A new study from the Potsdam Institute for Climate Impact Research (PIK) finds that folding CDR into the EU Emissions Trading System could deliver roughly 60 million tonnes of CO₂ removals per year by 2050. The researchers propose a phased approach, with full integration of removal credits and residual emissions under a single carbon price arriving around 2040. If the design holds, Europe’s carbon market would shift from merely capping pollution to actively pulling carbon out of the atmosphere.
Why it matters
The EU ETS is already the world’s largest compliance carbon market. Adding demand-side pull for removals through that market, rather than relying on subsidies alone, could give CDR technologies the long-term price signal they desperately need. Public budgets across Europe are tight. A market mechanism that channels private capital toward direct air capture and bioenergy with carbon capture and storage (BECCS) fills a gap that grant programs alone cannot close.
The details
The study, titled How the EU can utilize its carbon market to scale up Carbon Dioxide Removal, was published in the journal Joule on March 31, 2026. Lead author Darius Sultani and co-author Michael Pahle, both PIK researchers, used the Long-term Investment Model for the Electricity Sector (LIMES-EU) to model how removal technologies would behave inside a capped trading system. Their central finding: integrating DAC and BECCS into the ETS could yield around 60 million tonnes of CO₂ removals annually by 2050. Higher volumes are possible if technology costs fall faster than expected. Sultani framed the rationale in blunt fiscal terms. The ETS “could offer long-term financial certainty for investors at a time when public funding is constrained,” he said, adding that a market-based instrument “makes sense” given limited fiscal room and growing pressure to hit climate neutrality targets.
The three-phase rollout
The researchers don’t propose flipping a switch. They outline a step-by-step integration: Phase 1 focuses on building the infrastructure around measurement, reporting, and verification (MRV) systems and sustainability standards. No removal credits trade yet. The point is to get the rules right before money flows. Phase 2 introduces removal credits gradually, with caps on how many can be used and what types qualify. This limits exposure if a particular technology underperforms or if verification turns out to be harder than expected. Phase 3, projected for around 2040, is full integration. Removals and residual emissions sit under a single carbon price. At that point, the ETS would function as a net-emissions market, not just a gross-emissions market. Pahle said the proposal aims to shift the policy conversation from whether removals belong in emissions trading to how to include them without undermining environmental integrity.
The moral hazard question
This is the part that matters most. Critics of integrating CDR into carbon markets worry that cheap removal credits could let heavy emitters off the hook, slowing the pace of actual emissions cuts. The study addresses this head-on. Because the ETS operates under a hard cap on total emissions, any shortfall in removals would automatically push the carbon price higher, forcing additional cuts elsewhere in the system. The cap acts as a backstop. Removals can’t substitute for reductions if the math doesn’t add up. But the authors flag a real vulnerability: political risk. If carbon prices spike because removals underdeliver, policymakers might be tempted to loosen the cap. That would defeat the purpose. The integrity of the system depends on the cap staying firm. They also flag environmental risks tied to BECCS specifically. Scaling up biomass use for energy with carbon capture could strain land systems and biodiversity if sustainability safeguards aren’t enforced. This is not a hypothetical concern. It’s a known tension in BECCS deployment globally. It’s worth stating plainly: CDR is meant for residual emissions that are genuinely hard to eliminate. It is not a permission slip to delay phasing out fossil fuels. Any market design that blurs that line is a bad design.
Implications
The European Commission is expected to decide by 2026 whether carbon removals should be included in the EU ETS. This study lands right in the middle of that decision window, and it gives policymakers a concrete blueprint rather than abstract principles. If the EU moves forward, it would create the first major compliance market where CDR competes on price with emissions abatement. That price signal could unlock private investment at a scale that voluntary carbon markets and government grants have not achieved. It would also give hard-to-abate industries, think cement, steel, aviation, a clear mechanism for dealing with emissions they genuinely cannot eliminate through process changes alone. The 60 Mt figure is significant but not enormous. For context, the EU’s total greenhouse gas emissions are in the range of 3 billion tonnes per year. Removals at that scale would handle a meaningful slice of residual emissions, not replace the need for deep decarbonization across every sector.
Caveats
The 60 Mt estimate depends on cost assumptions for DAC and BECCS that carry real uncertainty. If costs don’t come down as modeled, volumes will be lower. The study acknowledges this but doesn’t resolve it. The phased timeline also assumes political continuity over 15+ years. European climate policy has been relatively durable, but “relatively” is doing a lot of work in that sentence. A single policy reversal on the cap could unravel the incentive structure. Finally, the study focuses on the EU. Whether this model can be replicated in other jurisdictions with less mature carbon markets is an open question. But if the EU gets this right, it sets a template that others can adapt.
Source: downtoearth.org.in