From niche market to billion-euro opportunity: integrating permanent CDR into the EU ETS
Reading Time: 3min
The European Commission plans to integrate permanent Carbon Dioxide Removal (CDR) firmly into the EU Emissions Trading System (EU ETS). The plan would direct up to €50 billion toward CDR technologies between 2031 and 2040. This step shifts carbon removal from a purely voluntary market to regulated, legally anchored demand.
Key takeaways
The EU proposes buying up to 250 million tonnes of permanent CDR by 2040.
The budget is fixed in allowances, not tonnes: 250 million is a ceiling, not a guarantee.
Only Bioenergy with Carbon Capture and Storage (BioCCS) and Direct AIr Capture with Carbon Storage (DACCS) qualify at launch; other CDR methods such as biochar could possibly follow.
The volume is more than five times all durable CDR ever contracted.
On 17 July 2026, the European Commission presented its long-awaited proposal to reform the EU Emissions Trading System (EU ETS) - Europe's central climate policy instrument. A review was needed because the EU's new climate law sets a 90% net emissions reduction target for 2040, and the ETS had to be adapted to that goal. The package covers many areas: relief for industry, reform of the market reserve, and new sectors such as waste incineration.
But one item stood out for the carbon removal sector: for the first time, the EU proposes buying certified removals itself, turning years of voluntary-only demand into regulated, predictable demand.
From voluntary purchases to compliance demand
Until now, carbon removals were bought mainly on a voluntary basis by large companies. The proposal changes that fundamentally: certified removal units are placed on equal footing with regular emission allowances.
Allowances are the permits companies must surrender under the EU ETS to cover their CO2 emissions. The result: long-term demand from one of the most financially powerful buyers in the world.
The mechanism, and the caveat
The Commission would auction 250 million EU allowances, plus 10 million as contingency (260 in total). With the auction proceeds, the EU would then fund the purchase of certified removals. Certification runs through the CRCF, the EU standard for permanent carbon removals.
The caveat matters. The budget is fixed in allowances, not tonnes.
An EU ETS allowance currently trades near €80, while the cost of a removal credit from new CDR technologies is often significantly higher, at €200-600+ per credit. If removals stay more expensive, the EU simply buys fewer tonnes.
For perspective: the entire durable CDR market has contracted about 48 million tonnes since inception (CDR.fyi). The EU target from 2040 (48Mt) equals that entire market history - year after year.
What it means for the market and investors
The regulatory framework creates clarity far beyond the EU ETS. From 2031, voluntary buyers will compete with the EU for the same volumes. Corporate climate target standards such as SBTi already point toward durable removals, making long-term purchase contracts (offtake agreements) strategically valuable.
This is complemented by a €100 billion Industrial Decarbonisation Bank, designed to de-risk projects and establish carbon removal as an infrastructure asset class.
How Planet2050 reads the proposal
The proposal confirms our conviction: durable carbon removals are essential to the decarbonisation mix. The EU now anchors that view with large-scale demand.
Yet one major bottleneck remains untouched: access to early-stage capital and risk-taking. Projects need financing long before the first tonne is delivered. This is the role Planet2050 takes.
Through early-stage investments - via equity, carbon streaming, or prepaid offtake agreements - projects receive upfront capital in exchange for future carbon credits or equity stakes.
The demand side, in turn, gains a second pillar. The EU ETS joins a growing base of net-zero corporate buyers. A broader, compliance-anchored market is a more resilient market for all participants.
Bottom line
The EU proposal now enters a 12 to 18 months negotiation phase. The potential €50 billion contract value (250 Mt at around 200€/t) is a ceiling, not a promise. Yet the direction is set: durable CDR is entering the world's most important regulated carbon market. The certification scheme, the EU CRCF, is the decisive gateway. Quality and financing structures will determine success.
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Read the EU page on EU CRCF - Carbon Farming
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