In a Nutshell

The Regulation on Trans-European Networks in Energy (TEN-E) sets out guidelines for cross-border energy infrastructure within the EU.  

Introduced in 2013 to improve physical interconnections between national energy markets and to ensure the security of energy supply, a revised TEN-E Regulation entered into force in June 2022. The revision was triggered by the publication of the European Green Deal which required amendments to align the TEN-E Regulation with the new climate and energy targets.   

As part of delivering on the aims of the legislation, the TEN-E regulation also outlines the process for selecting projects of common interests (PCIs). PCI are infrastructure projects recognised as essential to meeting the EU’s energy objectives, including greater competitiveness and improved interconnection between national markets. The revision of the regulation in 2022 introduced another category of projects entitled Projects of Mutual Interest (PMIs), which concern projects that involve at least one third country whilst bringing significant benefits to at least two EU member states. The PCI/PMI status is important since it makes projects eligible for funding under the Connecting Europe Facility for Energy (CEF). 

The TEN-E Regulation is significant for carbon removal since it identifies cross-border CO2 networks as a priority thematic area. This type of infrastructure involving CO2 transport and storage is needed for some CDR methods, such as direct air carbon capture and storage (DACCS) and bioenergy with carbon capture and storage (BECCS). By enabling the construction of CO<2 networks, the TEN-E Regulation and the CEF are therefore key to building a CO2 value chain for some CDR methods.  

What's on the Horizon?

The Commission will release its 7th PCI list by the end of 2025.  

A new call for proposals under CEF-Energy opened on 30 April 2024 and will close on 22 October 2024. EUR 850 million are available to co-finance studies and works for PCIs and PMIs.

Deep Dive

The TEN-E Regulation is one of three “Trans-European Networks”: transport (TEN-T), energy (TEN-E) and telecommunications (eTEN). Alongside the TEN, the Connecting Europe Facility has been created to stimulate investments in TEN sectors and to leverage funding from public and private sources.in TEN sectors and to leverage funding from public and private sources. 

The TEN-E Regulation’s role is to provide a common policy framework for cross-border energy infrastructure planning, support the modernisation and expansion of energy infrastructure, connect isolated countries to EU gas and electricity networks, secure and diversify the EU’s energy supplies and increase the integration of renewable energy sources. Initially primarily focused on enhancing the resilience of the EU natural gas and electricity networks, the revised regulation now focuses on four priority issue areas: electricity corridors, offshore grid corridors, priority corridors for hydrogen and electrolysers and priority thematic areas. The latter include smart electricity grid deployment, smart gas grids and cross-border carbon dioxide networks.  

Projects of Common and Mutual Interest  

The main feature of the TEN-E Regulation is the designation of trans-border energy projects as “Projects of Common/Mutual Interest” (PCI/PMI). Projects granted such status by the European Commission benefit from a streamlined permit-granting procedure, with their development facilitated by member states. While the absolute number of PCIs has been declining over time, especially when it comes to natural gas, the number of CO2 infrastructure projects granted PCI/PMI status has been steeply increasing. While this surge of CO2 network projects is promising, most PCIs are concentrated around the North Sea region. Some countries, mostly in Central and Eastern Europe, are not involved in any PCIs related to CO2 networks, including Estonia, Romania, Austria, Malta, Slovakia, the Czech Republic, and Portugal. Moreover, several large emitting countries like France, Italy, Poland and Spain are underrepresented in the PCI list compared to their relative and absolute emissions. For a truly European-wide CO2 network to be developed, these member states could better incentivise the development of national and cross-border CO2 infrastructure. 

To date, two CO2 storage projects have been granted PMI status, the 6th PCI list being the first one to officially grant projects the status as PMI since the revised TEN-E Regulation entered into force. The two projects are located in the North Sea area, with Norway being the final storage destination. 

The Connecting Europe Facility 

The Connecting Europe Facility (CEF) Regulation reserved a budget of EUR 5.84 billion for TEN-E projects for the period 2021-2027, focusing on projects with the PCI or PMI designation. The EU has allocated funding that can be provided for various project stages, including feasibility studies and construction; more than 640 million has been awarded for CO2 infrastructure projects between 2022 and 2023 

What to improve 

Through the TEN-E Regulation, the EU is addressing a key issue for the scaling up of EU-wide CDR capacities: the need for sufficient trans-border CO2 networks. When combined with the Net Zero Industry Act’s CO2 storage target of 50 Mt by 2030 and the measures that will follow the Industrial Carbon Management Communication, it is clear that the EU is taking steps to address the need for a significant scale-up in the availability and capacity of CO2 networks in Europe.

Future revisions of the TEN-E Regulation should consider several points. Firstly, the scope of the regulation should be made tech-neutral. Currently, CO2 networks are defined as infrastructure for CO2 “captured from industrial installations for the purpose of geological storage as well as carbon dioxide utilisation for synthetic fuel gases leading to the permanent neutralisation of carbon dioxide”. Depending on the interpretation of this definition, infrastructure moving atmospherically and biogenically-sourced CO2 would not be eligible for the PCI status. This ambiguity should be addressed to make it possible for all types of removed carbon to have free and equal access to CO2 infrastructure. Moreover, the regulation should clearly acknowledge the role of industrial CDR as part of industrial carbon management. Such recognition would be aligned with the target for carbon removal introduced in the 2040 target communication, and with the role foreseen for industrial CDR in the Industrial Carbon Management communication. Finally, the TEN-E Regulation and other EU laws related to CO2 transport and storage, namely the ETS Directive, the Industrial Emissions Directive and the CCS Directive, should be better integrated. Issues such as CO2 transport by other means than pipelines and CO2 quality standards should be harmonised within these laws. 

Timeline

2013
October 2013
January 2014
November 2015
November 2017
October 2019
December 2020
January 2021
November 2021
June 2022
December 2022
November 2023
December 2023
30 April 2024
22 October 2024
2013

Entry into force of the first version of the TEN-E Regulation

October 2013

Adoption of the first PCI list

January 2014

Entry into force of the first version of the CEF Regulation 

November 2015

Adoption of the second PCI list

November 2017

Adoption of the third PCI list

October 2019

Adoption of the fourth PCI list 

December 2020

Adoption by the EU Commission of the proposal for a revision of the TEN-E Regulation

January 2021

Entry into force of the revised CEF Regulation

November 2021

Adoption of the fifth PCI list  

June 2022

Entry into force of the revised TEN-E Regulation 

December 2022

Three CO2 transport and storage projects were awarded a total of EUR 160 million of CEF funding

November 2023

Adoption of the sixth PCI list 

December 2023

Four CO2 transport and storage projects were awarded a total of EUR 480 million of CEF funding 

30 April 2024

Opening of call for proposals under CEF-Energy for PCIs and PMIs

22 October 2024

Closing of of call for proposals under CEF-Energy for PCIs and PMIs

Official Document

Unofficial Title

TEN-E Regulation 

Status

Year

2013

In a Nutshell

The London Protocol prohibits all forms of marine dumping unless explicitly permitted to control marine pollution.

The London Protocol was introduced in 1996 to modernise and eventually replace the “Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, 1972″, also known as the London Convention. The Protocol was developed and agreed to by the International Maritime Organisation (IMO) and entered into force in 2006. It introduced a ‘reverse list’ approach, which outlines wastes and other matters that can be considered for dumping. Carbon dioxide used to be excluded from this list.

The London Protocol is of high significance for carbon dioxide removal, as it provides the international legal basis for sub-seabed geological storage of CO2 and for transboundary CO2 transport in international marine environments. The London Protocol also regulates marine geoengineering, which includes ocean fertilisation.

As the result of an amendment to the Protocol adopted in 2006, carbon dioxide is one of the wastes that can be considered for dumping in marine environments under specific conditions. This amendment provided the legal basis in international law for CO2 sequestration in sub-seabed geological formations and entered into force in 2007.

Until recently, the transboundary transport of CO2 for the purposes of sub-seabed geological storage was prohibited by the Protocol. A legal solution was found in 2019, allowing individual parties to the Protocol to opt in and get permission to conduct such activities, following an amendment adopted in 2009 still pending entry into force.

What's on the Horizon?

The first bilateral arrangement regarding the transborder transport of CO2 for geological storage under Article 6 of the London Protocol was signed between Belgium and Denmark on 26 September 2022. Several other European countries have signalled their willingness to adopt such arrangements and have already engaged in bilateral processes, such as Norway, the Netherlands, Finland, Sweden and Switzerland.

Deep Dive

Background on the London Convention and the London Protocol

The London Convention, established under the International Maritime Organisation, was adopted in 1972 and entered into force in 1975. It consisted of a grey list of substances that could be considered for dumping under strict control and a black list of substances that were prohibited under any condition. All other substances could be dumped after a permit had been issued.

Adopted in 1996, the London Protocol replaces the Convention and is built around the precautionary principle. Except for the substances listed in its reverse list in Annex 1, the dumping of any substance is strictly prohibited. When it entered into force in March 2006, the list comprised seven substances, including sewage sludge and dredged material.

Inclusion of CO2 in the reverse list

A 2006 amendment included CO2 streams from carbon dioxide capture and sequestration in waste and other forms of dumping materials.  It stipulates that levels of radioactivity shall not be greater than those specified in the Protocol, the CO2 captured must be disposed of in sub-seabed geological formations, the stream must consist overwhelmingly of CO2, and no wastes or other matters can be added for the purpose of disposing.

Transborder transport of CO2

In the initial text of the Protocol, Article 6 prohibited the export to other countries of all substances for dumping or incineration at sea. In 2009, Norway submitted an amendment proposal to allow the export of CO2 streams for disposal in sub-seabed geological formations, provided that an agreement or arrangement is made between the countries concerned. This amendment was adopted in late 2009. However, it has yet to enter into force as of August 2023, as fewer than two-thirds of the parties to the Protocol have ratified it so far. The countries that have ratified it are Norway, the UK, the Netherlands, Iran, Finland, Estonia, Sweden, Belgium, Denmark and the Republic of Korea. Germany and France are in the process of ratifying the amendment.

To avoid this legislative roadblock, Norway and the Netherlands co-filed a resolution to allow the provisional application of the 2009 amendment. They claimed that the EU CCS Directive provided sufficiently strong protection for human health and environmental safety. This resolution was adopted in 2019, meaning that two countries or more can now export CO2 for sub-seabed geological storage, provided that they have ratified the Article 6 amendment and submitted a formal declaration of provisional application to the IMO. The first bilateral arrangement was signed between Belgium and Denmark on 26 September, 2022. Several other European countries have signalled their willingness to adopt such arrangements, such as Norway, the Netherlands, Finland and Switzerland.

Marine geoengineering within the London Protocol

The London Protocol provides one of the few international legal frameworks around marine geoengineering, defined as “a deliberate intervention in the marine environment to manipulate natural processes, including to counteract anthropogenic climate change and/or its impacts, and that has the potential to result in deleterious effects, especially where those effects may be widespread, long-lasting or severe”.

In 2008, parties to the Protocol adopted a resolution to regulate ocean fertilisation, deciding that such activities are against the aims of the Convention and the Protocol unless conducted for legitimate scientific purposes. It also called for the creation of a framework to assess scientific research proposals. In 2013, parties to the Protocol adopted another resolution to provide a regulatory framework not only for ocean fertilisation but for other marine geoengineering activities, such as alkalinity enhancement, seabed rocks mineralisation or deposition of crop wastes on the seabed. Eligible activities are listed in Annex 4 of the resolution, and it currently only consists of ocean mineralisation. Therefore, other types of marine geoengineering are currently prohibited under the London Protocol. It is to be noted that this resolution is non-binding, meaning that parties could choose not to respect it without clear consequences.

Timeline

1972
1975
1996
March 2006
November 2006
2007
2009
2013
2019
26 September 2022
1972

Adoption of the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter

1975

Entry into force of the London Convention

1996

Adoption of the London Protocol to update and eventually replace the London Convention

March 2006

Entry into force of the London Protocol

November 2006

Adoption of an amendment to the Protocol to allow sub-seabed geological storage of CO2

2007

Entry into force of the November 2006 amendment to the London Protocol

2009

Amendment to the London Protocol to allow transboundary CO2 transport

2013

Amendment to the Protocol to regulate marine geoengineering, including ocean fertilisation

2019

Permission of provisional application of the 2009 CO2 transport amendment through bilateral arrangements

26 September 2022

Denmark and Belgium signed the first bilateral agreement on cross-border transportation of CO2 for the purpose of permanent geological storage

Unofficial Title

The London Protocol

Year

1996

In a Nutshell

The EU Carbon Border Adjustment Mechanism (CBAM) is the EU’s landmark tool to prevent carbon leakage and support the EU’s increased climate ambitions. It works by putting a price on carbon emitted during the production of carbon-intensive goods entering the EU to incentivise cleaner industrial production in non-EU countries.  

Carbon leakage refers to the process of shifted production and/or emissions to other jurisdictions with less stringent emission constraints. It is one of the key obstacles for the EU to reach its climate commitments. The CBAM was designed to specifically address this risk. Carbon leakage can occur when a domestic carbon price negatively impacts the competitiveness of an entity operating in this domestic context. This increased cost might result in the entity shifting its production to another country with a lower carbon price to reduce production costs. For example, a steel producer might consider relocating its production outside of the EU to avoid paying for the carbon it emits. Another possible instance of carbon leakage occurs when non-domestic producers that are not subject to the price of carbon enjoy significant competitive advantages compared to domestic producers, resulting in a shift of production abroad.  

The sectors that will first be covered by the CBAM are energy-intensive industries, namely cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. When fully phased in, the CBAM will capture approximately 50% of the emissions covered by the EU Emission Trading System (ETS). 

The CBAM is based on the purchase of certificates by importers, which represent the embedded emissions in the imported goods. The price of the certificates will be calculated based on the weekly average auction price of EU-ETS allowances, equivalent to Euro per tonne of CO2 emitted.  

The CBAM will in principle apply to the imports of goods from all non-EU countries. However, countries participating in the EU ETS and Switzerland are excluded from the mechanism.  

Even though carbon removal has not been taken into account by the CBAM yet, the system provides opportunities to create incentives for CDR. There could be several ways to include CDR in the context of CBAM, including using CDR to directly reduce embedded emissions or to compensate for embedded emissions.  

What's on the Horizon?

Transitional phase 1 October 2023 to end of 2025: Under the Commission’s proposal, importers will have to report emissions embedded in their goods subject to CBAM without paying a financial adjustment in a transitional phase, providing stakeholders with some time to prepare for the final system to be put in place. 

Implementing acts are expected to be drafted and released throughout the transitional phase until 2026, though no clear timeline has yet been established. These include implementing acts on the calculation of default values for embedded indirect emissions and authorised declarant conditions and registries. A delegated act on certificates sale and repurchase is to be expected as well. Clarifications on the methodology for counting embedded carbon emissions, with separate methodologies for different sectors and goods, are also to be expected.   

An ongoing public consultation is taking place in the United Kingdom on whether it should introduce an equivalent system to the EU CBAM or not.  

Deep Dive

While the CBAM does not include CDR explicitly yet, there are a strong rationale for including it and several different ways it could be included.  

 The CBAM is intended to mirror the conditions that European Economic Zone actors experience when they emit carbon and fall subject to the EU Emissions Trading System (ETS). Assuming the EU-ETS includes permanent CDR within its scope to enable participants to reduce net emissions in 2030 at the earliest, a case can be made to integrate removals in the CBAM to make the two mechanisms work under the same rules. This would require clear rules on MRV mechanisms, with removals limited to hard-to-abate sectors. The CBAM could integrate CDR within its scope first, as it gradually phases in starting 2026.   

CDR could be included either directly or indirectly within the CBAM: 

  1. By authorising importers to buy durable removals to compensate a share of the embedded emissions and reduce their CBAM obligations. A clear mention of this measure could be made in Article 7. This addition could be done in accordance with the forthcoming CRCF by clearly specifying that only permanent removals are allowed. 
  2. By recognising CDR as a way to reduce a product’s overall embedded emissions, therefore reducing the product’s net-direct emissions. For example, a steel-making factory in a non-European country could buy durable CDR credits in its country of operations to reduce the product’s emissions. 

The revenues generated by the CBAM will go to the general EU budget. Since the CBAM covers many hard-to-abate sectors that will likely continue generating GHG emissions in the long term, it could be argued that some of the revenues generated by the CBAM could be used to incentivise/support CDR development/deployment. A share of the revenues could be used to finance the Innovation Fund 

Including CDR within the CBAM does come with some risks, among them the risk of greenwashing and disincentivising decarbonisation along value chains. While the CBAM itself might not contain the tools needed to tackle these two risks, other EU legislations could help address these risks. Greenwashing will likely be prevented by the Green Claims Directive, whilst the EU-ETS incentivises European companies to reduce their emissions.  

Whether CDR could be used to circumvent the CBAM or not should be clearly defined, and if yes, clear eligibility criteria should be created and agreed upon. Effectively, only high-quality removals should qualify, and priority should be given to reducing embedded emissions in the first place. EU policymakers still need to discuss and agree on the methodologies related to embedded emissions accounting, which could provide some opportunities to promote a stringent and robust approach to CDR under the CBAM. For example, indirect emissions could be reduced or even negated if BECCS is allowed in the methodology. 

CBAM in perspective 

The CBAM is not only considered an essential tool to achieve the EU’s climate objectives but also serves to ensure the EU’s industrial competitiveness with the rest of the world. However, while it puts European production on a level-playing field with imported products, European exports are currently still at a disadvantage. How this issue is tackled remains to be seen, as carbon leakage could still occur if a company shifts its share of European production going to the rest of the world outside of the EU.  

Other geographies are also engaging with similar ideas. The United Kingdom is currently going through a public consultation as to whether it should introduce a CBAM. Interestingly, one of the questions asked pertains to whether carbon credits should be used to offset emissions. The United States is currently reviewing the “Clean Competition Act”, which would create a CBAM for the USA. California has already put in place a system similar to the CBAM regarding electricity imports in some situations, and Canada is considering adopting a border carbon adjustment mechanism. 

Timeline

15 July 2021
10 May 2023
16 May 2023
17 August 2023
1 October 2023
31 January 2024
2025-2026
1 January 2026
2035
15 July 2021

Proposal for a Regulation of the European Parliament and of the Council establishing a Carbon Border Adjustment Mechanism adopted by the European Commission. 

10 May 2023

Adoption by the EU Parliament and the Council. 

16 May 2023

Publication in the Official Journal of the EU.  

17 August 2023

The EU Commission adopted detailed reporting rules for the CBAM’s transitional phase.

1 October 2023

CBAM entered into force in its transitional phase. Importers only need to report until 2026, after which they will be required to pay financial adjustments.

31 January 2024

First reporting period for traders ends. 

2025-2026

Report reviewing how the CBAM is working and whether to extend its scope to more products and services to be published. 

1 January 2026

The permanent CBAM system will gradually enter into force while the free ETS allowances for CBAM sectors will be gradually phased out.

2035

All free ETS allowances will be phased out, thus CBAM will apply to all emissions in the sectors covered. 

Status

Unofficial Title

CBAM

Year

2023

Official Document

Last Updated

24/07/2023

In a Nutshell

The Common Agricultural Policy (CAP) aims to support farmers and ensure Europe’s food security. It sets out the EU legal framework and funds the support member states can provide to agriculture, forestry, and rural development. It has a double objective of ensuring Europe’s food security and incentivising environmentally friendly agriculture. 

The CAP has greatly evolved since its creation in 1962. In its latest iteration, the CAP 2023-2027 pursues 10 overreaching objectives aimed at ensuring agricultural productivity and farmers’ income while encouraging environmentally friendly practices.  

The total budget of the CAP 2023-2027 amounts to EUR 386.6 billion. The budget is divided into two funds, which are often referred to as the two pillars of the CAP:  

Each country implements the CAP 2023-2027 at their national level through a CAP Strategic Plan. These plans operationalise the numerous targeted interventions each country undertakes while contributing to the ambitions set by the European Green Deal 

Direct payments to support farmers are granted on the condition that they implement “good agricultural and environmental conditions” (GAEC). Around 90% of the total European utilised agricultural area (UAA) is covered by this conditionality. Furthermore, 25% of direct payments are optional and require farmers to implement eco-schemes (specific to each country) rewarding environmentally friendly farming. 

Carbon dioxide removal (CDR) and the CAP interact closely in several important ways. Practices that improve carbon sequestration in soils and ecosystems have many overlaps with soil health and agriculture and thus the CAP. The CAP provides an array of measures aiming to incentivise agroforestry practices, as well as the maintenance and restoration of land ecosystems. Finally, enhanced weathering and biochar are two novel CDR methods that also intersect with farming and may thus interact with the CAP in the future. 

There is, however, a dual dynamic within the CAP. On the one hand, some measures within the CAP still indirectly promote intensive farming practices depleting soil carbon stocks. On the other hand, more and more measures are targeted towards improving soil carbon stocks. The significant leeway provided to member states in their implementation of national measures means that the contribution of CAP to carbon removals varies across the EU.

What's on the Horizon?

As a response to the farmers’ protests across the EU, the Commission proposed a targeted review of the good agricultural and environmental conditions (GAEC) of the CAP. This review would reduce administrative burdens for farmers and but also waters down some of the CAP’s environmental criteria. The EU Parliament plenary adopted the targeted review on 24 April. The Council now needs to formally adopt it before it enters into force.

The CAP 2023-2027 and the national CAP Strategic Plans entered into force on 1 January 2023. In 2024, countries will have to report to the EU Commission on their performances. In 2025, the national CAP Strategic Plans will be reviewed by the EU Commission.  

A new obligation to protect wetlands and peatlands will be included in the CAP by 2025 at the latest; wetlands and peatlands are part of the conventional CDR methods.  

The Commission will propose an improved methodology to ensure that the contribution of the CAP to climate action is correctly measured and accounted for by 2026 at the latest. 

Deep Dive

National Strategic Plans and support mechanisms  

Within the CAP 2023-2027, CAP National strategic plans operationalise the CAP’s policy objectives at the national level.  

The CAP amounts to 20% of the total EU budget and plays an enormous role in the EU’s intervention in the land sector. It provides different support mechanisms:  

  • income support through direct payments, among others, to incentivise environmentally friendly practices; 
  • market measures to deal with difficult market situations; 
  • rural development measures (national and regional programmes to address specific needs and challenges). 

Each member state has relative freedom to distribute funding across these three types of support mechanisms and can freely allocate up to 25% of its budget between income support and rural development. The CAP Strategic Plans outline this allocation and describe which measures will be supported within each member state. The CAP 2023-2027 puts higher emphasis on tracking outcomes by setting an annual performance report and a biannual review process for national plans, assessing progress towards their goals and the 10 CAP overarching objectives. 

Direct payments use the biggest share of the CAP funding and are conditional to Good Agricultural and Environmental Practices (GAEC), which include measures on maintaining a minimum soil cover, limiting erosion and maintaining soil organic matter, and requiring farmers to save at least 3% of their arable farmland for non-productive areas/features with the possibility to get support to extend it to 7% of the arable land. The new CAP introduces a requirement prohibiting drainage, burning or extraction of peat from peatlands. This prohibition could have a favourable impact on peatlands, allowing them to serve as carbon sinks rather than as sources of carbon emissions.  

While a large share of utilised agricultural area (UAA) is set to be farmed under GAECs, only a limited share is set to be under commitments to reduce emissions or to maintain or enhance carbon storage, which includes permanent grassland, permanent crops with a permanent green cover, agricultural land in wetland and peatland. Moreover, this share varies dramatically between countries, from 0% to 85%. The metrics used in the strategic plans are also not the same; some mention the peak coverage year (note: peak year also varies between countries) while others use the average over the 2023-2027 period. It is quite concerning to see that several states currently have no measures to increase soil carbon storage. Experts have also raised the question of whether the measures proposed are enough to reach the objectives set in the strategic plans. 

Eco-schemes 

Additional subsidies in the form of eco-schemes can be made available to states as a reward for more environmentally friendly practices. Eco-schemes support various types of voluntary actions that go beyond the CAP’s obligation of conditionality. These include practices related to agro-forestry and carbon farming among others. The Commission has published an extensive list of examples. However, it includes only a handful of practices linked to CDR. Member states are not exploiting this opportunity to the fullest, as only a minority of them plan to use eco-schemes in relation to CDR. Some environmental NGOs raised concerns questioning the eco-schemes’ true environmental benefits. 

Carbon farming and related debates 

The recent communication by the EU Commission on “Sustainable Carbon Cycles” has highlighted that the CAP should be one of the primary mechanisms to promote carbon farming at the European level, together with LIFE and Horizon Europe’s “Soil Deal for Europe”. The Commission encouraged states to include measures to incentivise carbon farming in their strategic plans. The current efforts on the Carbon Removal Certification Framework (CRC-F), among others, aim to clarify what good carbon farming practices mean. 

There are, however, several issues related to carbon farming that need to be discussed and tackled with high priority.  

Firstly, carbon farming is a very loaded term. The EU defines it vaguely as “a green business model to reward farmers for adopting practices leading to carbon sequestration”. Therefore, carbon farming as an economic concept and the underlying practices it encompasses should be separated in order to differentiate the business model from the underlying practices.  

Secondly, there is a strong opportunity in the CRCF to make clear that the durability of carbon sequestration in soil is lower than for other CDR methods. Any market-facing claims need to be strictly regulated to ensure that fossil emissions are not compensated for through such practices.  

Thirdly, soil carbon sequestration comes along with many co-benefits besides carbon removal. These include improved soil quality, positive biodiversity impacts and better water retention. These practices should thus be incentivised. However, key questions remain, such as who should pay, and be paid, to implement these practices and what the basis for payment should be. 

Finally, the measuring, reporting and verification (MRV) of soil carbon fluxes is still very much a work in progress. There is currently a trade-off between the accuracy of results and the costs/scalability of methodologies. The EU has yet to determine how best to deploy MRV and at which geographical scale and granularity. The purpose of MRV deployment should be better defined. Furthermore, the commodification of sequestered soil carbon requires more strenuous MRV. 

Timeline

1962
1984
1992
2003
2014-2020
2021
2021-2022
2 December 2021
January 2023
December 2023
2024
15 March 2024
15 April 2024
24 April 2024
2025
2026
2027
1962

Launched in 1962. 

1984

First big reform of the CAP to bring production closer to what the market needs. 

1992

Shift from market support to producer support through direct payments to farmers. Farmers are incentivised to endorse more environmentally friendly practices. 

2003

The CAP introduces income support tied to environmental, food safety and animal health and welfare requirements

2014-2020

The CAP is once again reformed to increase the competitiveness of the sector, promote sustainable farming and support rural areas. 

2021

The EU Parliament, the Council and the Commission agree on the need to reform the CAP again and shift implementation responsibilities.

2021-2022

A transitional agreement is put in place while the reform is negotiated. 

2 December 2021

Adoption of the CAP 2023-2027.  

January 2023

The CAP 2023-2027 and the CAP strategic plans enter into force. 

December 2023

The EU Commission will submit a report to assess the joint CAP strategic plans in reaching Green Deal targets.

2024

Each country will present an annual performance report. 

15 March 2024

The EU Commission proposed a targeted review of the CAP

15 April 2024

Adoption of the targeted review by the AGRI Committee (Committee responsible)

24 April 2024

EU Parliament plenary adopted the targeted review

2025

The Commission will conduct its first performance review of the CAP strategic plans. 

2026

The Commission will conduct an interim evaluation of the CAP 2023-2027.

2027

The Commission will conduct a second performance review of the CAP strategic plans.

Status

Unofficial Title

CAP

Year

1962

Official Document

Last Updated

24/07/2023

In a Nutshell

The European Climate Law (ECL) sets a Union-wide, legally binding obligation to reach net zero greenhouse gas emissions by 2050. The EU Institutions and member states are bound to adopt the necessary measures to meet the target; the Law provides a solid foundation on which to anchor future EU climate policy. 

The Climate Law addresses the necessary steps to reach the end goal of net zero greenhouse gas emissions by 2050. The Law sets a more ambitious target of at least 55% emissions reductions by 2030 compared to 1990s levels, up from the previous 40% target. The 2030 targets are one part. The Law also includes a process for setting EU climate targets for 2040, which are currently in the making. The Law is a central element in achieving the European Green Deal and was the starting point of a set of proposals by the EU Commission set out in the Fit-for-55 package 

Carbon dioxide removal (CDR) is explicitly and implicitly referred to throughout the text. It introduces a distinction between emissions reductions and removals within the EU 2030 emissions reduction target, capping the contribution of land-based CDR through natural sinks based on the Land-Use, Land-Use Change, and Forestry (LULUCF) Regulation. Additionally, the ECL acknowledges the urge to enhance carbon sinks whether through natural or technological solutions. A commitment to achieving negative emissions after 2050 is also included in the Law. 

What's on the Horizon?

By 30 September 2023, and every five years thereafter, in line with the Paris Agreement stocktake exercise, the European Commission will assess the collective and individual progress of member states towards achieving the 2050 climate neutrality objective and assess progress on climate adaptation. 

Looking ahead, since the EU climate law gives legal teeth to the principle of net negative emissions, the need to reflect this objective in parallel EU climate legislation such as the EU Emissions Trading System (EU-ETS) carbon pricing mechanism is starting to gain traction. The Commission is expected to produce a report by 2026 regarding the feasibility of integrating removals within the system. 

Additionally, since the climate negativity target binds member states on a collective basis, the distributional question of how to operationalise the effort sharing deriving from this target will also have to be addressed in future policy developments. 

Deep Dive

Separate targets for emissions reductions and removals 

The climate law formally enshrines the objective to increase the EU’s interim 2030 emissions reduction target from 40% to at least 55% compared to 1990 levels. 

When the European Commission first came up with this proposal to step up ambition, moving from 40% gross to 55% net emissions reductions, it was criticised for creating a net target that did not differentiate between reductions and removals. Academic voices and campaigners responded by initiating a campaign calling for separate targets, which the European Parliament took on board as part of its own negotiating mandate. Campaigners indeed voiced the fear that an overreliance on carbon removal risked distracting from or delaying action on emissions reduction, leading to the so-called “moral hazard” or “mitigation deterrence” effect. 

The recommendation to account separately for carbon sinks was finally mirrored in the ECL, as the 2030 target included a capped contribution of 225 million tonnes of carbon dioxide removal through natural sinks, linking to the pre-existing commitment made under the LULUCF Regulation. Since then, the LULUCF Regulation has been revised and the nature-based target was increased to 330 million tonnes by 2030, de facto increasing the ambition of the 2030 targets. However, the capped contribution of 225 million tonnes remains.  

No definition of carbon removal nor hard-to-abate emissions 

Despite formally acknowledging the need to balance emissions with removals, the ECL does not introduce a definition of what constitutes carbon dioxide removal. The Law mostly refers to removals as natural sinks, de facto looking at the CDR contribution mainly through the lenses of land use and forestry. 

However, this gap in the definition could be expected to be addressed in the proposal for a carbon removal certification framework, which the ECL mentions in the context of enhancing carbon sinks and supporting carbon farming. 

Finally, the Law acknowledges the role of “removals of greenhouse gases” as a necessary second step to avoiding emissions at source and compensating for residual emissions from “sectors where decarbonisation is the most challenging”, without further elaborating on what constitutes a hard-to-abate emission or sector. Hard to abate emissions should be explicitly defined. 

Some acknowledgements of technology-based solutions 

The role of more engineered forms of removals, including those enabled by carbon capture and storage technology, is not expanded upon in the Law. One reference is however made in the legislation to the “sinks” that will be needed to balance anthropogenic emissions including both “natural and technological solutions.” 

The climate law also includes a recital on the need to promote investment certainty and to introduce policy incentives for technological innovations that can fast-track the transition to a climate-neutral economy, providing an indirect legal hook for the scale-up of CDR solutions. 

Lastly, whilst the quantified contribution of natural sinks is specified in the ECL, no target is given for other forms of removal methods. 

An aspirational, non-binding target for technological solutions was however subsequently proposed as part of the European Commission’s communication on sustainable carbon cycles, which calls for a 5 million tonnes objective by 2030, thereby giving a strong signal to investors and formally recognising the need to increase research and deployment for these types of solutions. 

New Scientific Advisory Body 

The law officially establishes the launch of an independent scientific body to provide unbiased advice on the EU’s climate neutrality pathway and encourages member states to set up their own entities to do so. 

Interestingly, the ECL specifically mandates the advisory body to provide scientific knowledge on climate modelling and monitoring but also on “promising research and innovation” which contribute to increasing removals, indirectly mandating the advisory body to assess the potential of more emerging types of carbon removal methods. 

Right-sizing the EU carbon budget for the 2040 climate target 

The climate law enshrines the objective for the European Commission to propose an intermediate 2040 climate target within six months of the first global stocktake exercise of the Paris Agreement. For transparency and accountability purposes, the law notes that the European Commission will in parallel publish an indicative greenhouse gas budget for the period spanning 2030-2050 defined as the total net greenhouse gas emissions (expressed as CO2 equivalent and providing separate information on emissions and removals) that are expected to be emitted without compromising the Paris Agreement. The law specifies that here too, the recommendations of the Advisory Board will be solicited and that the Commission will publish the underlying methodology used. 

Timeline

November 2019
December 2019
October 202
December 202
April 2021
July 2021
November 2022
September 2023
November 2019

EU Parliament declares climate emergency and urges EU member states to commit to net zero GHG emissions by 2050

December 2019

European Commission presents its European Green Deal flagship plan to make Europe the first climate-neutral continent by 2050

October 202

European Parliament adopts its negotiating mandate, notably calling for a 60% emissions reduction target and a separate accounting of removals and emissions

December 202

Council adopts general approach endorsing the -55% net emissions reduction target for 2030 

April 2021

The three EU institutions reach a political agreement 

July 2021

The EU Climate Law enters into force, formally enshrining the climate neutrality target into binding legislation

November 2022

Deal reached on increasing the carbon sink capacity of the EU through land use and forestry sector

September 2023

EU Commission to deliver its first report, and every five years thereafter, in line with the Paris stock taking exercise

Status

Unofficial Title

EU Climate Law (ECL)

Year

2021

Official Document

Last Updated

14/07/2023

In a Nutshell

The Renewable Energy Directive (RED) aims to increase the share of renewable energy sources (RES) within the European Union’s final energy consumption. It establishes a common framework for the development of renewable energy capacity in the European Union and sets a binding target for the share that renewable energy represents within the EU’s final energy consumption.

In its 2021 revision, the Commission proposed increasing the target minimum share of RES in the EU’s final energy consumption to 40% in 2030 (RED III), an increase of 8 percentage points compared to its 2018 recast (RED II), which had established a minimum RES share of 32% of final energy consumption in 2030. Since the 2021 proposal, the binding renewable target has been raised to a 42.5% RES share in 2030 as part of the RePower EU Package (RED IV). RePower EU follows the Russian invasion of Ukraine and an increasing need to reduce dependency on Russian gas.

The Directive is particularly relevant for bioenergy with carbon capture and storage (BECCS), as it regulates the use of biomass and biofuels for energy generation, affecting the feasibility of introducing BECCS in the EU, and its potential scale. RED is also highly relevant to carbon dioxide removal (CDR) methods that rely on a stable supply of renewable and lowemissions energy, such as direct air carbon capture and storage (DACCS).

The RED also impacts biomass-based CDR methods beyond BECCS. Due to the high expected demand and relatively limited supply of eligible types of biomass, competition may arise between actors proposing different potential uses for biomass. Biomass use also affects carbon storage in biogenic carbon sinks. For example, forests can be a biogenic carbon sink, provide timber, and provide residual harvest biomass for bioenergy production.

What's on the Horizon?

  • A tentative political agreement on RED III was reached between the EU Parliament and the EU Council on 30 March 2023. This agreement was due to be formally approved on 17 May, but a last-minute disagreement over the role of low-carbon hydrogen produced using nuclear energy in the EU’s decarbonisation targets led to the process being postponed.
  • On 19 June, the EU Council reached an agreement on RED III. The European Parliament Committee responsible for the file approved the text on 28 June. A plenary vote in the European Parliament took place on 12 September, during which the EP voted in favour of the revision. The Council adopted the final text on 9 October 2023. The text was published in the Official Journal of the EU on 31 October 2023 and entered into force on 20 November 2023.
  • The energy policy framework for the post-2030 period is under discussion.

Deep Dive

Making sense of the Renewable Energy Directive

To help deliver on the EU’s increasing climate ambitions, including the EU-wide 55% emissions reduction target by 2030 and the target to achieve net neutrality by 2050, the targets set by the RED have been repeatedly increased. As a result, the RED has evolved from RED I to its latest version, RED IV. Starting from a target of 20% RES as a share of total final energy consumption by 2020 set in 2009, RED I was revised as part of the “Clean energy for all Europeans” package in 2018 to include a target of a 32% RES share by 2030, thereby becoming RED II.

In July 2021, as part of the “Fit-for-55” package, RED III was proposed and the target was raised to 40% by 2030. Following the Russian aggression against Ukraine, the Commission proposed a first amendment (RED IV) with a target of 45% as part of its “REPowerEU” plan. In November 2022, the Commission proposed a second amendment for a Council regulation to accelerate RES deployment.

In March 2023, the EU Parliament and the Council reached a tentative agreement to raise the target to a 42.5% RES share by 2030. Member states will need to increase their national contributions in their integrated National Energy and Climate Plans (NECP), which are due to be updated in 2023 and 2024, to collectively achieve the target. Achieving the target would bring EU member states’ total renewable energy generation capacity to 1236 GW by 2030.

RES considered within the RED’s scope include wind, solar, hydro, tidal, geothermal, and biomass. The binding target is supported by differentiated targets for a variety of sectors, such as heating and cooling, industry, and transport. The provisional agreement under RePowerEU also aims to remove barriers to the scale-up of renewable energy generation by making permitting processes for renewable energy installations quicker and easier. To this end, member states will define regions (so-called ‘go-to areas’) with limited environmental risks and high renewable energy generation capability, in which the permitting procedure shall be simplified. 

The RED and its impacts on biomass use

Biomass is considered a RES within the provisional agreement, provided that its use meets several sustainability criteria. These include requirements that woody biomass used in energy generation follows the cascading principle – ensuring that biomass of higher quality should serve purposes demanding higher-quality biomass first – and that forest biomass may not be harvested from areas with particular significance with regard to carbon stocks or biodiversity. Furthermore, no financial support shall be granted when energy facilities use stumps and roots for energy generation (as they are considered important, for example, to protect soil carbon stocks) or when they use high-quality biomass that should be reserved for other use cases under the cascading principle, such as industrial-grade roundwood, veneer logs, and saw logs.

The provisional agreement sets out a new binding combined target of 5.5% for advanced biofuels, generally derived from non-food-based feedstocks, and renewable fuels of non-biological origin, mostly renewable hydrogen and hydrogen-based synthetic fuels, in the share of renewable energy supplied to the transport sector. The increasing need for advanced biofuels that use biomass as a feedstock may conflict with the demand for the lower-quality biomass upon which several CDR methods rely, such as BECCS and biochar.

Where does BECCS fit in?

The recognition of biomass as a renewable energy source affects the feasibility and potential scale of BECCS. BECCS can both provide renewable energy and remove carbon dioxide from the atmosphere. The 2021 proposal states that member states should not support electricity production from installations producing only electricity, as opposed to, for example, installations producing both heat and power), unless these installations are located in regions included in the Just Transition Plan, or if the installations used CCS technologies to capture and store the associated (biogenic) CO2 emissions.

Currently, negative emissions stemming from BECCS cannot contribute towards targets set under any of the three main legislative pillars of EU climate action, namely the EU Emissions Trading System (EU ETS), the Effort Sharing Regulation (ESR), and the LULUCF Regulation.

The RED: Are sustainability criteria enough to ensure the sustainable use of biomass?

The role of biomass within the RED is important. While sustainability criteria exist to prevent the misuse of biomass for energy generation, the demand for biomass may increasingly exceed supply. Some communities might be adversely impacted, especially in terms of resource use and food security. It is therefore critical that future revisions of the RED take these concerns into consideration.

Timeline

1997
2001
2003
2009
2018
2021
2022
30 March 2023
17 May 2023
19 June 2023
12 September 2023
9 October 2023
31 October 2023
20 November 2023
1997

Energy for the future: renewable sources of energy, indicative EU target of 12% renewables by 2010.

2001
2003
2009

RED I: EU target of 20% renewables by 2020 and national binding targets

2018

RED II: 32% renewables target for 2030 – This is the piece of legislation that is currently in force

2021

RED III: EU Green Deal: EC proposal to raise target for 2030 to 40%

2022

RED IV: REPowerEU Plan: EC proposal to raise target for 2030 to 45% (voted as part of RED III)

  • Parliamentary position agreed & endorsed 14/09/2022 
  • Council general approach agreed on 29/06/2022. 
30 March 2023

Council and Parliament reach provisional agreement on the revision

17 May 2023

A last-minute objection postponed the adoption of the revision of the Directive

19 June 2023

The Council reached an agreement on its position

12 September 2023

The EU Parliament voted in favour of the revision

9 October 2023

The Council adopted the final text

31 October 2023

The Directive was published in the Official Journal of the EU

20 November 2023

Entry into force of RED III

Status

Year

1997

Unofficial Title

RED

Official Document

Last Updated

19/06/2023

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

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. The Council will need to formally adopt it, likely on 27 May 2024, before it is published in the Official Journal of the EU and becomes EU law.  

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 (TBC)
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 (TBC)

The Council is to adopt the provisional agreement

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

The EU Emissions Trading System (EU ETS) is a market-based approach for setting a price for carbon dioxide (CO2) emissions. It works on a ‘cap and trade’ basis whereby a ‘cap’ or limit is set on the total greenhouse gas (GHG) emissions allowed from specific sectors of the economy each year, with the aim of achieving emissions reductions over time. This cap is converted into tradable emission allowances, which are then allocated to market participants through free allocation or auctions. One allowance gives the holder the right to emit one tonne of CO2 (or its equivalent) during a specified period. Companies covered by the EU ETS must monitor and report their emissions each year and purchase or trade allowances as needed to cover their annual emissions.

Participants who are likely to emit more than their allocation have a choice between taking measures to reduce their emissions or buying additional allowances; either from the secondary market, for example companies who hold allowances they do not need, or from member state-held auctions. When participants reduce their emissions, they can either sell their allowances or keep them for the future.

The ETS is the EU’s main tool for addressing emissions reductions, covering the following sector, representing about 40% of the EU’s total CO2 emissions: power, heat generation, energy intensive industrial sectors, aviation, and, since the latest revision, the maritime sector. It is now in its fourth trading phase (2021-2030). In December 2022, the European Parliament and Council reached a political agreement on the reform of the ETS. The overall target of the revised ETS was increased to a 62% reduction in carbon emissions from the sectors covered by the scheme by 2030, up from 42.8% since its introduction in 2005.

Carbon removal is not included under the EU ETS, but the Commission is set to report, by 2026, on how negative emissions could be accounted for and covered by emissions trading.

The Innovation Fund, a key source of EU support for nascent carbon removal projects amongst other clean technologies, is funded by the auctioning of ETS allowances. At 75 euro/tCO2, the ETS is set to provide around EUR 38 billion from 2020 to 2030 to the Fund.

What's on the Horizon?

The provisional political agreement reached between the European Parliament and Council in late 2022 needs to be formally adopted before the Regulation can enter into force:

  • 18/04/2023: Formal adoption by the European Parliament
  • 25/04/2023: Formal adoption by the Council of the European Union
  • 16/05/2023: Publication in the Official Journal of the European Union
  • 05/06/2023: Entry into force

By 31 July 2026, the European Commission is required to submit a report to the Parliament and the Council on the possibility of integrating negative emissions technologies (NETs) into the EU ETS. This should explore how emissions removed from the atmosphere through methods such as direct air capture can be safely and permanently stored, and how these negative emissions can be accounted for and covered by emissions trading without compromising necessary progress in reducing emissions.

By 31 July 2026, the Commission will have to assess and report on the possibility of including the municipal waste incineration sector in the ETS with a view to including it from 2028.

Deep Dive

Update to the ETS

The ETS was revised as part of the Commission’s ‘Fit for 55’ package, which aims to introduce new or improve existing legislative tools for achieving the EU’s target of reducing net GHG emissions by at least 55% below 1990 levels by 2030. The proposed changes to the ETS include:

  • Increased ambition to reduce emissions by 62% in the sectors covered by the ETS by 2030  and reduction of the cap by 4.3% per year in 2024-2027, and by 4.4% in 2028-2030.
  • End of free allowances for sectors covered by the Carbon Adjustment Mechanism (CBAM) in 2026-2034.
  • Phase-out of free emissions allowances for aviation (25% in 2024, 50% in 2025 and 100% from 2026).
  • Inclusion of maritime shipping in the ETS.
  • Creation of a separate ETS for the building and road transport sectors, applying to the distributors that supply fuels for combustion. A new Social Climate Fund will direct part of the revenue from the auctioning to support vulnerable households and micro-enterprises.
  • Increase in the Modernisation Fund and Innovation Fund.
  • Strengthening the market stability reserve (MSR), the mechanism to help prevent excessive carbon price fluctuations.

Support for CDR through the Innovation Fund

Although the EU ETS is designed to incentivise emissions reductions as opposed to carbon removals, money raised through auctions of emission allowances under the ETS are reinvested into the EU’s Innovation Fund, which provides a source of funding support for technology-based CDR methods among other low-carbon technologies.

For more information on the link between CDR and the Innovation Fund, see here.

Should carbon removal be integrated into the EU ETS?

The inclusion of carbon removal (with permanent storage of captured carbon) in the EU ETS is subject to a nascent and growing debate in the EU policy ecosystem, in anticipation of the announced Commission report. Integrating negative emissions into the ETS would allow participants to offset a portion of their emissions by purchasing carbon removal credits. This, in turn, could create a potential long-term market for CDR.

Including removals in the EU ETS could have a number of benefits. As the ETS allowance cap is steadily reduced over time, integrating negative emissions would create additional market liquidity and decarbonisation options for hard-to-abate sectors. It would therefore help to satisfy demand for removal credits or allowances from hard-to-decarbonise sectors like aviation and would allow for carbon removal credits to be easily integrated into existing market infrastructure and trading platforms.

Carbon removal project developers and investors would gain greater confidence that there will be sustainable long-term demand for carbon removal credits. It would also allow removal projects to benefit from the carbon price. However, the price differential between the cost of CDR and the EU ETS carbon price will be a key consideration. The EU ETS would only incentivise CDR solutions within a certain range of the ETS price. This could be sufficient for some approaches such as BECCS (cost at scale  USD 15 – 400/tCO2) and waste-to-energy with CCS, but additional incentives would be needed for direct air capture given its higher price point (cost at scale USD 100 – 300/tCO2) – although this is expected to change as technologies improve and costs of different methods decrease. Complementary incentive mechanisms such as Carbon Contracts for Difference (CCfDs) could bridge the gap between the actual cost of certain CDR methods and the EU ETS carbon price to drive the investment needed. The Commission is considering CCfDs as part of the overall agreement on the revision of the ETS Directive.

However, it is imperative that the potential inclusion of carbon removal credits in the EU ETS does not undermine the incentive for emitters covered by the ETS to decarbonise, or the urgency with which they should do so. One option to address this risk would be to limit access or quantities of removals to specific sectors that are harder to decarbonise and more likely to have residual emissions.

Another important consideration is the impact that any inclusion of CDR in the EU ETS would have on the integrity of the market. Developing robust monitoring, reporting and verification (MRV) standards would safeguard the integrity of the ETS. The introduction of these standards is underway under the EU’s CRCF legislation.

An alternative approach might be establishing a separate, regulated negative emissions market. This separate market could later be linked with the EU ETS after the differential between CDR and ETS prices has been reduced and CDR technologies have a demonstrated track record at scale.

The EU ETS & other markets

The EU ETS was the world’s first international emissions trading system when it was set up in 2005. It has since inspired the development of emissions trading in other countries and regions, including most recently the UK and China. The potential role of the UK ETS as a market for CDR was signalled in July 2023, when the UK Government stated its intention to include Greenhouse Gas Removals (GGRs) in the UK ETS, subject to further consultation, a robust MRV regime being in place and the management of wider impacts. In 2017, the EU and Switzerland signed an agreement to link their emissions trading systems. The agreement entered into force on 1 January 2020, and the link became operational in September 2020.

Timeline

27 October 2004
ETS Phase 1 (2005-2007)
ETS Phase 2 (2008-2012)
ETS Phase 3 (2013-2020)
ETS Phase 4 (2021-2030)
14 July 2021
18 December 2022
2026
27 October 2004

Entry into force of Directive 2004/101/EC establishing a scheme for GHG emission allowance trading

ETS Phase 1 (2005-2007)

The cap is set based on estimates. The majority of allowances are given for free, and ETS covers CO2 emissions from power generators and energy-intensive industries.

ETS Phase 2 (2008-2012)

The cap is lowered around 6.5% in comparison to 2005, based on actual emissions. Around 90% of the allocations are given for free, and auctions are held. N₂O emissions are included by certain countries. The aviation sector is included in 2012.

ETS Phase 3 (2013-2020)

National caps are traded with a EU-wide cap. Default auctioning method replaces the free allocation system, and the scope is expanded to include more sectors and gases.

ETS Phase 4 (2021-2030)

Current trading phase

14 July 2021

Proposal for a revision of the EU ETS released as a part of the Fit for 55 package

18 December 2022

Provisional agreement between co-legislators on the revision of the EU ETS

2026

Commission’s report on the inclusion of negative emissions in the ETS expected

Further reading

Status

Unofficial Title

EU ETS

Year

2022

Official Document

Last Updated

24/04/2023

In a Nutshell

The proposal for a Soil Monitoring Law introduces a monitoring framework for all soils across the European Union. The proposed directive establishes a definition of what constitutes healthy soil. The law aims to present the information necessary to monitor European soils’ health and provide incentives for sustainable soil management.

In the proposal, soil health is defined as ‘the physical, chemical and biological condition of the soil determining its capacity to function as a vital living system and to provide ecosystem services’. Healthy soils have the potential to draw significant amounts of CO2 from the atmosphere. However, EU soils are losing their ability to retain carbon and are actually emitting CO2, exacerbating climate change. Peatland drainage and soil erosion linked to agriculture and human settlements are just some of the reasons behind this carbon loss and associated emissions. In turn, the declining quality of EU soils might impact future food production.

The proposal’s most important feature is the introduction of a harmonised methodology and rules for soil health monitoring across the EU. Although some room is left for member states to decide how to implement the directive, it establishes common Union-wide criteria to assess whether a soil body is ‘healthy’ or ‘unhealthy’. The framework would create a common database integrating data from EU-level, member state and private sources. Member states will be required to regularly and accurately measure soil health using the framework. 

The law significantly lacks a legally binding objective to achieve soil health across EU territory by 2050. If monitoring shows that EU soils are unhealthy, there is no obligation for member states to restore soil health. Thus, this law does nothing to ensure that soil health is achieved.  

What's on the Horizon?

The EU Commission published its legislative proposal on 5 July 2023.

The proposal will be subject to interinstitutional negotiations in the European Parliament and Council. 

A public feedback period on the European Commission’s proposal was open until 27 November 2023. 

The ENVI Committee adopted its report on 11 March 2024. The EU Parliament plenary agreed on its negotiating position on 10 April 2024, which waters down the Commission’s proposal.

The Council is expected to adopt its general approach on 17 June 2024.

Deep Dive

Context of the law

In 2021, the European Parliament requested that the Commission develop an EU-wide common legal framework for the protection and sustainable use of soil. The 2023 Framework proposal followed up on this request. Soil health also plays a key role in delivering existing EU strategies and targets, including the EU Biodiversity Strategy for 2030, the EU Soil Strategy for 2030 and the 8th Environment Action Programme 

Reaching the new climate objectives set under the European Green Deal, as well as ensuring a stable food supply, relies on healthy soils. In the proposal, the Commission reports that an estimated 61% to 73% of agricultural soils in the EU are affected by erosion, loss of organic carbon, nutrient exceedances, compaction or secondary salinisation, or a combination of these threats, which not only impacts soil carbon sequestration but also food production capacities. For example, crop yields can be reduced by 2.5-15% by soil compaction. It is estimated that around 75 billion tonnes of organic carbon are stored in EU soil. As a point of reference, the EU’s total CO2 emissions were about 4.5 billion tonnes in 2017.  

What does it look like in practice?

The proposal for a directive applies to all soils in the territory of member states. Under the Framework, member states are required to delineate their territories in ‘soil districts’, which is a newly defined governable unit introduced in the directive. Some loosely defined parameters to determine soil districts are laid out in the proposal. A competent authority designated by each member state will be assigned for each soil district. Member states are then required to establish a monitoring framework based on a set of criteria laid out in the directive, ensuring comparability of measurement across soil districts and member states. Most importantly, the European Union now has a measurable definition of soil health. Using this framework, member states are required to accurately and regularly measure soil health. The Directive lays out methodologies to do so and an obligation to measure soils at least every five years.   

Under this proposed directive, member states would also be required to set up a mechanism for voluntary soil health certification, viewed as a way to incentivise the uptake of sustainable soil management practices by land owners. As per the current proposal, this certification would be complementary to the Carbon Removal Certification Framework (CRCF). This linkage is still unclear and needs to be further clarified by the Commission.

Room for improvement

The Commission’s plan to create a strong soil health monitoring framework is a positive move for Europe. It will help foster healthier soils, potentially leading to greater quantities of carbon being absorbed. Carbon Gap especially welcomes the establishment of measurable common thresholds for soil health across a wide range of variables, minimum criteria for determining sampling points, an EU-wide soil health assessment and reporting system, and a digital portal to make soil data publicly accessible as important steps towards boosting Europe’s soils through a harmonised framework.  

However, it is important to recognise that monitoring soil health does not necessarily mean that soil health will be improved. The proposed directive would better serve its purpose if it included a legally-binding target for soil health by 2050 holding member states accountable for their stated goal. Another concern is that the proposed frequency of measurement and the timelines for reporting cycles is insufficient. Effectively, if the law enters into force as it stands today, the first soil measurements would only be required within four years. New soil measurements would then be required every five years, meaning that it would take close to a decade before a clear view is established of whether EU soils are recovering, protected or enhanced.  

While the Commission’s desire to incentivise sustainable soil management principles is welcome, its proposed mechanism of soil health certification for land owners and managers raises concerns. The suggested link to the CRCF warrants scrutiny as soil health and soil carbon are not interchangeable, soil carbon fluxes are difficult to measure accurately at scale, and the durability of soil carbon storage is low. Therefore, soil health certificates should not be sold as carbon credits or used to contribute toward net-zero targets. Rather, these certificates might be supported by entities wanting to make contribution claims or do good for the environment and society.

Timeline

17 November 2021
24 October 2022
5 July 2023
24 October 2023
3 November 2023
13 November 2023
27 November 2023
18 December 2023
13 February 2024
11 March 2024
10 April 2024
17 June 2024 (TBC)
17 November 2021

EU soil strategy for 2030

24 October 2022

Public consultation on new soil health legislation

5 July 2023

The EU Commission published its legislative proposal

24 October 2023

The ENVI Comittee published its draft report on the file

3 November 2023

Public feedback period deadline on the European Commission’s proposal 

13 November 2023

The AGRI Committee (committee for opinion) published its draft opinion

27 November 2023

Deadline to submit amendments to ENVI Committee draft report

18 December 2023

First policy debate on the file for the European Council

13 February 2024

AGRI Committee adopted its opinion report

11 March 2024

ENVI Committee adopted its report on the file

10 April 2024

EU Parliament plenary adopted its report

17 June 2024 (TBC)

Council to adopt its general approach

Status

Year

2023

Official Document

Unofficial Title

Soil Monitoring Law

Last Updated

22/08/2023