EU Proposes Historic €50B ETS Carbon Removal Compliance Market

The European Commission’s proposed revision of the EU ETS for Phase 5 would establish a centralised mechanism for integrating permanent carbon removals into the compliance market. Rather than allowing emitters to purchase removals directly, the Commission would auction 250 million additional allowances, plus a 10-million-tonne contingency, between 2031 and 2040. Auction revenues would finance an equivalent volume of domestic permanent removals, with annual procurement reaching 48 million tonnes by 2040. Initially, eligibility would be limited to CRCF-certified BioCCS and DACCS, excluding technologies such as biochar pending review. The proposal also provides for up to 260 million international credits from 2036 to 2040, subject to a 2033 review and centralised EU procurement. At an assumed price of €200 per tonne, experts estimate that domestic procurement could create a €50 billion market. However, the proposal remains subject to negotiations involving the European Parliament and Council before becoming law.
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