1. Delaying ETS net-zero
2. Funding decarbonisation and CDR
The proposal creates multiple funding instruments for scaling decarbonisation and carbon removal projects. This will speed up deployment of many innovative low-carbon technologies that are already commercially available but have been struggling to compete with conventional products.
Free allocations are extended from 2034 to 2038 but will be conditional on investment in industry decarbonisation projects, lowering the threshold for piloting and scaling innovative solutions.
An Industrial Decarbonisation Bank is proposed to be established in 2028, reserving 800 million allowances to support the scaling-up and deployment of decarbonisation technologies that can also generate permanent carbon removals. In the first period 2028–2031, a €30 billion ‘Investment Booster’ will provide fixed carbon premia, for fast-track projects. In the second period, from 2031 onwards, the Bank will allocate €100 billion in funding to support the deployment of low carbon solutions in energy intensive sectors through mechanisms such as Carbon Contracts for Difference, providing long-term revenue stability and de-risking investments.
The Innovation Fund will continue to support scaling up of low- and zero-carbon technologies, while the eligible investment areas of the Modernisation Fund will be extended to include electrification and industrial decarbonisation, including CCS/CCU.
Member States will be required to utilize at least 50% of ETS auction revenues for industrial decarbonisation activities, such as CCS/CCU projects, CO₂ transport infrastructure, permanent carbon removals, and the development of lead markets for low-carbon products.
The demand for durable CDR is further strengthened by proposing to allow ETS-covered operators to compensate their own fossil emissions with CRCF-certified removals that they themselves generate.
3. Including durable carbon removal
Creating compliance demand for 250 million EU CRCF-certified durable carbon removal credits will scale the market by providing political certainty on the direction up to 2040 and unlocking the needed investments and capacity expansion.
4. International credits
The proposal outlines the planned purchase of 260 million high-integrity international credits from 2036. These international credits will be funded by allowances set aside from within the ETS cap and reduce the need for domestic abatement of up to 5 percentage points in 2040. This will weaken the ETS, shifting focus away from domestic emission reductions to offsetting emissions.
The volume of planned purchase of international credits (260 Mt) surpasses the volumes of planned DACS and BECCS credits (250 Mt). The proposal establishes a stronger position for international credits in comparison to domestic durable non-CRCF certified credits. Some of these CDR methods are certified by strict carbon standards on the voluntary market and can support both industry decarbonisation and durable carbon removal, helping the EU get closer to net-zero.
