and regulate public environmental claims. The Green Claims Directive has not yet reached a provisional agreement, with only the European Parliament having adopted a mandate for the trilogues that are expected in the next legislative cycle. The Parliament is driving towards strong principles for corporate compensation claims, namely ensuring that any compensation only takes place for residual emissions, and any fossil-derived emissions must be compensated with permanent removal credits (‘like-for-like’). Any carbon removal credits used for compensation are expected to be required to be CRCF-compliant. The Parliament’s direction on the Directive also enshrines the possibility of using carbon credits (namely those certified under CRCF) towards corporate ‘contribution’ claims where, instead of compensating specific emissions, companies make a financial contribution towards an outcome, but may not claim any specific improvement in climate impact resulting from this contribution. The Council has not yet reached a position on Green Claims. The trilogue negotiations on this file are expected to commence during the next legislative cycle, after the new Parliament is in place.

Supporting strong corporate claims is only one application for the CRCF. The Framework has the potential to underpin diverse applications of CDR that broaden its uptake and contribute to the scaling-up of removals in service of EU climate goals. CRCF will certainly form the basis for recognising and rewarding land managers for carbon removal (and soil emission reduction) activities, contributing to the delivery of emission removal (and reduction) targets under the LULUCF Regulation. But, as the EU moves towards enshrining specific 2040 targets for nature-based as well as for permanent removals, the CRCF should enable the development of policies aiming to develop all types of removals (e.g. by enabling the inclusion of CDR activities in public procurement programmes, or by accounting for CDR in sectoral policies, such as building codes).

Timeline

15 December 2021
30 November 2022
7 March 2023
11 May 2023
21-22 June 2023
30 August 2023
24 October 2023
25-26 Oct 2023
17 November 2023
21 November 2023
2023
28 November 2023
23 January 2024
19 February 2024
10 April 2024
15-17 April 2024
17 June 2024
30 June 2024
9 July 2024
2024
2025
2026
15 December 2021

Communication on Sustainable Carbon Cycles by the European Commission announcing the development of the framework

30 November 2022

Proposal for the certification framework adopted by the European Commission 

7 March 2023

First meeting of European Commission expert group on carbon removals

11 May 2023
Draft report from the rapporteur in the European Parliament

 

21-22 June 2023
30 August 2023

The AGRI Committee (committee for opinion) adopted its opinion on the file

24 October 2023

ENVI Committee vote on the adoption of the ENVI report

25-26 Oct 2023
Expert group meeting on industrial carbon removal methodologies
17 November 2023

Negotiating mandate adopted by Member States in the Council

21 November 2023

EU Parliament plenary adopted the ENVI Committee report

2023

Development of methodologies for certification of different carbon removal activities

28 November 2023

Kickstart of trilogues between EU institutions

23 January 2024

Second trilogue between EU institutions

19 February 2024

Third trilogue between EU institutions. A provisional agreement was reached

10 April 2024

The EU Parliament Plenary adopted the final text of the CRCF

15-17 April 2024
4th expert group meeting (online only) which covered a wide range of topics, see agenda here
17 June 2024

Online Workshop on biochar CRCF methodology development

30 June 2024

Deadline to provide feedback on the first recommendations on carbon farming from the “Credible” project

9 July 2024

Online workshop on peatland rewetting CRCF methodology development

2024

Expected entry into force of the CRCF

2025

Commission report expected on the potential inclusion of carbon storage in products in scope of the LULUCF Regulation

2026

Commission will have to assess the potential inclusion of carbon removals with permanent storage in the EU ETS

Further reading

Unofficial Title

CRCF

Year

2022

Official Document

Last Updated

24/04/2023

In a Nutshell

The Directive for the Substantiation of Explicit Environmental Claims (Green Claims Directive) is a legislative proposal that aims to address and reduce greenwashing in consumer-facing commercial practices. It establishes minimum requirements on the substantiation and communication of voluntary environmental claims and labels that are not otherwise banned under the Directive on Empowering Consumers for the Green Transition.

To make green claims (including climate-related claims) about the environmental footprint of their products, services, and operations, companies will need to comprehensively demonstrate environmental impact and performance by submitting recognised scientific evidence and the latest technical knowledge. The Directive establishes specific requirements for distinguishing claims on environmental performance from common practice, legal obligations, and from other traders or products.

Environmental claims and labelling schemes will be verified by independent accredited bodies before being put on the market. Member states will nominate a competent national authority to supervise this process, monitor and verify the claims and substantiations on a regular basis. This monitoring will help the Commission evaluate where more specific requirements are needed and implement delegated acts accordingly.

Climate-related claims such as net zero or carbon neutrality claims based on carbon credits use, including carbon removal, fall under the remit of this Directive. To substantiate such claims companies must report offsetting and emissions data separately, specify whether offsetting relates to emissions reductions or carbon removals, and explain accurately the accounting methodology applied. Once approved and when communicating to consumers, climate-related claims must be accompanied by additional information detailing the extent of reliance on offsetting and whether it is based on emissions reductions or removals.

What's on the Horizon?

The Green Claims proposal by the European Commission is currently being discussed within the European Parliament and the Council, with the aim to come to an agreement on their positions as part of the ordinary legislative procedure, before entering interinstitutional negotiations.

2023-2024: The European Parliament and the Council will develop their positions separately.

Directive on Empowering Consumers for the Green Transition (ECGT):
  • The Council adopted its negotiating mandate regarding the ECGT Directive on 3 May. The mandate outlines the Council’s position on this directive which would lay the foundation for the Green Claims Directive.
  • The European Parliament on adopted its position on 11 May 2023, setting stricter conditions than the Commission proposal.
  • On 19 September 2023, the Council and the Parliament reached a provisional agreement on the ECGT Directive, banning carbon neutrality claims for products and services based on carbon offsetting, and setting stricter requirements for organisations to make claims based on future environmental performance. Complementing the Directive on Empowering Consumers, the Green Claims Directive will provide further guidance on the conditions to make substantiated environmental claims.
  • On 17 January 2024, the European Parliament adopted the provisional agreement on the ECGT Directive. After the Council adopts the final text, the directive will be published in the Official Journal of the EU, and member states will have 24 months to transpose it into national law.

Green Claims Directive (GCD):

  • The ENVI and IMCO Committee (joint committees responsible) adopted their report on 14 February 2024, which was adopted by the Parliament plenary on 12 March 2024.
  • The Council aims to adopt this file’s general approach on 17 June 2024.
  • 2024- 2025: Following trilogues between EU institutions, the Directive is expected to be formally adopted and transposed by member states.

Deep Dive

Policy Landscape

The Green Claims Directive complements the Empowering Consumers Directive published by the European Commission on 30 March 2022 within the EU. Together, they aim to improve the circularity of the EU’s economy and achieve climate neutrality. They set requirements to substantiate environmental claims made to consumers and other commercial practices.

Apart from the French ministerial decree n°2022-538, the Green Claims Directive is a first of its kind in the specificity with which it regulates environmental claims and addresses climate-neutrality claims. The French decree regulates advertising claims based on emission compensation projects. It has different requirements surrounding emissions reporting, compensation data, and net zero plans.

Aim

The Green Claims Directive proposal addresses the issue of greenwashing, increasingly prevalent in recent years. It seeks to standardise environmental claims and labels to improve transparency and credibility for consumers. The proposal aims to use delegated and implementing acts in the future to address substantiation methodologies for specific product groups and evolving commercial practices.

The preamble of the proposal states that climate-related claims are prone to being unclear and misleading, as they are often based on offsetting greenhouse gas (GHG) emissions through carbon credits of low environmental integrity and credibility, generated outside the company’s value chain and calculated based on methodologies that vary widely in transparency, accuracy, and consistency. Offsetting can also deter traders from reducing emissions in their own operations and value chains.

However, credible net zero claims have the potential to incentivise and drive the development of safe, just and sustainable carbon removals to transition towards real climate neutrality. Claims based on offsetting must be regulated through a robust and science-based system to prevent greenwashing.

Room for improvement

Unfortunately, the Green Claims Directive as it currently stands does not establish the necessary measures to do so:

  • The Directive does not align with scientific consensus as it allows offsetting through emissions reductions and avoidance to substantiate carbon neutrality claims. The IPCC’s definition of net zero is clear: balancing emissions with physical removals. Accordingly, offsetting projects that avoid emissions, but do not physically remove and store carbon, must be barred from use in substantiating claims about net climate impacts.
  • The proposal rightly requires companies to report GHG emissions separately from offsetting data, to disclose the share of their total emissions that are addressed through offsetting and whether these come from emission reductions or removals. This isn’t enough to monitor whether the claimed climate impacts are real. There is a need for more extensive disclosure on the types of carbon credits companies are purchasing (avoidance, reduction, removals), which emissions they are claiming compensation for, and the methodologies used to ensure integrity and correct accounting.
  • The proposal allows all types of offsetting without any clear criteria for which emissions they can compensate for, nor which climate claims they can substantiate. However, not all carbon storage is equal in terms of capacity, duration or reversal risk. This means that long-lived fossil fuel emissions otherwise impossible to abate can only be balanced by removals with high-durability storage in the geosphere where the carbon came from. Lower-durability removal and storage of carbon into the biosphere must be accelerated for its own sake, to halt and reverse the loss of ecosystems and natural carbon stocks but cannot be eligible to compensate for fossil fuel emissions. Failing to enshrine this non-fungibility principle in EU law would allow companies to continue offsetting their long-lived emissions through shorter-term carbon storage with higher risks of reversal.
  • Although the Directive encourages companies to use offsetting only for residual emissions, it provides no robust definition for what constitutes these residual or ‘hard-to-abate’ emissions. Without a sector-specific and measurable definition, companies can weaken emissions cutting efforts by manipulating the boundary between emissions that must be reduced’ and ‘emissions that physical removals can offset’. The EU will need to establish a transparent process for classifying emissions as difficult-to-decarbonise.
  • The proposal excludes from its scope environmental claims and labels substantiated by rules in the Carbon Removal Certification Framework (CRCF). However, the proposal for the CRCF has no rules for claim substantiation. Instead, the Green Claims Directive could establish guardrails for legitimate net zero claims, which could be substantiated through the purchase of high-quality carbon removal credits certified under the CRCF.

Timeline

11 March 2020
20 July 2020
25 November 2020
30 March 2022
22 March 2023
11 May 2023
6 June 2023
19 September 2023
17 January 2024
14 February 2024
12 March 2024
17 June 2024 (TBC)
11 March 2020

The EU Circular Economy Action Plan sets out the plan to support the EU’s transition to a circular economy, including by protecting consumers

20 July 2020

Impact assessment and public consultation on substantiating green claims

25 November 2020
30 March 2022
22 March 2023

European Commission publishes the proposal for Green Claims Directive (GCD)

11 May 2023

European Parliament adopts its position on the ECGT Directive

6 June 2023

Deadline to provide feedback to the Commission on the GCD legislative proposal

19 September 2023

The Council and the Parliament reached a provisional agreement on the ECGT Directive

17 January 2024

The EU Parliament adopted the ECGT Directive

14 February 2024

Joint report of the lead ENVI and IMCO Committees on the GCD adopted

12 March 2024

European Parliament plenary adopted the GCD joint report

17 June 2024 (TBC)

Council to adopt its general approach on GCD

Unofficial Title

Green Claims

Year

2023

Official Document

Last Updated

24/04/2023