Introduction

This summer has seen several important developments both in the EU and UK regarding certification and standards for negative emission or carbon removal methods and for the use of such credits in their respective carbon markets:

The European Commission’s 2 July communication to change the European Climate law by inscribing a target for 2040, confirmed that removals will be included in the EU ETS. A public consultation is open until 15 September.

The public consultation on the upcoming review in 2026 of the EU ETS directive, including its Market Stability Reserve, closed on 8 July. The revised directive will make the market framework fit for its fifth trading phase, and several of the consultation questions, as well as numerous feedback responses center on the role of removals in the context of emissions trading.

On 17 July, the European Commission launched a public consultation on its draft act establishing methodologies for certifying permanent carbon removals under the Carbon Removal Carbon Farming Framework (CRCF). The initial scope covers DACCS, biogenic carbon capture and storage (BioCCS), and biochar production.

On 21 July, the UK Emissions Trading Scheme (UK ETS) Authority published its response to the 2024 consultation on how to integrate greenhouse gas removals (GGRs) into the UK ETS.

At the same time, on 31 July, the British Standards Institution (BSI), the UK’s National Standards Body, released draft methodology standards for DACCS and BioCCS, open for consultation, which complements the Authority’s intention to include engineered GGRs in the UK ETS, offering a future demand stream for GGR credits.

Further, on 27 August, the European Commission released explorative studies on how to increase demand for permanent removals via an EU-wide purchasing programme aimed at encouraging investments and boosting technological progress.

On the same day, the UK government published its GGR Business Model to incentivise private investment in removal technologies, following the initial consultation held in July 2022 and the government response in June 2023.

In this analysis, we look into the approaches taken by the UK and EU, their respective pathways to ensure the credibility of supply and boost demand for permanent CDR via carbon market integration and support policies

UK opens the market, EU builds the rulebook

In the UK, the direction of travel has been clear: removals will be integrated into the UK ETS. The policy commitment was made early, already in 2024 (see our analyst update for insights), and the July 2025 government response reaffirmed the timeline: legislation by 2028 and operational integration by 2029. In practical terms, demand for certified carbon dioxide removal units in the UK compliance market could emerge as early as 2030. Several design elements will shape this transition: the UK GGR Standard must be finalised, with accredited verifiers in place, before the first units enter the market.

In contrast, the European Union has opted for a more bottom-up or “supply-first” approach through the establishment of the certification framework (CRCF). The CRCF is a dedicated certification mechanism that aims to set a gold standard for permanence, additionality, and monitoring. Its scope is explicitly supply-side. The European Commission has been deliberate in its approach, decoupling the certification of removals from their use cases. This has allowed the EU to focus on methodological rigour and environmental integrity, but has introduced uncertainty around future demand pathways, particularly regarding whether and when CRCF units could be eligible within the EU ETS. The 2040 target proposal published in July (our take on it here) states that the Commission sees a place for domestic permanent removals within the EU ETS, although confirmation is pending the 2040 climate target legislative process, and detailed discussion awaits a legislative proposal mid-2026.

While the two jurisdictions began their “removals journey” from different angles, the UK defining modes for ETS integration first, the EU starting by building supply-side certification standards, their timelines are now converging. Both are moving towards operational integration of removals, with key milestones illustrated in Figure 1. The UK is now working to define crediting methodologies after setting market rules, while the EU is turning to demand-side integration after establishing its certification framework.

The supply side: Geography, permanence, leakage, and risk management

In 2022, the European Commission proposed a regulation to establish a voluntary EU-wide framework for certifying high-quality carbon removals. The aim of this is to establish a regulatory baseline intended to support the uptake of removals alongside emission reductions across sectors. The culmination of this initiative is the CRCF Regulation (EU/2024/3012), published in December 2024, which reflects a deliberate certification focus, prioritising methodological rigour before establishing use-cases for those credits. The UK has taken a different route: after mandating the development of standards in October 2024, the UK standards body (BSI) released draft DACCS and BioCCS methodologies for consultation in summer 2025. Table 1 summarises key elements of the certification framework across the two jurisdictions.

An obvious trait to note is that both the UK and EU restrict certification to domestic projects, reflecting the requirement that long-term climate targets and NDCs must be met through reductions and removals within their own geography.

The UK has adopted a prescriptive permanence requirement of 200 years, supported by liability provisions and fungibility measures such as buffer pools. This approach widens eligibility to include not only geological storage but also long-lived pathways such as biochar and enhanced rock weathering, while managing reversal risk through upfront contributions to pooled reserves. By contrast, the EU CRCF defines permanence as “long-term” storage, generally interpreted as several centuries, and requires compliance with Directive 2009/31/EC for engineered storage. This interpretation limits eligibility to a smaller set of nature-based or hybrid solutions.

Both frameworks treat leakage as a material source of emissions that must be quantified and deducted from net removals. The CRCF explicitly categorises fugitive, vented, and transport-related losses as carbon-only leakage streams, requiring measurement and accounting across capture, transport, and injection. The UK BSI standards require the project boundary to encompass all upstream and downstream flows, including feedstock, transport, and energy use, and prescribe conservative measures for leakage estimation.

Quantification approaches are aligned: both are conservative, ex-post, and lifecycle-based. MRV requirements are rigorous in both jurisdictions, though the UK mandates accredited protocols, whereas the EU requires detailed, activity-specific MRV plans. Baseline setting diverges slightly: the EU often applies a zero-emissions default for engineered pathways to streamline certification, while the UK requires a credible counterfactual scenario, allowing more project-specific tailoring but demanding conservative assumptions and ex-post verification.

Risk management tools also differ. In the UK, liability for reversals rests with the operator and is backed by insurance, corrective action, or replacement obligations, with buffer pool contributions scaled to technology risk. The CRCF places long-term responsibility on national authorities once permanence is certified, with reversal treatment rules under development. Buffer pools are not universal under the EU system but appear in specific methodologies, such as for biochar.

When it comes to corresponding adjustment, the CRCF has already clarified that no corresponding adjustment will apply to CRCF units, as they will count toward the EU’s NDC. Meanwhile, the UK’s BSI framework on DACCS and BioCCS does not explicitly address the issue, nor whether such adjustments could become relevant. Given the UK’s domestic supply scope and the likely demand source from within the UK jurisdiction, be it from the ETS or outside the scope of the ETS, the absence of a corresponding adjustment requirement is operationally logical, though its omission leaves the door open to future policy debate should international transfers of credits be considered.

The demand side: ETS integration on the horizon

Inclusion of removals in emission trading systems has two benefits: first, the carbon price signal will play a role in providing an incentive for scale-up of industrial carbon removals. Secondly, removals can help balance residual emissions from hard-to-abate emissions on the pathway to net-zero. From an investor, a removal operator or a carbon market participant’s point of view, regulatory predictability is key – earlier clarity is better in terms of getting the investment signal right.

The UK has committed to legislating GGR integration by 2028 with operational use from 2029, sending an early demand signal that positions the ETS as a primary market for engineered removals. Notably, there will be no specific limit on the proportion of compliance obligations that can be met with removals. Their use will only be constrained by the overall UK ETS cap on UK allowances (UKAs), meaning removals could, in theory, account for the entire cap. In practice, however, market uptake will be determined by the available supply of eligible GGR units and a function of the ratio between the costs of removal versus reduction technologies. The UK will maintain its gross emissions cap and replace emissions allowances with GGR allowances on a one-for-one basis, although in the longer term, the Authority has indicated it may move toward a new net cap once removals deployment is more established. Allowances will be issued ex-post, following verified sequestration – most likely limited to DACCS, BioCCS, and potentially biochar in the early stage. The Authority also plans to differentiate GGR units from existing UKAs and to provide auction mechanisms to ensure market access for GGR developers.

In contrast, the nuts and bolts of the integration of negative emissions in the EU ETS are still in the blue. The anchor for considering removals in the context of the EU ETS is the directive itself, tasking the Commission to assess by 31 July 2026 “….how negative emissions resulting from greenhouse gases that are removed from the atmosphere and safely and permanently stored could be accounted for and how those negative emissions could be covered by emissions trading, if appropriate…”.

The “could” and “if appropriate” leave the room open in the legislation that removals will not be deemed appropriate for inclusion into the EU ETS – it’s not merely a matter of how, but if. With such a report to the co-legislators, it would be up to the Parliament and the Council to decide whether the inclusion of removals is justified. With such legislative processes taking up to two years, clarification would tard until the late 2020s. So while the removal certification framework has been progressing over the past few years, the demand side signal has been blurred.

In its February 2024 impact assessment underpinning the 2040 climate target, the Commission set an aim for roughly 75 Mt of industrial removals within the EU as a whole – though importantly, there is no concrete removal target in the proposal. While so far keeping its cards close to its chest, the Commission in 2025 has successively signalled through communications like Competitiveness Compass and the Clean Industrial Deal that it does see the ETS playing a role in building a business case for removals in Europe. However, only in the 2 July proposal for a 2040 climate target, the executive formally proposes to include domestic permanent removals in the EU ETS. The case for removals in the EU ETS is proposed as one of three flexibility routes for how the 2040 target can be met.

The way this could be done and under what constraints is yet to be discussed and decided. The assessment and formal proposal from the Commission is due mid-2026, in conjunction with the overall ETS review. The consultation on the EU ETS review– which includes input on how to address removals in the context of the carbon market– closed this summer, and the stakeholder feedback reveals high engagement and multiple ideas with regard to negative emissions in the market context.

Before and beyond ETS: Building a business case for removals

While demand may be primarily anchored in their respective compliance markets, it will not be confined to them; also, the non-traded part of the economy will have residual emissions that require access to negative emissions. Boosting demand for permanent removals will also require incentives beyond what a carbon price signal can deliver, in particular to help kick-start the business case for this industry.

Following its May workshop (our take here), DG CLIMA last week released three studies examining policy options for an EU purchasing programme, mapping Europe’s permanent CDR pipeline to 2035, and reviewing funding models to expand supply. On the same day, the UK government published its GGR Business Model to incentivise private investment in removal technologies. Drawing on the Contracts for Difference scheme used in renewables, CCUS and hydrogen, it offers 15-year revenue support contracts to bridge the gap between technology costs and market revenues, with delivery expected through the Low Carbon Contracts Company. While the UK and EU are at different stages, the underlying logic is the same: ETS integration provides an essential source of demand, but early deployment will not scale without complementary government-backed funding mechanisms.

Both jurisdictions are exploring near-term measures to stimulate investments: the EU is at an early stage assessing options for an EU-wide purchasing programme, while the UK has committed to its GGR Business Model. Although at different stages – the EU still evaluating, the UK already implementing – the direction of travel is aligned.

This convergence – on certification, ETS integration and support for removals – is good news for the upcoming linking negotiations (see our analysis on the negotiation mandate). But as the UK and EU ETS are gearing up to link, a number of questions still arise and will have to be solved as to how removals would be treated across the schemes? Could UK GGR allowances be fungible with EUAs? Would CRCF permanent removal units be recognised in the UK ETS? And would the EU have to let go of its domestic approach and open up for removal units from projects on UK soil? And what common permanence, accounting, and MRV rules would be required to ensure market integrity? These questions will be crucial to the linking debate, alongside a number of other factors, both as regards ambition levels and overall market framework.