Removals in EU ETS: limited supply and flexibility trade-offs

Integrating carbon removals into the EU ETS can moderate carbon price pressures. Removals act as a flexibility mechanism, easing reliance on costly demand adjustment rather than replacing emission reductions through abatement, and can be integrated in the EU ETS without materially weakening the system’s abatement function. However, the uptake of engineered removals such as direct air carbon capture and storage (DACCS) and bioenergy with carbon capture and storage (BioCCS) depends primarily on cost competitiveness and technology learning and at projected carbon prices, is unlikely to scale through ETS demand alone. If large volumes of lower-cost credits enter the system, they can significantly reduce EUA prices and crowd out both engineered removals and abatement.