This article is part of the thematic channel The Carbon Observer: subscribe to the newsletter
The European Commission has proposed auctioning 250 million additional EU Emissions Trading System allowances between 2031 and 2040 and using the revenues to purchase permanent carbon removals. The ambition is to procure up to 250 million tonnes of removals certified under the EU Carbon Removals and Carbon Farming Certification Framework.
This could become the largest demand signal the carbon removal market has ever received. But the headline conceals three fundamental questions: Who will benefit? Who will be excluded? Will auction revenues be enough to pay for the removals?
The proposal initially limits eligibility to BioCCS and Direct Air Carbon Capture and Storage, or DACCS. Although both technologies are included, they are unlikely to compete equally. DACCS removes CO₂ directly from the atmosphere, but it remains energy-intensive and expensive. BioCCS captures biogenic CO₂ from industrial and energy processes, often from much more concentrated streams.
If EU procurement prioritises the lowest-cost tonnes, BioCCS will probably dominate. The main beneficiaries could therefore be industries already producing biogenic CO₂: biomethane and biogas; bioethanol and fermentation; pulp and paper; biomass energy; waste-to-energy.
Biomethane is particularly interesting. CO₂ is already separated when biogas is upgraded into renewable methane. Instead of releasing that biogenic CO₂ into the atmosphere, plants could capture and permanently store it. A biomethane facility could therefore produce two sources of revenue: renewable gas and permanent carbon removals. Bioethanol and other fermentation processes may offer an equally attractive opportunity because they generate highly concentrated streams of biogenic CO₂.
The biggest winners, however, may ultimately be the companies transporting and storing the carbon. Europe will need pipelines, liquefaction facilities, ports, specialised ships, injection wells and geological storage sites.
Access to this infrastructure will determine which projects can participate. A facility located close to a CO₂ hub will have a significant advantage over an identical installation hundreds of kilometres away.
Europe’s CDR market may therefore develop around a limited number of industrial clusters rather than as a broad and decentralised carbon market. The initial exclusion of biochar is one of the proposal’s main weaknesses. Biochar is one of the few durable removal pathways that could allow farmers and rural businesses to participate directly.
Agricultural and forestry residues can be converted into stable carbon through pyrolysis and stored in soils or other materials. Unlike BioCCS, biochar does not necessarily require pipelines, ports or access to geological storage. Its exclusion therefore has consequences beyond the treatment of one technology. It helps determine who will own the new market.
Under the current proposal, farmers may provide biomass to industrial operators, but they are unlikely to control the most valuable parts of the chain: processing, certification, transport, storage and the sale of removal units.
Agriculture risks becoming a feedstock provider rather than a genuine participant in the CDR market. This could particularly disadvantage agricultural regions in southern and eastern Europe that have biomass resources but currently have limited access to CO₂ transport and geological storage infrastructure.
The Commission’s concerns about biochar permanence should be taken seriously. The proportion of carbon that remains stable depends on the feedstock, production process and final application. However, these uncertainties could be managed through conservative accounting, strict production standards and crediting only the fraction of carbon demonstrated to be stable over the required period. Excluding biochar entirely risks creating a carbon removal market designed primarily for large industrial operators while leaving farmers and rural communities outside the market.
The second problem is financial. Auctioning one allowance does not necessarily generate enough money to purchase one tonne of permanent removal. The Commission’s expenditure assumptions imply a blended procurement cost of approximately €143–222 per tonne across BioCCS and DACCS.
This blended figure is not a specific cost forecast for BioCCS. Some concentrated sources, such as biomethane upgrading and fermentation, could deliver removals at a lower cost. Smaller facilities, diluted CO₂ streams and projects located far from storage infrastructure could be considerably more expensive. But the overall implication is clear: unless EUA prices rise towards the average cost of permanent removal, auction revenues alone will not be sufficient.
If the average EUA price were €100 and the average removal cost €150, the programme would face a €50 funding gap per tonne. Across 250 million tonnes, this would require an additional €12.5 billion. The proposed contingency of 10 million additional allowances would cover only a limited part of such a shortfall.
The Commission is effectively assuming that EUA prices will rise while removal costs decline. Additional instruments such as the Innovation Fund, national subsidies and carbon contracts for difference may also be needed to close the gap.
Francesco Gagliano, Co-founder of Rete Italiana Rimozione Carbonio (RIRC), Italy's national CDR network, thinks the assumptions don't hold. “The European Commission assumes costs will fall fast enough to close the gap,” he says. “People in the sector have checked the Commission's cost projections against reality, and the numbers are outdated and unreliable. BioCCS in Europe still runs around 300 to 400 euros a tonne without subsidies, and there's little reason to expect the 2035-2040 estimates to land where the impact assessment projects. For biochar, the Commission assumes costs as low as €37 per tonne by 2040, a fraction of the €150-250 European producers need today. That kind of cost advantage risks distorting the market, and that may be another reason it got left out.”
If prices do not converge, Europe will face three options: provide substantially more public funding; purchase fewer than 250 million tonnes; procure only the cheapest BioCCS removals. The third option would further concentrate the market around large industrial facilities with access to transport and geological storage.
DACCS could remain technically eligible but struggle to compete commercially. Biochar and agricultural solutions would remain outside the programme.
The proposal is potentially transformative, but 250 million allowances should not yet be described as a guaranteed order for 250 million tonnes of carbon removal. The final volume will depend on legislation, procurement rules, project availability, infrastructure and funding.
Rete Italiana Rimozione Carbonio raises a different point here. “Whatever the final rules say, someone has to build the plants,” says Gagliano. “Europe is on track for a few million tonnes of permanent removals a year by 2030, and the proposal assumes close to fifty a year by 2040. Member states have to close that gap, because that's where the projects, the biomass, the permits and the storage are. Political will matters here, and it isn't only Brussels' job: the European scheme is only going to start buying gradually from 2031, so the capacity has to be built and supported well before that, and should be kept growing through the decade. That's why national CDR networks matter, and why we started RIRC.”
The proposal nevertheless marks an important shift. Permanent carbon removal is moving from voluntary corporate procurement towards the architecture of Europe’s main compliance carbon market. But Europe is also making a choice about what kind of market it wants to create. It can build a narrow system designed to procure the cheapest industrial removals. Or it can create a more diversified ecosystem that includes DACCS, biochar, farmers and regions without direct access to geological storage.
Those objectives may require different procurement windows, differentiated price ceilings and targeted support for technologies that cannot compete directly with the lowest-cost BioCCS projects.
The 250 million-tonne headline is impressive. But the eligibility rules, infrastructure and mechanism for closing the price gap will determine how much carbon is actually removed and who ultimately benefits from Europe’s new CDR market.
Cover: Bruxelles, photo Envato