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

The Net Zero Industry Act (NZIA) is a legislative proposal from the European Commission from March 2023 that aims to provide a stable and simplified regulatory environment to support the scale-up of net zero technologies. The NZIA aims to reach a goal of at least 40% manufacturing capacity of strategic net zero technologies in the EU according to annual deployment needs.

The Act sets out enabling conditions, streamlined permitting processes, and one-stop shops for net zero technology manufacturing projects. It differentiates between ‘net zero technologies’ (at least TRL 8) and ‘innovative net zero technologies’ (lower TRL, and can benefit from regulatory sandboxes to foster innovation). It proposes a list of eight strategic net zero technologies that would benefit from even faster permitting process within what are defined as “net zero strategic projects”:

  • Solar photovoltaic and solar thermal technologies,
  • Onshore wind and offshore renewables,
  • Battery/storage,
  • Heat pumps and geothermal energy,
  • Electrolysers and fuel cells,
  • Sustainable biogas/biomethane technologies,
  • Carbon capture and storage (CCS),
  • Grid technologies.

The Act establishes an annual EU CO2 injection capacity goal of 50 million tonnes. This goal will be adjusted when the regulation is incorporated into the EEA Agreement to account for additional capacity in Norway and Iceland and is expected to grow post-2030; according to the Commission’s estimates, the EU could need to capture up to 550 million tonnes of CO2 annually by 2050 to meet the net zero objective, including for carbon removals.

In one of the world’s firsts, oil and gas producers are subject to an individual contribution to this target, making them directly responsible for building and operating the newly mandated CO2 injection capacity. The contributions will be calculated based on a “pro-rata” basis, accounting for their share of oil and gas production within the EU during 2020-2023.

The Act also aims to facilitate access to markets through public procurement, auctions, and support for private demand. It focuses on ensuring the availability of skilled workforce and foresees net zero industrial partnerships with third countries.

What's on the Horizon?

The Parliament plenary adopted the text on 25 April and the Council on 27 May. The final text now needs to be published in the Official Journal of the EU and will enter into force on the day of its publication.  

To provide dedicated funding support to scale up clean technologies, the Commission was set to propose a European Sovereignty Fund by Summer 2023 within the context of the multi-annual financial framework (MFF). On 20 June, the Commission proposed, instead, to establish a ‘Strategic Technologies for Europe Platform’ (STEP), to provide an immediately available tool to member states. A provisional agreement on the STEP was reached on 7 February.

By the end of 2028, the Commission must assess the balance between CO2 capture, transport and storage capacity. Member states may be able to ask for adjustments in their contributions in case of an imbalance. The Commission must also propose a potential CO2 injection capacity by 31 December 2028.

A market assessment for captured CO2 will be conducted after three years of entry into force, potentially leading to legislative proposals to address shortcomings, especially for hard-to-abate emissions.

Four years after the entry into force, the Commission also needs to assess the possibility of including other technologies in the list of net-zero technologies, opening a window of opportunity for CDR. The evaluation will take into account: (1) updates to the National Energy and Climate Plans, (2) the Strategic Energy Technology (SET) Plan and (3) the State of the Energy Union Report.

Deep Dive

As one pillar of a larger Green Deal Industrial Plan, the NZIA is meant to strengthen and support the EU’s capacity to reach its climate goals. It ensures Europe seizes the potential to be a world leader in the global net zero industry in the context of strong support for net zero technologies coming from different parts of the world, such as the United States’ IRA.

(Strategic) net zero technologies

The NZIA proposes key developments for net zero technologies. Two main aspects of the definition are particularly relevant: (1) the definition is not technology-neutral, it identifies key areas to be addressed, and further lists a family of eight strategic net-zero technologies, which benefit from even faster permitting, priority status, and in some circumstance of overriding public interest, and (2) net zero technologies must be at least Technology Readiness Level (TRL)  8. CDR is not explicitly listed as a strategic net zero technology, and the TRL 8 requirement would exclude most CDR methods. However, if based on TRL only, some could fall under the definition of ‘innovative net zero technologies’, e.g., some forms of direct air capture are considered TRL 7. This flaw of the proposal could be addressed by co-legislators by adding carbon removal in the definition of net zero technologies and in the related annex.

CO2 injection capacity target to incentivise CO2 storage infrastructure

The NZIA proposes a 50 million tonnes per year of CO2 injection capacity in the EU by 2030. The act rightly identifies the lack of storage capacity as one of the largest bottlenecks for CO2 capture investments. One of the key aspects of the act is the transparency of CO2 storage capacity, including the obligation for member states to make publicly available data on sites that can be permitted on their territory, as well as reporting on CO2 capture projects in progress, and their needs for injection and storage capacity. The NZIA clarifies that CO2 injection capacity will also be available to accommodate CDR, but provisions are not proposed to ensure the shared CO2 infrastructure can efficiently be used to accommodate both CCS and CDR methods. A comprehensive and coordinated approach to carbon management that considers both CCS and CDR is needed to ensure that limited CO2 storage capacity is used effectively to reach the EU’s climate neutrality targets. The target will need to be continuously reassessed to meet the storage needs in the EU, especially beyond 2030. Furthermore, separate provisions to ensure adequate transport infrastructure should be foreseen. The European Commission estimates that about 550 million tonnes of CO2 may need to be captured annually by 2050 to meet the net zero objective.

Oil and gas producers’ responsibility to develop the EU CO2 injection capacity has the potential to be a world-leading initiative

The NZIA Article 18 introduces an innovative obligation on oil and gas producers to take responsibility for building EU CO2 storage infrastructure subject to the EU’s injection capacity target. This obligation could introduce an element of producer responsibility for fossil fuel producers in a similar way as producers of packaging, car tires, and other products are required by law to take responsibility for the environmental footprint of end-of-life disposal. If confirmed, this provision would also allow the development of open carbon storage sources by mapping and hosting transparent, open data on carbon storage resources, much of which is held today by private companies. Critical details of this obligation, such as how different sources of CO2 for storage are prioritised or barred, which entities, beyond oil and gas producers, are required to build the CO2 infrastructure, and the procedures to determine their location remain open and need further attention.

Fresh funding is needed

The proposal establishes new initiatives, such as the “Net Zero Europe Platform”, that will discuss the financial needs of the net zero strategic projects and could be key in advising how the financing of these projects can be achieved. Beyond this, the NZIA is anchored in already existing funding mechanisms such as Innovation Fund, InvestEU, Horizon Europe, Important Projects of Common European Interest (IPCEI), the Recovery and Resilience Facility, and Cohesion Policy programmes. Clarity on new and additional funding will be key, as bigger goals will require bigger means that can support the variety of CDR methods at different TRL stages.

Timeline

1 February 2023
16 March 2023
26 May 2023
13 June 2023
19 June 2023
27 June 2023
20 September 2023
25 October 2023
21 November 2023
7 December 2023
13 December 2023
22 January 2024
6 February 2024
22 February 2024
25 April 2024
27 May 2024
31 December 2028
1 February 2023

The Green Deal Industrial Plan Communication

16 March 2023
26 May 2023

Publication of Draft Report by MEP Christian Ehler

13 June 2023

Deadline for submission of amendments – ENVI Committee

19 June 2023

Deadline for submission of amendments – ITRE Committee

27 June 2023

Deadline to provide feedback to the Commission on the NZIA proposal

20 September 2023

ENVI Committee adopts draft opinion

25 October 2023

ITRE Committee vote

21 November 2023

EU Parliament plenary adopted the parliament’s report

7 December 2023

The Council adopted its general approach

13 December 2023

First trilogue on the file

22 January 2024

Second trilogue on the file

6 February 2024

Third trilogue on the file. The EU Parliament and the Council reached a provisional agreement.

22 February 2024

ITRE Committee adopted the provisional agreement

25 April 2024

The EU Parliament plenary adopted the provisional agreement

27 May 2024
31 December 2028

Deadline for the Commission to potentially propose a CO2 injection capacity target for 2040

Unofficial Title

NZIA

Year

2023

Official Document

Last Updated

24/04/2023

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

In a Nutshell

Nature Restoration Targets is a legislative proposal from the European Commission that would set legally binding targets for nature restoration in Europe. The aim is to mitigate biodiversity loss, ecosystem degradation and climate change, and to boost human and animal health by complementing the EU’s existing framework for protecting ecosystems. If adopted, the regulation would be the first continent-wide, comprehensive law of its kind.

By 2030, the targets would ensure restoration of at least 20% of degraded EU land and sea areas, and the remaining ones by 2050. The proposed legislation covers a broad range of ecosystems with specific targets, from forests and agricultural land to urban areas, rivers and marine habitats, with emphasis on restoring those with the highest potential for carbon removal and storage, and for prevention and reduction of natural disasters. Member States would be required to develop Nature Restoration Plans, to be assessed by the Commission, and to report on their progress toward meeting domestic targets.

Many aspects of the law would promote carbon removal. The draft law prioritises the restoration of damaged terrestrial and aquatic ecosystems that have significant potential for carbon removal. This includes ecosystems such as peatlands, forests, grasslands, marshlands, heathland and scrub and coastal wetlands. Focusing on damaged and carbon-rich ecosystems is thought to be cost-efficient (as well as critical for climate change mitigation) because the monetised benefits from carbon storage could outweigh the cost of restoring ecosystems by a factor of six. It is still unclear how the Commission expects to monetise carbon removals through nature restoration, but it has proposed that Member States fund their restoration efforts through the EU, national and private sources.

Under the proposed regulation, agricultural ecosystems across member states must achieve a trend of increasing organic carbon stocks in cropland and mineral soils. This trend must be evident at the national level, be measured at least every three years and is mandated to increase until satisfactory levels have been attained. Moreover, many ‘high-diversity landscape’ agricultural practices overlap with good soil management protocols for reducing soil loss, such as terracing and buffer strips. Reducing topsoil erosion is fundamental to soil carbon sequestration.

What's on the Horizon?

The draft Law faced political opposition from the EPP and the Conservatives and was almost withdrawn.

On 27 June, the ENVI Committee rejected the Commission’s proposal on the Nature Restoration Law. On 12 July, the Parliament rejected the EPP’s call to reject the law. It voted in favour of a common approach to the file, which had to be watered down to gather support.

Interinstitutional negotiations started in July 2023. The Spanish Presidency has signalled that the Nature Restoration Law will be one of its priorities. A provisional agreement was reached between the European Parliament and the Council. Both parties now need to formally adopt the agreement before the law is published in the Official Journal of the EU. On 29 November 2023, the Parliament’s ENVI Committee voted in favour of the provisional agreement, and on 27 February 2024, the EU Parliament Plenary adopted the agreement.

Initially scheduled for 25 March 2024, the Council vote has been postponed to an unknown date, possibly until after the EU elections. Currently, there is not enough support from member states for the law to be adopted. On 14 May 2024, eleven member states, led by Ireland, signed a letter calling other countries to approve the law. The Nature Restoration Law has been added to the provisional agenda of the next Environment Council on 17 June 2024, which might result in a vote on the file.

Deep Dive

Giving teeth to EU environmental rules

The proposed Nature Restoration Law sits at the intersection between European climate and biodiversity policies, demonstrating the interconnected nature of these crises. If passed, the Law would contribute toward the EU’s delivery of its 2050 climate neutrality target, especially if the range of ecosystems in scope remains as broad and numerous as proposed. Many ecosystems constitute natural carbon sinks; restoring them can help draw down more carbon from the atmosphere and the Law’s legally binding targets will prioritise the restoration of those that have the highest potential to capture and store carbon.

In general, this law would add rigor to the EU’s existing environmental law regime. To date, the efficacy of these schemes has suffered from lack of targets, deadlines and procedural clarity. The EU has, so far, failed to meet its voluntary goals (for example, the Convention on Biological Diversity’s voluntary target to restore at least 15% of its degraded ecosystems by 2020 was missed).

Another advantage of the law would be new data sources that will be gathered as part of the national Restoration Plans and reports, such as mapping any agricultural and forest areas that need restoration that would highlight areas of carbon depletion, which may help fill data gaps on terrestrial carbon flows.

Additionality and the CRCF

It is still unclear how the Nature Restoration Law would intersect with the EU Carbon Removal Certification Framework (CRCF). The Commission has proposed that carbon farming through restoration of peatlands and other ecosystems be eligible for certification under CRCF. However, the introduction of the Nature Restoration Law will have implications for the additionality rules in the CRCF, which state that carbon removal activities must exceed standard practices and legal requirements to be certified. By changing legalities and norms governing nature restoration, and by extension terrestrial and aquatic carbon-enhancing practices, the Nature Restoration Law might limit which carbon farming projects can be certified under the CRCF.

Status of the stakeholder debate

There is a strong case for increased ambition for the Nature Restoration Law. Parliament’s rapporteur, MEP César Luena, is advocating for raising the proposed target of restoring 20% of the EU’s land and seas by 2030 to 30% in line with the global decision adopted in December at the COP15 UN Biodiversity Conference in Montreal. Additionally, under the current proposal, the majority of the restoration action is postponed until after 2030; it takes time for the carbon benefits of nature restoration measures to materialise. Hence, policy-makers should bring the timeline forward to ensure these measures contribute to the EU’s net zero and biodiversity goals.

Questions remain as to how much flexibility member states will have in their implementation of the law. Some are particularly concerned about the impact of this regulation on farmers and foresters and, by extension, European food security and sovereignty (although the perceived trade-off between ecological restoration and EU food security has been challenged). For example, farmers and foresters may be obligated to transition to more sustainable practices, which may result in additional costs. Several voices in the Parliament’s Agriculture Committee argue that the proposed law should better integrate the interests of farmers by excluding agriculture from the scope, or ensuring nature restoration is economically attractive to farmers with new non-CAP financing.

There are similar concerns as to whether the new regulation adequately accounts for the socioeconomic role of forests. The proposed law aims to legally protect all remaining primary and old-growth forests. This stipulation is a particularly contentious issue for Nordic and Baltic countries with large forestry sectors. The European Landowners’ Organisation (ELO) decries the lack of new financing or market-based incentives for forest owners to preserve their land under the new law.

Overall, policy-makers should assess the existing EU funding available for nature restoration and what further financial support is needed while also establishing dialogue and coordination with landowners and farmers. For example, the ENVI Committee’s report could require the Commission to reflect on the creation of a dedicated nature restoration fund. Policy-makers should also not overlook the  potential for new green jobs to be created as a result of the regulation.

Timeline

20 May 2020
22 June 2022
20 June 2023
27 June 2023
12 July 2023
19 July 2023
5 October 2023
9 November 2023
29 November 2023
27 February 2024
17 June 2024
20 May 2020

European Commission Biodiversity strategy for 2030 setting out the long-term plan to protect nature and reverse the degradation of ecosystems

22 June 2022

European Commission adopts the proposal for a Nature Restoration Law

20 June 2023

The EU Council agreed on a general approach on the proposal for a Nature Restoration Law.

27 June 2023

The ENVI committee (the lead EU Parliament committee for this file) rejected the Commission’s proposal for the EU nature restoration law as amended by the ENVI Rapporteur of the file (44 pro, 44 against)

12 July 2023

The EU Parliament adopted a common approach to the Law and rejected the EPP’s call to reject the Law.

19 July 2023

First trilogue negotation

5 October 2023

Second trilogue negotiation

9 November 2023

Provisional agreement between the EU Parliament and the Council reached after the third trilogue negotiation

29 November 2023

The EU Parliament ENVI Committee voted in favor of the provisional agreement

27 February 2024

EU Parliament plenary adopted the provisional agreement

17 June 2024

Potential vote on Nature Restoration Law during Environmental Council

Year

2022

Official Document

Last Updated

24/04/2023