The EU just built the largest compliance market Carbon Removal has ever seen

The EU Just Built the Largest Compliance Market Carbon Removal Has Ever Seen

On 17 July, the European Commission tabled its proposal to integrate permanent carbon removal into the EU Emissions Trading System (ETS). It's easy to let a headline like that slide by as just another item in a long list of EU climate paperwork. It shouldn't. This is the formation of the largest compliance market for carbon removal the world has seen to date — and it marks a real turning point in how the industry gets funded.

From Subsidy to Market

For years, the EU's role in carbon removal has looked a lot like venture funding: small pilot programs, innovation grants, projects cherry-picked in Brussels. Useful for getting a nascent industry off the ground, but not the kind of demand that turns a technology into an industry.

This proposal is different. Instead of picking winners through subsidy, the EU is creating structural, ongoing demand for removals at scale — funded by the market it already runs. That's the shift worth paying attention to: carbon removal moving from something Brussels supports to something the ETS actually pays for.

What's Actually in the Proposal

Strip away the reactions and reposts, and the mechanism itself is fairly concrete:

• The European Commission will act as a centralized "Removals Authority," auctioning 250 million allowances(plus a 10-million-tonne contingency) tied to verified, permanent carbon removals delivered between 2031 and 2040.

• Eligible pathways are limited, for now, to Direct Air Carbon Capture and Storage (DACCS) and Bioenergy with Carbon Capture and Storage (BECCS/Bio-CCS) — both of which require durable, long-term storage. Temporary or biological storage doesn't qualify, since the Commission wants removals used against fossil emissions to hold carbon on a comparable timescale to the warming those emissions cause.

• Operators who build their own BioCCS can use those removals directly against their own compliance obligations starting in 2031, uncapped in volume but drawn from the overall 250-million-tonne budget.

• The mechanism is backed by two complementary funding tools: the ETS Investment Booster ahead of 2031, and the Industrial Decarbonisation Bank afterward.

• Safeguards are built in to try to prevent removals from substituting for genuine emissions cuts rather than supplementing them — a risk regulators call "mitigation deterrence."

• Some early estimates put the resulting market at roughly €50 billion.

Why the Scale Actually Matters

Numbers like "250 million tonnes" can be hard to feel. Here's the comparison that makes it land: the durable carbon removal industry has delivered just over 1.6 million tonnes, cumulatively, in its entire existence to date.

This proposal points to 250 million tonnes of demand by 2040. That's not an incremental step for the industry — it's a different order of magnitude entirely, and it comes with the credibility of the world's most established carbon market behind it.

Getting It Right, Not Just Getting It Done

We believe the EU ETS is on a path to getting this right — and potentially becoming the pioneer in large-scale implementation and adoption of what is genuinely a crucial industry. We're watching carbon removal move toward being a real industry with real revenue, not a research line item that lives on grant cycles.

That doesn't mean the work is done. This is still a proposal, not law — it needs to move through the European Parliament and Council, and several important pieces, including the international-credits facility, are left to future legislation. There's also legitimate debate about whether limiting eligible methods to DACCS and BECCS is too narrow, and whether approaches like biochar or enhanced weathering deserve a seat at the table too.

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