Allowing carbon removals into the EU ETS could transform CCS economics: what experts said at Climate Week New York

The poor economics around carbon capture and storage could improve significantly if the EU moves ahead with allowing carbon removals into its Emissions Trading System, experts said at Climate Week New York on Tuesday. The argument centres on the revenue side of the CCS business model: if captured carbon can generate EU ETS credits that are then sold into the compliance market, project developers gain a predictable income stream that does not currently exist. Without that, most CCS projects struggle to close their financing gap against the cost of capture and compression.

The CBAM dimension adds a second potential mechanism. Experts at the event argued that allowing international credits to cover the EU's Carbon Border Adjustment Mechanism obligations could extend the market signal for carbon removals beyond Europe's borders. CBAM currently applies to imports of steel, cement, aluminium, fertilisers, electricity, and hydrogen, and is scheduled to enter its definitive phase in 2026. If importers in those sectors could use verified carbon removal credits to offset their CBAM liability, demand for high quality removal projects could increase materially.

For compliance teams tracking EU ETS and CBAM obligations, the practical significance of this debate is that it could reshape the long term cost structure of both mechanisms. A CCS sector with better economics would produce more supply of removal credits, which in turn would influence the price dynamics of the ETS and the cost of meeting CBAM obligations over time. CFOs and sustainability directors modelling their carbon cost exposure through the 2030s should treat the EU's removal integration decisions as a material variable in their scenarios.

The political pathway for integrating removals into the EU ETS is not straightforward. Any formal inclusion would require legislative amendment to the ETS Directive, and would raise questions about additionality, permanence, and how removal credits are distinguished from avoided emission credits within the registry system. The EU has been developing its Carbon Removal Certification Framework in parallel, which is designed to set quality standards for removal activities, and alignment between that framework and any ETS integration would be a prerequisite for credible implementation.

The expert discussion at Climate Week New York reflects a broader recognition that the EU's climate architecture was designed primarily around emission reductions rather than removals, and that the two need to be better integrated to meet 2050 net zero commitments. For companies with CCS assets or long term offtake agreements in carbon removal markets, a positive policy decision on ETS integration would be a significant upside scenario. ESG managers advising on corporate climate strategy should follow the European Commission's forthcoming position on removal integration closely.