As the European Commission announced a first concrete measure to reinforce the European Union Emissions Trading System (EU ETS), academics said the emissions trading system launched by the EU in 2005 could one day also be used to capture CO₂ on a large scale.

The Commission has proposed an amendment to the Market Stability Reserve Decision to strengthen the instrument that ensures a “stable, well-functioning carbon market”. Under the current system, all allowances in the reserve above 400 million are invalidated.

The proposed amendment will stop the invalidation mechanism, allowing these allowances to be kept as a buffer that can support market stability. The MSR reduces the supply of allowances to the market when there are too many in circulation and injects allowances when there is market scarcity.

“Today, we are delivering on one of the commitments made by our leaders. This marks an important first step in modernising our carbon market. By strengthening the Market Stability Reserve, we enhance EU ETS’ resilience to volatility and ensure that it continues to drive decarbonisation, support competitiveness and foster clean investment,” said Wopke Hoekstra, commissioner for climate, Net Zero and Clean Growth

He said the EU ETS is a key driver for decarbonisation. It has massively reduced fossil fuel consumption, lowering the Union’s dependence on imports and strengthening its resilience. In addition, it has driven major investments in the clean energy transition in renewables and low-carbon energy sources. These are homegrown and enhance our energy independence. However, in light of recent challenges, the EU ETS needs to be modernised and made more agile.

The announcement came as a team led by the Potsdam Institute for Climate Impact Research (PIK)  explained the emissions trading system launched by the European Union in 2005 could one day also be used to capture CO₂ on a large scale.

The study quantified the potential, and outlined that phased integration of removals into the trading system can avoid misguided incentives, while providing industry with planning security for residual emissions that are hard-to-abate.

According to the study, the existing EU emissions trading system for the energy sector and energy-intensive industries alone could provide incentives for companies to remove between 68 and 86 million tonnes of CO₂ from the atmosphere annually by 2050, depending on cost developments. The research team uses the LIMES-EU calculation model developed at PIK, which optimises investment decisions. The analysis is based on the EU, as well as the United Kingdom and Norway. And it focuses on two novel, promising removal methods: using air filter systems (direct air capture) and burning biomass with CO₂ sequestration (bioenergy with carbon capture).

“The removal potential we have calculated would make a significant contribution to the implementation of the EU climate targets,” said Darius Sultani, PIK researcher and lead author of the study. “Of course, dedicated support programmes for removals are also needed to achieve climate neutrality by 2050, and net carbon removals thereafter. But fiscal space is limited, and it makes sense to make good use of the market-based instrument of emissions trading. We show how this could work – and that it even strengthens the acceptance of climate policy.”

The team said at present, firms are looking ahead to 2039 with concern: the annual reduction in emission allowances for the energy sector and energy-intensive industries will then reach zero, and CO₂ emissions will in principle be taboo. There are considerations to soften the timeline, but a more elegant solution emerges if removal companies are added to the system. These would be rewarded for their “negative emissions” with certificates from the trading system, which they would then be able to resell to companies that have not (yet) completely eliminated their CO₂ emissions.