How to integrate the CDR into the EU ETS?

In brief

• Integrating carbon capture and storage (CCS) into the EU ETS is essential to achieve the EU's 2050 climate neutrality targets; projections converge on a need for 550 to 800 MtCO₂/year of net removals, equivalent to the combined annual emissions of Germany and Poland, a volume impossible to mobilize without a clear and incentivizing regulatory framework.
• Reference studies have highlighted very real risks that need to be managed from the outset: impermanence of non-geological eliminations, windfall effects via cheap credits, weakening of the price signal, and excessive burden on public finances.
• Choosing not to integrate CDR into the compliance system, or delaying its integration, generates equally significant systemic risks: impossible to achieve climate objectives at optimum cost, blocking private investment, slowing down technological learning, and persistent public costs.
• These risks are now well understood and can be effectively offset by the integration devices proposed in the literature: CDR use caps, permanence equivalents, conditional reserves activated by price thresholds, time-dependent purchase obligations, and the establishment of a Carbon Bank as a central regulator.
• AFEN advocates a gradual integration path leading to the integration of permanent CDR credits into the EU ETS, in a technologically agnostic way, but strictly framed by CRCF quality criteria (MRV, permanence, equivalence). This integration must be based on rigorous governance, a clear articulation between market tools and public regulation (strategic reserves, CCfD, Carbon Bank), and be accompanied from now on by strong incentives to support the industrialization of solutions and secure the emergence of a credible carbon elimination market, stable and compatible with the balances of the ETS.

Introduction: Why integrate CDR into the EU ETS? A scientific imperative and growing market expectations

The EU is aiming for climate neutrality by 2050, in line with the Paris Agreement, which means including negative emissions in its climate instruments. The European Scientific Advisory Board (ESABCC) call to integrate carbon capture and storage (CCS) into market mechanisms, notably the EU ETS, in order to offset residual emissions and align carbon prices with neutrality trajectories.

The needs are colossal: the IPCC estimates that between 5 and 16 GtCO₂/year will need to be eliminated by 2050, including 550 to 800 MtCO₂/year for the EU (ESABCC and Carbon Gap). However, less than 8 MtCO₂ of CDR permanent have been certified in the world by 2024, in the absence of strong incentives. Today, the CDR market is based on the voluntary market, which is holding back investment. Developers and manufacturers are waiting for a clear signal: integration into a regulated market.

EU ETS, with 1,380 MtCO₂e of emissions covered, €781 billion traded in 2024 and a stable average price of around €80/tCO2, provides a robust basis for structuring demand. The EU has launched a consultation in 2025, with a report expected in 2026. This dynamic, supported by AFEN and its partners such as Carbon Gap, opens up a major window of opportunity.

But integrating the CDR raises risks: impermanence/remission, windfall effects, carbon price deflation. AFEN, a federation of producers, industrialists and experts, took an active part in the consultation process to put forward a common position: the urgency of a compliance framework, the need for environmental robustness, and rigorous governance.

This article aims to explain these issues, and to show how the integration models analyzed in the scientific literature can help structure an integration that is credible, sustainable and economically efficient.

1. Why integrate CDR into ETS and how to limit the risks

In our previous article, we set out why integrating CDR into the ETS was a necessity if these technologies were to see real development. Current disposal technology costs vary between €150 and €400/t (biochar, BECCS, DACCS), making large-scale deployment impossible without a regulated outlet. The inclusion of CRCF-certified CDR credits in the ETS would provide a clear price signal and the long-term visibility needed to mobilize several tens of billions of euros of investment. Framed by the like-for-like principle, it would guarantee that only residual fossil emissions would be neutralized, ruling out any temporary offsetting. The ETS would thus become not only the central tool for reducing emissions, but also the framework for promoting the permanent elimination needed to achieve climate neutrality by 2050.

The introduction of the CDR into the EU ETS is a milestone in European climate strategy. However, its success will depend on its ability to preserve environmental integrity, the credibility of the carbon market, and the economic efficiency of the system. Several reference works - notably Rickels et al (2022)ICAP (2021 and 2025the report by the Ecologic Institute (2024), as well as the ESABCC report (2024) - identify a series of structural risks to be anticipated right from the design stage of the integration framework.

The table below summarizes the five main risks to be monitored, their potential impacts, and the public policy responses envisaged:

Risk	Description	Consequences	Management tools
R1 - Impermanence/reemissions	Risk of re-emission of stored carbon (particularly for non-geological solutions)	Loss of environmental integrity	Equivalence factors, insurance or permanent buffers
R2 - Carbon lock	Low prices due to entry of cheap credits → disincentive to direct emissions reduction	Deteriorating price signal and increased dependence on CDR	Conditional integration, CDR ceilings, strict minimum quality
R3 - Tax risk	High cost of early-stage technologies → need for massive public support	Public deficits, weakened social acceptability	Gradual transfer of financing to issuers via bonds
R4 - Insufficient technological learning	Demand unstable or too low → hinders cost reduction	Unfinished technologies by 2035	Purchase obligations, temporary CCfD, outlet guarantees
R5 - Market inefficiency	Multiplication of disjointed or overly complex markets	High climate costs, signal fragmentation	Gradual harmonization, eventually full integration

AFEN is fully aware of the risks identified and is campaigning for an ambitious, rigorous and progressive integration of the CDR into the EU ETS. 

Rather than hindering integration, this risk map highlights the challenges to be anticipated in building a robust, credible and sustainable CDR market within the EU ETS. Above all, it shows that not integrating the CDR entails equally significant risks: continued market fragmentation, lack of a unified price signal, delayed investment, and inability to achieve climate objectives at optimum cost. These observations justify the need to design framed integration trajectories, capable of offsetting the identified risks through a combination of regulatory tools, market mechanisms and environmental safeguards. Approaches vary according to priorities: some focus on economic efficiency, others on predictability or environmental integrity. The following section examines these options in detail, showing how they can credibly reduce risk while supporting the development of a genuine CDR market under the ETS.

2. Four major integration options: differentiated models for accepted compromises

Visit four main integration scenarios in the EU ETS address the risks identified above (impermanence, carbon lock, fiscal deficit, slow learning, inefficiency). Back in 2021, the International Carbon Action Partnership (ICAP) laid the initial conceptual foundations for four integration models (A-D). Each pathway proposes a specific combination of mitigation tools, as demonstrated in the work of Rickels et al (2024), ICAP (2021 and 2025) and the Ecologic report (Meyer-Ohlendorf, 2023).

In addition, the economic analysis by Verbist et al. (2024) allows us to compare the average total cost per net ton of CO₂ emitted (€/tCO₂), and thus to evaluate theefficiency of each governance option. This is not an estimate of allowance prices, but a synthetic indicator of the costs of achieving a given climate objective under different political regimes.

• Option A - Disjointed markets : Maintaining the CDR outside the EU ETS, either without a market mechanism or via subsidy-financed public targets, eliminates the risks associated with impermanence (R1) and the postponement of reduction efforts (R4), but generates persistent inefficiency due to the lack of a unified price signal between reduction and elimination, while transferring the costs in full to public finances (R3), for an average cost of €400 to €700/tCO₂ depending on the modalities.
  
• Option B - Conditional integration via a Carbon Bank : This model introduces CDR credits into the EU ETS system only above a certain price threshold (e.g. €300/tCO₂), under the guidance of a public authority that modulates injection via a strategic reserve, thus containing the risks of impermanence (R1), carbon lock-in through premature substitution (R2), and market destabilization, while promoting economic efficiency (average net cost of €365/tCO₂).
  
• Option C - Integration with CDR credit purchase obligations : Introducing a mandate for the progressive purchase of CDR credits (e.g., up to 15 % of gross emissions per emitter, notably via a specific scheme) within the EU ETS market creates a guaranteed demand favoring technological learning and lower costs (R4), spreads the economic burden between industry and government (R3), and enables a controlled ramp-up of the sector while being able to be combined with support instruments (e.g.. CCfD), for an initial cost estimated at up to €440/tCO₂ with potential for reduction.
  
• Option D - Full integration into EU ETS (net cap) : By making CDR credits fully fungible with ETS allowances and defining a net cap (allowable emissions = gross emissions - phase-outs), this system maximizes economic efficiency through a single price signal and the optimal trade-off between reduction and phase-out, but exposes us to high risks of a weakening carbon price (R2), slackening of reduction efforts (R4) and loss of environmental integrity if non-permanent removals are allowed without robust guarantees (R1), making it essential to implement strict criteria for permanence, MRV, buffers and equivalence.

This overview shows that risks can be managed through adapted instrumental combinations at every stage of market maturity. Visit most hybrid models (options B and C) enable gradual increase in powerwhile ensuring credible governance and a price stability.

3. How to discuss these options? 

The integration of carbon removal credits into the European Union Emissions Trading Scheme (EU ETS) is now the subject of a scientific literature both more and converging on the main directions to follow. Several structuring analyses agree on a central observation: failure to integrate the CDR into the compliance market would compromise the EU's ability to achieve climate neutrality in an economically efficient way.

At the same time, these works warn against a poorly supervised integrationparticularly if it allows the use of non-permanent or less robust credits, which could lead to undermine the environmental integrity of ETS and undermine its long-term political acceptability.

These options are not mutually exclusiveA robust strategy combines several tools:

• The scenario conditional proposes a central credit reserveactivated according to a price threshold (~300 €/tCO₂), to cushion market shocks.
  
• The scenarios with purchase obligation of CDR accelerate technological learning while limiting public budget exposure.
  
• The scenarios with equity adjustment ensure environmental robustness by modulating the value of credits according to their permanence.

In all cases, a transversal instrument emerges as institutional cornerstone one European Carbon Bankas proposed by Ecologic, Rickels et al. or ICAP. Whether used to manage a conditional reserve, to guarantee contracts for difference (CCfD), or to centralize the purchase/sale of credits, it facilitates the gradual ramp-up of the CDR market. Its role is useful in almost any scenario.

Finally, the trajectory proposed by ICAP articulates these options over time:

• 2025-2035 partial integration via conditional reserve, CCfD, and limited obligations
  
• 2035-2040 Gradual tightening of issuers' compliance obligations
  
• After 2040 Convergence towards a single market, with adjustment of permanence factors and full integration of CDR credits into the EU ETS.

Conclusion

Integrating carbon capture and storage (CCS) into the EU ETS is a strategic step towards achieving the European Union's 2050 climate objectives. The scientific literature and the institutions consulted all agree that a compliance system excluding CDR would not guarantee a credible, economically efficient and technologically realistic trajectory towards neutrality.

AFEN advocates a gradual but permanent integration of sustainable CDR credits into the EU ETS, technologically agnostic but in line with CRCF standards, notably in terms of MRV, permanence and the principle of equivalence ("like for like"), excluding the use of temporary credits to offset fossil emissions. Dedicated governance, such as a central agency, will be needed to steer allocation, certification and the supply-demand balance, while preserving the integrity of the carbon market.

At the same time, complementary measures are essential to support the sector's growth: differentiated targets for reductions, temporary and permanent phase-outs in climate legislation; support for innovation in low-TRL methods; neutrality obligations aligned with the sustainability of credits; incentives for multi-year contracts; and equitable development of transport and storage infrastructures.

On a European scale, France is progressing more slowly than many of its neighbors. Visit United Kingdom has already published its business model for CDR (≥ 5 Mt/year by 2030). Visit Denmark has awarded a long-term contract for BECCS (Ørsted in Kalundborg). The Sweden has adopted multi-billion euro envelopes for its BECCS industry. And theGermanywhich has just included CDRs in its federal budget, is committing some 476 M€ over the next eight yearsof which approximately 111 M€ in 2026 for carbon removal projects

AFEN will be actively involved in the forthcoming European debate, in order to defend an ambitious integration trajectory. However, it is now up to public authorities to define the foundations of a clear and progressive framework - governance, timetable, quality criteria - while businesses must prepare for the emergence of a robust carbon elimination market, the pillar of neutrality and then net negativity by 2050. As we in our buyer's guide, if this signal is important, companies need to start structuring their CDR strategies today.

by Raphaël Cario