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| | EUROPEAN COMMISSION |
| | Brussels, 30.11.2022 |
| | SWD(2022) 377 final |
| | COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT |
| | Accompanying the document |
| | Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL |
| | establishing a Union certfication framework for carbon removals |
| | {COM(2022) 672 final} - {SEC(2022) 423 final} - {SWD(2022) 378 final} |
| | 1.Introduction: Political and legal context |
| | 2.Problem definition |
| | 2.1.What is/are the problems? How likely is the problem to persist? |
| | 2.1.1.It is difficult to assess and compare the quality of carbon removals |
| | 2.1.2.Many stakeholders do not trust existing carbon removal certificates |
| | 2.1.3.Carbon removal providers face barriers to access finance |
| | 2.2.What are the problem drivers? |
| | 2.2.1.Diversity of certification approaches |
| | 2.2.2.Diversity of carbon removals |
| | 2.2.3.Risks of unreliable certification processes |
| | 2.2.4.Diversity of business models |
| | 3.Why should the EU act? |
| | 3.1.Legal basis |
| | 3.2.Subsidiarity: Necessity of EU action |
| | 3.3.Subsidiarity: Added value of EU action |
| | 4.Objectives: What is to be achieved? |
| | 4.1.General objectives |
| | 4.2.Specific objectives |
| | 4.2.1.Quality |
| | 4.2.2.Tailored methodologies |
| | 4.2.3.Trust |
| | 4.2.4.Harmonisation |
| | 5.What are the available policy options? |
| | 5.1.What is the baseline from which options are assessed? |
| | 5.1.1.Overview of certification actors and roles |
| | 5.1.2.Current status of carbon removal certification in the EU |
| | 5.1.3.Quality of existing carbon removal certification |
| | 5.1.4.EU regulatory context |
| | 5.2.Description of the policy options |
| | 5.2.1.Quality options Q1 and Q2 – Developing the tailored certification methodologies |
| | 5.2.2.Governance options G1 and G2 – Implementing the certification framework |
| | 5.3.Options discarded at an early stage |
| | 6.What are the impacts of the policy options? |
| | 6.1.Identification of impacts |
| | 6.2.Impacts of QU.A.L.ITY criteria and methodologies (Quality options) |
| | 6.3.Impacts of the choice between Q1 and Q2 |
| | 6.4.Impacts of Transparency criteria (Governance options) |
| | 6.5.Impacts of the choice between G1 and G2 |
| | 7.How do the options compare? |
| | 7.1.Effectiveness |
| | 7.2.Efficiency |
| | 7.3.Coherence |
| | 8.Preferred option |
| | 9.How will actual impacts be monitored and evaluated? |
| | 10.References |
| | Glossary |
| | Term or acronym | Meaning or definition |
| | BECCS | Bioenergy with carbon capture and storage is the combination of generating energy from biomass with carbon capture and storage; the stream of CO2 from industrial and energy-related sources at bioenergy facilities is separated (captured), conditioned, compressed and transported to a storage location for long-term isolation from the atmosphere. |
| | Carbon Farming | Land management practices that result in the increase of carbon storage in living biomass, dead organic matter and soils by enhancing carbon capture and/or reducing the release of carbon to the atmosphere |
| | Carbon removal | For the purposes of this Impact Assessment, carbon removal means either the storage of atmospheric or biogenic carbon within geological carbon pools, biogenic carbon pools, long-lasting products and materials, and the marine environment, or the reduction of carbon release from a biogenic carbon pool to the atmosphere |
| | Carbon removal activity | One or more specific practices or processes carried out by an operator resulting in carbon removals |
| | Carbon removal solution | A type of carbon removal activity. |
| | Certification methodologies | Technical documents describing, for each specific carbon removal solution, how to quantify the net carbon removal benefits expected from a carbon removal activity, how to monitor and report emissions and removals from the activity when executed, how to establish the additionality of carbon removal activities, how to address the risks of carbon reversal, and how to assess the overall sustainability of the activity. |
| | Certification scheme | An organisation that oversees the certification of carbon removal activities and records carbon removal activities in regitries. |
| | DACCS | Direct air carbon capture and storage uses engineering processes relying on chemical capture to remove CO2 directly from the atmosphere using a separating agent that is regenerated with heat, water, or both. The CO2 is subsequently desorbed from the agent and released as a high purity stream. |
| | Operator | Any legal or physical person who operates or controls a carbon removal activity, or to whom decisive economic power over the technical functioning of the activity has been delegated |
| | IPCC | Intergovernmental Panel on Climate Change |
| | Programme developer | Economic operator specialising in the identification, development, registration and implementation of carbon removal activities conducted by various project operators. |
| | Validation | The ex-ante evaluation of the conformity of a carbon removal project with the certification requirements. |
| | Verification | The ex-post assessment that the carbon removal information and data provided by an operator or a group of operators comply with the certification requirements. |
| | 1.Introduction: Political and legal context |
| | Limiting the global average temperature increase to below 1.5° Celsius will require deep cuts in global GHG emissions throughout the forthcoming decades. To achieve this, first we need to improve the efficiency of our buildings, transport modes and industries, to move to a circular economy, and to massively scale up renewable energy. Second, we need to recycle carbon from waste streams, from sustainable sources of biomass or directly from the atmosphere, to use it in place of fossil carbon in the sectors of the economy that will inevitably remain carbon dependent, for instance thorough carbon capture and use (CCU) and sustainable synthetic fuels. In parallel, increasing amounts of CO2 will have to be captured and removed each year from the atmosphere by carbon farming and industrial removal activities or projects to reach the climate neutrality goal. |
| | At a global scale, the latest report by the International Panel on Climate Change (IPCC) 1 point towards a decreasing likelihood of limiting global warming to 1.5°C unless rapid GHG emission reductions occur. The IPCC report clearly states that "the deployment of carbon dioxide removal to counterbalance hard-to-abate residual emissions is unavoidable if net zero CO2 or GHG emissions are to be achieved". This will mean the large-scale deployment of sustainable solutions for capturing CO2 from the atmosphere and durably storing it in geological reservoirs, terrestrial and marine ecosystems, or products (see Box 1). |
| | Box 1 – Carbon removal solutions | Carbon removal solutions are activities that transfer carbon from the atmosphere to storage within a non-atmospheric carbon pool. In the context of carbon farming, activities that reduce the release of carbon to the atmosphere are also considered carbon removal solutions as they have the potential to eventually turn the soil into a net carbon sink. | A study carried out for the European Commission 2 evaluated the potential to remove carbon of several carbon removal solutions and assessed their suitability for deployment within Europe. Annex 5 presents more details about the characteristics of various carbon removal solutions as well as an assessment of their sustainability, cost and potential. | For the purposes of this Impact Assessment, carbon removal solutions are grouped into three families based on where the removed carbon is stored: | 1.Permanent storage solutions store away atmospheric or biogenic 3 carbon for several centuries, either in geological reservoirs (see BECCS, DACCS) or in other media. This impact assessment focuses more specifically on: | ·Bioenergy with Carbon Capture and Storage (BECCS): atmospheric CO2 is absorbed by plant biomass and used as a fuel, and then the corresponding emissions are captured and injected into geological formations for permanent storage. | ·Direct Air Carbon Capture and Storage (DACCS): engineering processes to capture CO2 directly from the atmosphere and store it into geological formations for permanent storage. | 2.Carbon farming solutions enhance carbon sequestration in soils or in living biomass in synergy with other sustainability objectives such as biodiversity: | ·Afforestation & Reforestation: Conversion of land that has a non-forest use to forest, or restocking of trees on land that has been depleted of trees, in full respect of the principles favourable to biodiversity and contributing to the 3 Billion Tree Planting Pledge for 2030 4 . | ·Agroforestry: Planting of woody biomass (e.g. trees, hedges, shrubs etc.) on agricultural land. | ·Peatland rewetting: Stopping and reversing the drainage of peatlands and the associated release of stored carbon, which can significantly reduce carbon emissions as well as potentially leading to net carbon sequestration in the long-term. | ·Enhanced Forest Management: forest management that increases a forest’s ability to remove carbon from the atmosphere and with co-benefits to biodiversity. | ·Increase in soil organic carbon in mineral soils: practices such as cover cropping, improved crop rotations, reduced tillage, deep rooting crops, conversion from arable to grassland and other management of grazing land and grassland. | ·Blue carbon: carbon sequestration by oceanic and coastal ecosystems through e.g. algae, seagrasses, macroalgae, mangroves, salt marshes and other plants. | 3.Carbon storage in products store atmospheric or biogenic carbon in materials that are used to make long-lasting circular products. Examples: | ·Biomass in buildings: Use of sustainably sourced and circular bio-based materials in the construction sector enables the storage of carbon captured from the atmosphere and/or delayed emissions of biogenic carbon harvested in forestry and agricultural activities | ·Carbon Capture and Utilisation (CCU): utilisation of captured atmospheric or biogenic CO2 in production processes can store captured carbon for a long time (up to several decades). | Some carbon removal solutions belong to different categories depending on the context of their deployment. This is the case for biochar that can be used as a soil amendment contributing to the enhancement of soil properties (carbon farming), as a construction material with the partial replacement of GHG intensive material (carbon storage in products) or can be stored in suitable geological formations (permanent storage). |
| | The European Climate Law 5 provides for the EU to become climate neutral by 2050. This requires that greenhouse gas (GHG) emissions and removals should be balanced within the European Union at the latest by 2050, with the aim to achieve negative emissions thereafter. In its 2030 Climate Target Plan 6 , the Commission estimated that to achieve this objective both natural ecosystems and industrial solutions should contribute to removing several hundred million tonnes of CO2 per year from the atmosphere. Today and with current policies, the EU is not on track to deliver these quantities: carbon removals in natural ecosystems have been decreasing in recent years and no significant industrial carbon removals are currently taking place in the EU (see Annex 5 for more details on the role carbon removals towards 2050). |
| | Under the ‘Fit for 55’ package, the European Commission therefore proposed – for the first time – a separate land-based CO2 removals target of -310 million tonnes of CO2-equivalent by 2030. The EU-wide target is to be implemented through binding national targets for the LULUCF 7 sector, requiring Member States to step up ambition for their land use policies. Another proposed amendment is to establish an EU-level target of climate neutrality for the land sector by 2035 (which combines the agriculture and LULUCF sector), requiring further enhancement of land-based carbon removals together with a necessary reduction of emissions from agriculture. The Commission has also proposed to increase the size of the Innovation Fund, which is financed with the revenues from the EU ETS, thereby helping businesses invest in innovative clean technologies, including technology-based carbon removals solutions. |
| | Box 2 – The role of carbon removals in achieving the 2030 climate goals of the EU | The European Climate Law limits the amount of LULUCF carbon removals (which includes both land-based removals and carbon storage in bio-based products) that can contribute to the -55% target in 2030 to 225 MtCO2eq, which is below the current level of LULUCF net removal in the EU (approx. -268 MtCO2). This baseline corresponds to the aggregate commitments of Member States for 2030 as computed by applying the accounting rules from the LULUCF Regulation adopted in 2018 and now under revision. Land-based carbon removals in excess of this level can therefore be considered additional with respect to the EU Nationally Determined Contribution of -55% net emission reduction compared to 1990. | According to the Commission’s estimates 8 , the -225 MtCO2eq baseline can be exceeded in a cost-effective manner, especially if carbon farming approaches are able to attract public and private finance based on robust certification. This consideration led the Commission to propose a separate target for the LULUCF target of -310 MtCO2eq for the year 2030, which is now being discussed under the co-legislation procedure. In this context, the European Parliament proposed amendments that consider carbon farming as a means to go beyond the ‑310 MtCO2eq target. | As to carbon removals from industrial solutions (capture and storage/utilisation of non-fossil carbon), they are not explicitly included under the EU -55% target, and therefore any such removal would be additional with respect to this target. |
| | The Commission’s Communication on Sustainable Carbon Cycles 9 stresses the importance of enabling a business model that rewards land managers for carbon sequestration in full respect of ecological principles (‘carbon farming’), and of creating an EU internal market for capture, use, storage and transport of CO2 through innovative technologies. The communication also defines action plans to achieve the following aspirational goals for carbon removals: by 2028, all land managers should have access to verified emission and removal data to measure carbon farming practices, and all CO2 captured, transported, used and stored through industrial solutions should be reported and accounted; by 2030, carbon farming approaches should contribute to reaching the LULUCF target of ‑310 Mt CO2eq net removals; and industrial technologies should remove annually at least ‑5 Mt CO2eq by 2030. |
| | The proposed Nature Restoration Law sets out the goal that 20% of the EU’s land and sea should be covered by restoration measures by 2030. There are many synergies among carbon farming solutions and restoration measures. Among others, the Nature Restoration Law requires that areas under restoration show an improvement in the stock of organic carbon in agricultural and forestry ecosystems. |
| | In line with the key megatrends foreseen by the IPCC, the European Commission has announced in the Circular Economy Action Plan from March 2020 that it will develop an effective regulatory framework for the certification of carbon removals to incentivise the uptake of carbon removals and to increase circularity of carbon, in full respect of the biodiversity objectives. This certification framework is applicable to carbon removals produced in the EU. It is a voluntary framework, i.e. it is not mandatory for operators or certification schemes and it can be used for several purposes (see section 2.1.3). This certification framework is a first stepping stone and it may be proposed later to apply this framework as mandatory for certain policy uses. However, any mandatory use of this framework is outside the scope of this impact assessment (see also section 5.3). The present document assesses policy options for such EU certification framework. |
| | 2.Problem definition |
| | 2.1.What is/are the problems? How likely is the problem to persist? |
| | Reducing GHG emissions must remain the absolute priority of the Union’s climate policies. Nevertheless, the urgency of the climate crisis requires to make use of the full range of tools that we have available to mitigate the worst effects of global warming, including carbon removals, as concluded by the latest IPCC report. Therefore, there is also a need to incentivise land managers and industrial actors to take up sustainable management practices and technologies to sequester carbon from the atmosphere. The EU’s increased climate ambition and the growing awareness of the climate and environmental crises are pushing national governments, citizens and corporations not only to step up their efforts to decrease emissions but also to support carbon removal activities in order to achieve their climate goals. However, there are at least three interconnected problems due to which the increasing willingness to support carbon removals is not yet fully exploited or is being channelled towards ineffective and unsustainable carbon removal activities. |
| | 2.1.1.It is difficult to assess and compare the quality of carbon removals |
| | Any support to carbon removal activities must be based on reliable certification. Certification is the process of confirming that a product or service meets a set of characteristics, or standards. For instance, under the Renewable Energy Directive, biomass is certified as sustainable if its production complies with certain criteria; similarly, farmers are allowed to market their food as organic if they respect some specific rules. |
| | Certification of carbon removals is much less common than certification of emission reductions, and it is particularly complex because of some methodological challenges which are currently addressed in different ways by existing certification schemes (see section 2.2.1). This creates significant search costs for potential financiers of carbon removals, who need to invest time and cognitive effort to find robust carbon removal certificates and to compare the quality of the carbon removals between the various certification approaches. In addition, these certification challenges differ across carbon removal solutions (see section 2.2.2), which makes it even more difficult to compare the quality of carbon removals. This is a typical ‘market failure’ because, in the absence of reliable and comparable information about quality, users are not able to assess the true value of carbon removals, which undermines the effectiveness of any type of support. According to stakeholders, allowing comparability and competition between different carbon removal solutions is the first most important objective of the certification of carbon removals; it was selected by 52% of respondents, indicating a need for a common quality standard. In addition, the importance of internationally harmonising frameworks regarding carbon removals was often mentioned by stakeholders in the position papers submitted in their reply to the public consultation. |
| | How likely is the problem to persist? New global standards to define the quality of carbon certificates are emerging 10 : these initiatives may contribute to address this problem to some extent. However, these approaches alone cannot address the EU’s needs for carbon removal certification. First, their scope includes emission reductions and does not comprehensively cover all carbon removal solutions. Second, as those approaches do not include an effective and enforceable governance, they do not offer sufficient guarantees for an impartial standard setting and may also be driven by commercial interests. And third, they do not necessarily reflect the environmental, socio-economic and regulatory context of the EU. |
| | 2.1.2.Many stakeholders do not trust existing carbon removal certificates |
| | Previous experience of using carbon offset programs in a regulatory context, such as the possibility to buy a limited quantity of credits from the Clean Development Mechanism (CDM, established under the Kyoto Protocol) in place of ETS allowances until 2021, revealed the risks of relying on credits whose quality could not be guaranteed. An Oeko-Institut study 11 prepared for DG CLIMA in 2016 highlighted that the CDM had fundamental flaws in terms of environmental integrity and suggested that 85% of the CDM projects covered in their analysis and 73% of the potential 2013-2020 Certified Emissions Reduction (CER) supply had a low likelihood of emission reductions being additional and not over-estimated. Similarly, in the context of voluntary carbon markets, environmental organisations organised vocal protests calling offsets ‘scams’ 12 , questioning their quality and warning about the risk that they may deter action to mitigate emissions, and also took legal action 13 against oil or airline companies for false claims. Ensuring that strong action to reduce emissions is not undermined by shifting focus on carbon removals was the most selected challenge by NGOs in the public consultation. The risk of greenwashing is often driven by weak governance processes that open the door to unreliable and low-quality certificates, possible fraud, errors or double-counting (see section 2.2.3). This ultimately can lead to carbon removal certificates that do not deliver the climate and sustainability standards that financiers expect. |
| | These risks undermine the trust of many stakeholders: the corporations and governments that intend to support carbon removals fear the reputational risks associated to accusations of greenwashing 14 , and the customers or citizens served by these corporations and governments do not believe their climate neutrality claims. |
| | How likely is the problem to persist? The unreliability of the certification process can be addressed by drawing inspiration from governance rules of similar certification schemes (e.g. certification of sustainability criteria of the Renewable Energy Directive or of organic farming), but is not yet the object of any existing EU legislation in the context of carbon removals; therefore, in the absence of this initiative, this problem is likely to persist. |
| | 2.1.3.Carbon removal providers face barriers to access finance |
| | One of the reasons behind the existing heterogeneity of certification approaches is that different certification schemes serve different financing models, and they adapt the certification rules to the final use that will be made of the certificate. Indeed, there is a wide variety of ways to use carbon removal certificates, each of which may require specific certification approaches (see section 2.2.4). This diversity creates transaction costs for the operators that want to have their carbon removal activity certified 15 . First, they may incur search costs in order to understand the quality of the certification procedures of a given scheme. Second, operators that have already started a certified project to deliver carbon removals may face switching costs when trying to raise other complementary or alternative types of funding; in the current situation, this is likely to require changing their operations and providing a different set of evidence and information, which may hinder their capacity to raise enough finance for their activity. In the public consultation, creating a level-playing field was selected as the second most important objective of this initiative. |
| | How likely is the problem to persist? There is currently no other existing or planned framework to harmonise certification methodologies and procedures across different certification schemes; therefore, in the absence of this initiative, this problem is likely to persist. |
| | 2.2.What are the problem drivers? |
| | 2.2.1.Diversity of certification approaches |
| | In the last couple of years, some companies 16 have been eager to invest in a portfolio of solutions to remove carbon but they have noted the absence of clear standards for high-quality carbon removals. A study by Carbon Direct concluded that “carbon dioxide removal project developers and purchasers lack a common framework for what constitutes a best-in-class project”. 17 Instead, a recent analysis 18 of the U.C. Berkeley’s Voluntary Registry Offsets Database, which aggregates carbon management projects from the four largest voluntary offset project registries (American Carbon Registry, Climate Action Reserve, Gold Standard, and Verra), shows that emission reduction credits from renewable energy projects and avoided deforestation projects accounted for more than three quarters of the carbon credits exchanged on voluntary carbon markets, and that pure carbon removal credits are scarce (around 3%). The scarcity of carbon removal certificates was confirmed by a report for the Integrity Council for Voluntary Carbon Markets indicating that only 7% of the voluntary carbon market credits issued in 2019 and 4% in 2020 are carbon removals (the bulk being almost exclusively afforestation and reforestation) 19 . Also the CORSIA initiative, the Carbon Offsetting and Reduction Scheme for International Aviation, does not target specifically carbon removals, on the contrary it provides mainly emission reduction or emission avoidance credits. This is a problem for two reasons. First, “avoided emissions offsets” are not sufficient to get to the net zero emissions on a global scale that we need to reach the objective of the Paris Agreement and of the European Climate Law: they help to support cost-effective emission reduction elsewhere, but they simply do not remove carbon from the atmosphere in order to neutralise the unavoidable remaining emissions. Second, the lack of clear definition of what is considered as carbon removal hampers the scaling up of carbon removal solutions and undermines long-term planning among operators who need certainty for their investments. 20 |
| | In addition, carbon removals are a complex phenomenon. Certifying their quantity and their quality presents four main methodological challenges, which certification protocols address in different ways. Section 5.1.3 summarises how these approaches are addressed in the policy baseline, while Annexes 6 to 9 describe each of these four challenges and existing approaches in more details. |
| | 1.Correctly quantifying carbon removals |
| | It is important to accurately quantify and then monitor, report and verify (MRV) the net climate effects of carbon removal activities. This requires to: set the boundaries of the activity to be certified so that the total amount of direct and indirect emissions and removals are quantified; determine the baseline that is used as a benchmark against which the net climate effect of the activity is quantified (see more on this concept under the next challenge 21 ); and finally monitor and report all GHG emissions and removals generated by the activity with the need for an appropriate verification system to be set. |
| | 2.Ensuring that more carbon is removed from the atmosphere |
| | As said above, certification methodologies need to quantify the total amount of removals resulting from an activity (a basic information to understand the climate effect of the activity). In addition, public or private financiers want to be reassured that they finance carbon removals which go beyond standard market practices (e.g. through standard forest management practices) and regulatory requirements (e.g. through statutory management practices under the Common Agricultural Policy). The certification schemes therefore compare the total amount of removed carbon to a baseline that should represent the total removals that would have happened otherwise. The choice of the baseline presents difficult trade-offs: one trade-off is between ambition and uptake (i.e. if the baseline is too ambitious then participation will be low, but if it is too close to business-as-usual then the alignment with climate targets will not be ensured); another trade-off is between accuracy and costs (i.e. the cost to establish baselines can become a large part of the certification costs if this exercise requires too many data and information). On top of comparing the total removals to a baseline, some certification schemes undertake separate tests to check whether the carbon removal activity would have anyway been required by the law (regulatory additionality) or would have been profitable on its own (financial additionality). |
| | 3.Addressing the risk that carbon is released back into the atmosphere |
| | A ton of CO2 that is removed through a given carbon removal activity may be released back into the atmosphere due to natural events (e.g. extreme weather events, natural degradation of products, seismicity) or anthropogenic events (e.g. unsustainable management practices, disposal or incineration of products, cap-rock fracturing and leakage). The duration of carbon removals and the likelihood of carbon reversals are difficult to predict ex ante. This makes it challenging to guarantee that the activity results in sequestration of atmospheric CO2 for periods relevant to the mitigation of climate change. |
| | 4.Encompassing broader sustainability impacts |
| | Restoring areas of high biodiversity value, developing nature-based solutions for climate adaptation, and increasing the carbon stock of ecosystems can go hand in hand. Thus, carbon farming solutions can have positive impacts on other environmental or social objectives, such as biodiversity, water quality, zero-pollution, circularity, or food security. Conversely, if not well designed and implemented, carbon removal solutions can also cause negative impacts on those same objectives. |
| | 2.2.2.Diversity of carbon removals |
| | There exist many different ways to remove carbon from the atmosphere (see Box 1 ). Each of them has specific characteristics. First, the importance of the certification challenges listed under the first driver varies considerably across solutions. Second, carbon removal solutions are very different in terms of their maturity, cost-effectiveness and related monitoring costs. It is a very dynamic environment, where some carbon removal solutions or monitoring techniques that are today immature and expensive could be more widespread in a few years. |
| | A.Permanent storage |
| | Solutions storing carbon in geological formations (BECCS, DACCS) are well established but are expensive and their deployment has not achieved a large scale yet. On the other hand, they do not present major monitoring, reporting and verification challenges. The scarce deployment of these solutions and their explicit connection to climate change mitigation simplify the setting of the baseline (which can often be assumed to be zero) and in principle justifies an assumption that the activity can be considered additional by default. The risks of re-emission of carbon are low. |
| | B.Carbon farming |
| | Solutions storing carbon in biomass and soils play an important role to mitigate climate change in the short-term and can provide synergies with environmental objectives but it is more challenging to guarantee long-term storage due to natural disturbances, such as forest fires, or changes in management practices. These solutions have on average lower implementation costs than permanent storage solutions, even though costs per ton of removed carbon can still vary quite a lot depending on the specific type of carbon farming, and some practices are still consolidating (e.g. paludiculture, biochar). In addition, certain monitoring approaches (e.g. soil sampling) can be expensive and may represent a large share of the certification costs 22 , constituting a significant barrier to uptake for smaller land managers. However, significant progress is being made to increase monitoring accuracy and at the same time drive down costs, in particular thanks to the application of remote sensing and machine learning technologies. |
| | There is also a lot of heterogeneity within the carbon farming family. First, the outcome of carbon-removing activities is highly dependent on local climate and soil characteristics (even for the same type of solution), which requires the setting up of tailored mitigation strategies. Second, the importance of the certification challenges identified above differs according to the specific type of carbon farming solution. For instance, in the case of afforestation or agroforestry, it is relatively simple to set the baseline, while this can be more difficult in the case of improved sustainable forest management or increase in soil organic carbon; peatland rewetting results in a time-dependent balance between emission reductions, new emissions, and removals. |
| | C.Carbon storage products |
| | These solutions too cannot be considered as permanent, although the duration of the storage can vary considerably between products and depends on the uses to which they are put, but they can contribute to delaying emissions by prolonging the effective lifetime of carbon removals and by optimizing end-of-life uses, in synergy with the objectives of a Circular Economy. Pathways to store non-fossil carbon in bio-based materials and CCU products are very diverse. Some solutions, in particular those relying on the transformation of biomass for long-lasting circular products (e.g. construction sector, fiber-based production, nanocellulose solutions), are already deployed at a certain scale. Others, such as applications relying on industrial carbon capture and utilisation, are less mature in the EU 23 . The certification challenges relate to improving the quantification methods, setting the baseline, defining the expected lifetime of long-lasting products, defining responsibilities across the product value chain, and addressing the risk of carbon reversal during the use of the product and after the end of its lifetime. |
| | 2.2.3.Risks of unreliable certification processes |
| | As argued in section 2.1.2, certification needs to be reliable to avoid greenwashing. In particular, stakeholders expect certification schemes to put in place transparent and robust rules and procedures to mitigate three types of risks 24 : |
| | ·Risk that the certification process is not able to detect low-quality removals, to be mitigated through sound internal governance and management. |
| | ·Risk that the carbon removal projects are not actually delivering the removals as planned, to be mitigated through third-party auditing. |
| | ·Risk that the same project is certified twice, or that the same certificate is used twice, to be mitigated through a robust registry that tracks the certified projects and removals. |
| | 2.2.4.Diversity of business models |
| | There is a wide variety of ways to use carbon removal certificates. To date, the most common use of certificates has typically been in the context of voluntary carbon markets, but many inputs to the Call for Evidence (especially NGOs) underscore the dangers of relying on these markets to effectively address the climate and biodiversity crises, and respondents to the public consultation stressed that the main objective of the framework should be to increase transparency and the level-playing field in these markets (2nd highest-ranked objective in a list of seven, selected by 49% of respondents). The same number of respondents selected the objective to provide better public incentives for carbon removals in the EU and through national funding programmes. Other respondents supported the benefits of certification in corporate sustainability reporting (3rd, 55%), in commercial contracts in food and biomass value chains (4th, 34%) and in sustainable product labelling (6th, 31%). |
| | ·In voluntary carbon markets, companies that have made climate neutrality pledges buy carbon removals to compensate emissions. To avoid the risk of mitigation deterrence 25 , they should only finance an amount of carbon removals corresponding to the quantity of their unavoidable emissions (“offsetting”). Alternatively, companies may also finance carbon removal projects without any offsetting claim (“result-based financing”) or can use certificates to demonstrate a contribution to national targets (“contribution claims”). In these contexts, it is important that the certificates carry all the information that is needed to perform a corresponding adjustment in case compliance with article 6 of the Paris Agreement is required (see Box 3 ). |
| | Box 3 – The concept of corresponding adjustment | In the context of international and voluntary carbon markets, there has been significant discussion for many years as to how to avoid double counting of emissions and removals, and reconcile levels of offsetting with Paris Goals – irrespective of whether a credit is based on emissions reductions or carbon removals. Article 6 of the Paris Agreement proposes that a “corresponding adjustment” should be made in the national inventories to address double-counting of credits, and that baseline levels need to be aligned with national targets and strategies and goals. The applicability of adjustments, and alignment with Paris goals in other contexts, including in voluntary markets and towards voluntary targets, is currently much debated, but is ultimately dependent on the nature of the claim being made by the user. | Article 6 has yet to be implemented, and the processes for adjustment and alignment are not elaborated. It is not in the scope of this initiative to assess and design options for “corresponding adjustments” in national inventories related to trading of carbon credits in international or voluntary carbon markets. The vast majority of carbon credits traded today come actually from emissions reductions and not carbon removals. | The Article 6 of the Paris Agreement, including corresponding adjustments, will need to be implemented within the EU and require the establishment of a Paris Registry. This will provide a clear framework enabling alignment of accounting standards for any credit traded on international carbon markets, irrespective of whether it is about emissions reductions or carbon removals. |
| | ·Certification is also increasingly important to support carbon removals via public policies and initiatives. The Union and Member States are already implementing policies to provide incentives to carbon removal practices via public subsidies (e.g. Common Agricultural Policy), public procurement (e.g. reverse auctions to buy carbon removals, contracts for difference), and public funding (e.g. Innovation Fund that supports a BECCS plant in Stockholm). In the longer term, the Union may develop new policies to better integrate incentives for carbon removals into its policies. Certification can help to make these policies increasingly result-based and effective. |
| | ·The inclusion of sustainability in corporate reporting and in contractual arrangements also creates an important use case for carbon removal certificates. For instance, companies in the food sector may require primary suppliers to improve their climate performance to reduce their “scope-3 emissions” from purchases; as a consequence, primary producers receive a price premium on the basis of certified climate-friendly practices. Financial institutions that want to achieve a climate-neutral portfolio are increasingly offering impact financing to projects and companies (e.g. linking the financial conditions of equity or loans to the achieved climate performance). |
| | ·Voluntary labelling approaches can also build on the information provided by the certificates. This brings new revenues to carbon farming producers or producers of carbon storage products via the price premium that they can charge with respect to competitors. |
| | Each of these uses places more importance on given certification elements. For instance, in voluntary carbon markets the focus is exclusively on the net climate effect resulting from an additional activity, whereas in the other contexts the ‘gross’ climate effect of the activity is also an important piece of information (e.g. for corporate reporting and public funding it is important to know the total amount of emissions and removals that result from the activity). While reporting or labelling approaches would seek aggregate information on the net climate effect within large boundaries (e.g. Life-Cycle Assessment), a more granular breakdown of GHG emissions and removals by sources and pools would be necessary to ensure consistency with national GHG inventories (e.g. in the case of public funding, or if certificates retired in voluntary markets are subject to corresponding adjustment in the host country). Finally, the frequency of audits and verification must be on a yearly basis to be included in corporate sustainability reports whereas it can be carried out less frequently in other cases. |
| | 3.Why should the EU act? |
| | 3.1.Legal basis |
| | The proposal is based on Article 192(1) of the Treaty on the Functioning of the European Union (TFEU), which gives the Union the right to act in order to achieve objectives of its policy on the environment. The objectives of the Union policy on the environment as defined in Article 191(1) of the TFEU include, inter alia, preserving, protecting and improving the quality of the environment; a prudent and rational utilisation of natural resources; and promoting measures at international level to deal with regional or worldwide environmental problems, in particular combating climate change. |
| | 3.2.Subsidiarity: Necessity of EU action |
| | Climate change is a trans-boundary problem. Its effects are global, irrespective of the location of e.g. sources of greenhouse gas emissions. Therefore, these challenges cannot be solved by national or local action alone, since individual action is unlikely to lead to optimal outcomes. Coordination at the European level enhances climate action and can supplement and reinforce national and local action effectively; EU action is justified on grounds of subsidiarity, in line with Article 191 of the Treaty on the Functioning of the European Union. |
| | 3.3.Subsidiarity: Added value of EU action |
| | A European framework would be more appropriate than national initiatives in addressing the difficulty to assess the quality of carbon removals. Such framework would create a level-playing field and a fair internal market for the certification of carbon removals, enhancing comparability and trust. A patchwork of national initiatives in this area would only exacerbate the problem rather than solving it. |
| | 4.Objectives: What is to be achieved? |
| | 4.1.General objectives |
| | To address the first problem (i.e. the difficulty to assess and compare the quality of certified carbon removals), this initiative aims to create a certification framework to ensure the high quality of carbon removals in the EU. To address the second and the third problem (i.e. the lack of trust and the barriers to access finance), this initiative aims to establish an EU governance system to recognise certification schemes that correctly apply and enforce the EU quality framework in a reliable and harmonised way across the Union. |
| | These actions are necessary to trigger action and to build any future policy in this area, in view of the need to remove hundreds of MtCO2 per year to achieve the 2050 climate neutrality objective set in the European Climate Law and the environmental objectives of the European Green Deal. A very large majority of the respondents to the public consultation (89%) agreed that establishing a robust and credible certification system for carbon removals is the first essential steppingstone towards achieving a net contribution from carbon removals in line with the EU’s climate neutrality objective. The introduction of a certification of carbon removals based on robust, solid and transparent carbon accounting was also one of the measures proposed by the Conference on the Future of Europe 26 . |
| | 4.2.Specific objectives |
| | The four identified problem drivers correspond to four specific objectives: quality, tailored methodologies, trust and harmonisation. |
| | 4.2.1.Quality |
| | To harmonise the way in which the four certification challenges identified above are addressed, the framework will promote existing best practices through the establishment of four certification criteria (under the acronym QU.A.L.ITY): QUantification, Additionality and baselines, Long-term storage, and sustainabilITY. The shortlisting of these four QU.A.L.ITY criteria follows a general consensus about what constitutes high-quality certification according to most existing certification methodologies analysed in the study supporting this Impact Assessment 27 , as well as by the main international references for GHG accounting such as the GHG Protocol 28 , the ISO Standard 14064-2 29 , and the draft Core Carbon Principles proposed by the Integrity Council for the Voluntary Carbon Market 30 . |
| | 4.2.2.Tailored methodologies |
| | To address the diversity of carbon removal solutions (even within the same family of solutions, in particular within the carbon farming domain), the framework should include specific certification methodologies that are tailored to each type of carbon removals, while being aligned with the four QU.A.L.ITY criteria. The respondents to the public consultation clearly indicated that the Commission should allow different types of certificates depending on the characteristics of the carbon removal solutions (55%). |
| | 4.2.3.Trust |
| | To address the need to ensure the reliability of certification processes, the framework should provide public guarantees that certification schemes are capable of enforcing the four QU.A.L.ITY criteria, rely on third-party independent auditors to certify their projects, and manage registries of good quality to avoid double-counting. These guarantees would increase trust in certification schemes for carbon removals. |
| | 4.2.4.Harmonisation |
| | To minimise the transaction costs for providers of carbon removals when navigating through different certification schemes, an EU governance process should be established to harmonise as much as possible the rules and procedures of certification schemes operating in the EU framework. The certificates should transparently carry all the core information needed to access financing opportunities of different types (e.g. both net and gross climate effect, a granular breakdown of emissions and removals), while certification schemes shall be allowed to go beyond the EU standard (e.g. more ambitious baseline, longer commitment periods, higher frequency of audits) to differentiate themselves, including on specific aspects that are more relevant for the uses of the certificates they issue. |
| | 5.What are the available policy options? |
| | 5.1.What is the baseline from which options are assessed? |
| | 5.1.1.Overview of certification actors and roles |
| | Three broad categories of actors are involved in the certification of carbon removals. |
| | First, operators are defined as those who carry out carbon removal activities, i.e. companies implementing industrial removal solutions or land managers implementing carbon farming solutions, and who seek certification for these activities. These project operators, especially in the carbon farming domain, are often SMEs; therefore, it may be difficult for them to directly access the opportunities offered by certification schemes, because of lack of skills or time. This has created a demand for intermediary operators (called programme developers in this Impact Assessment) who aggregate multiple projects, support them in obtaining certification, and usually take a share of the revenues linked to the certificates. |
| | Then, certification schemes provide a set of rules and procedures to certify operators. Typically, the following actions need to be performed: |
| | ·Establish certification criteria and develop the related certification methodologies. Often, certification schemes apply certification methodologies that are developed in a bottom-up fashion by external parties (often, the programme developers); in such cases, the schemes would establish a methodology approval process to check that the methodologies are aligned with the scheme’s criteria. |
| | ·Validate projects ex-ante and verify climate benefits ex-post; this is often delegated to third-party auditors called certification bodies (see more below). |
| | ·Issue removal certificates corresponding to the verified carbon removals (this could also be done by certification bodies on behalf of certification schemes), and record them in a registry system. |
| | Finally, certification bodies (VVB) are third-party auditors that are often appointed by certification schemes to evaluate documentation at two stages in the certification cycle, and to issue certificates on behalf of the certification scheme. At the stage of project registration, these auditors perform an ex-ante project validation, i.e. an initial assessment of carbon-removing projects to evaluate the reasonableness of statements about the outcome of future activities. At the issuance of credits, they perform an ex-post verification of carbon removals, i.e. they audit the projects to confirm the quantified climate impact and ensure alignment with the scheme’s criteria. |
| | These actors, roles, and relationships are illustrated in Figure 1 . |
| | Figure 1 - Roles in a certification system. Dashed elements indicate optional roles or relationships that are not always present. |
| | 5.1.2.Current status of carbon removal certification in the EU |
| | There is little presence of European projects on voluntary carbon markets. For instance, the two biggest certification schemes in voluntary carbon markets, the Voluntary Carbon Standard and Gold Standard, have respectively registered only 11 and 4 projects as taking place in the EU 31 , of which only 1 is specifically aimed at carbon removals. Thus, it is possible to conclude that currently the largest certification schemes in voluntary carbon markets have virtually no role in certifying carbon removals happening in the EU.In this context, a few national or local certification schemes have emerged in the EU that are solely or mainly dedicated to certifying various types of CO2 removals. |
| | An example of a certification scheme run by a national public authority is the Label Bas Carbone in France, which is managed by the French Ministry for Ecologic and Solidary Transition and jointly developed with the Ministry of Agriculture and Food, as well as external experts. It currently 32 certifies 233 projects covering farming and forestry activities to both reduce emissions and increase removals; of these, the large majority (176) are individual carbon removal projects in the af/reforestation or forest management domains (total carbon removal potential: ~325 ktCO2), but there is also one large collective project (Carbon’Agri) gathering 300 individual livestock farms based on a methodology to certify emission reductions (total emission reduction potential: ~140 ktCO2). The Ministry has defined the basic certification criteria in a decree 33 , and it convenes an ad-hoc, informal expert group to help the review and approve the methodologies submitted by programme developers and project operators. After third-party verification, the Ministry issues the certificates; French companies, public organisations or individuals can buy those credits but not resell them further. |
| | Another national certification scheme is the Spanish Registro de Huella de Carbono, a public registry managed by the Ministry for the Ecological Transition. It covers both emission reductions projects in many sectors (2.057 projects 34 ) as well as carbon removal activities (166 projects, two thirds of which started in 2021, mainly af/reforestation and forest restoration). The registry asks operators to apply recognised methodologies and to be validated and verified by independent auditors. Once the project is verified, the Ministry records the certificates on a public registry. In addition, the Ministry gives a three-tier label to private companies that (1) compute their carbon footprint, (2) reduce their emissions and (3) compensate their remaining emissions by buying certificates from the registry. |
| | Other local initiatives in the EU, run by either private or public actors, include Puro.earth from Finland, certifying 30 projects (of which 13 in Europe) dedicated to both industrial carbon removal solutions and carbon farming solutions, for a total removal potential of ~100 ktCO2eq 35 ; MoorFutures 36 from Germany, dedicated exclusively to peatland rewetting and certifying two projects for a total mitigation potential of ~10-15 ktCO2eq; and CarboCert (Germany) and Kaindorf Humuszertifikate (Austria), both dedicated to CO2 removals in organic soils 37 . In the UK, the Woodland Carbon Code certifies around 1000 projects for a total removal potential of around ~100 ktCO2eq 38 . This overview does not include several local schemes and start-ups that have emerged recently and which could not be considered due to their small size or not yet available data. It can therefore be concluded that several national or local EU certification schemes have emerged in recent years, but that these are very specialised and cover small regions. Except Puro.earth, there is virtually no other scheme certifying industrial carbon removal solutions or carbon storage products. This provides a rationale for an EU certification initiative to encourage the scale-up of the activities of existing schemes and the entry of new ones. |
| | Annex 4 provides an overview of certification schemes that are active globally or in the EU. |
| | 5.1.3.Quality of existing carbon removal certification |
| | It is not only important to scale up carbon removal activities but also to ensure a growth path based on robust certification schemes that create trust in the quantity and quality of carbon removals. As explained in section 2, certificates are still associated with a large reputational risk if unreliable and non-transparent certificates are used as a means for “greenwashing”, and there is still a high degree of confusion about what classifies as high-quality carbon removals, as evidenced by the diversity of certification approaches. Stakeholder’s replies to the public consultation (summarized in Annex 2) provide an overview of the most salient quality gaps of the current approaches to carbon removal certification. Annexes 4, 6, 7, 8, 9 provide overviews and in-depths assessments of current approaches. |
| | ·Quantification. Despite the existence of comprehensive guidance on the necessary steps to establish quantification, monitoring and reporting protocols 39 , there are still gaps in our ability to monitor, report and verify carbon removals via either direct observation or modelling techniques. The best practice when establishing the boundaries of certification is to carry out a life-cycle assessment to capture the total impacts of a given carbon removal activity, including related upstream and downstream emissions. Different approaches to establish the baseline are discussed below. Some certification schemes estimate the amount of carbon removals based on direct measurement, others rely on modelling, others do both, but methodologies differ in approaches to manage uncertainty (e.g. discounts, buffers, conservative assumptions), and the potential to use of remote sensing to increase the accuracy and lower the costs of MRV in the carbon farming domain is not yet fully exploited. Respondents to the public consultation put a great emphasis on this challenge. Ensuring precise, accurate and timely measurement for removals was ranked as the most important challenge regarding the integration of carbon removals in EU climate policies (this result was mainly driven by the replies of business associations and companies/business organisations). The robustness of MRV aspects was the most selected criterion defining the types of carbon removals that EU climate policies should incentivise. When asked what information the certification of carbon removals should disclose, respondents selected as the three top replies “Quantity of carbon removed”, “Type of carbon removals” and “Information on MRV processes”. |
| | ·Additionality and baselines. There are different ways to define baselines, depending on whether the carbon removals are compared to the historical practice of the individual operator or with the standard practice of other operators under similar circumstances; there are also different approaches to ensure the ambition of the baseline, e.g. a discount on the historical level of emissions and removals, or the choice of an ambitious benchmark such as best available technologies or best performing activities. The key question is how to find the good balance between accuracy and ambition on the one hand, and lower costs and a broad uptake on the other hand. Most schemes adopt project-specific baselines, but these have shortcomings in terms of ambition, reliability, administrative burden and incentives for “first-movers” (see Annex 6 for more details). In terms of additionality, only few certification schemes require both regulatory and financial additionality (they more often require just one of the two, or none) 40 . In the public consultation, the challenge of setting appropriate baselines and demonstrating the additionality of removals was considered relatively less important than others, as it only ranked 6th in a list of eight challenges. Nevertheless, in a question specifically dedicated to additionality, 71% of respondents call for EU guidance on baseline and additionality criteria. |
| | ·Long-term storage. Most certification schemes define a specific duration for the monitoring period of the project 41 , which can last from 10 to 100 years 42 , and the continuous storage of carbon removals is not guaranteed after this period. However, the issued certificates have no expiration date, thereby failing to fully recognise the non-permanence of some types of carbon removal solutions (see Annex 7 for more details). In addition, to cover the risk of early release of reversals, certification schemes create buffer accounts and allocate liabilities (imposing adequate redress and compensations) on the carbon removal supplier, the certification scheme or the user of the certificate. Providing sufficient guarantees for the duration of carbon storage and the prevention of reversals was considered the 3rd (among eight) most important challenge by the respondents to the public consultation. Regarding the way to best manage the risks of reversal, the most common response was to require risky removal solutions to be discounted or have a proportion of expected removals be stored in a buffer account; the second most popular response was to require multi-year monitoring plans at the outset of the certification procedure; the third most popular response was for certificates to be issued with specific durations (e.g. 5, 7, or 10 years), which could then be renewed. |
| | ·Sustainability. Existing schemes include more or less stringent prescriptions and tools to identify and to clarify how sustainability impacts are managed. Some schemes require the disclosure of additional co-benefits, as long as they can be monitored and verified, but very few certification schemes require to provide an assessment of the environmental and social impacts of the projects based on specific rules and monitoring tools 43 . More typically, schemes may require identifying and mitigating risks of adverse side-effects on sustainability, or exclude activities that, despite their climate benefits, are likely to generate them. Avoiding potential negative environmental impacts and complying with sustainability principles was considered a less important challenge by respondents to the public consultation (ranked 7th out of eight), but it was considered an important criterion (especially by NGOs and EU citizens) when defining the types of removals that should be incentivised (ranked 4th). |
| | Regarding the reliability of the certification process, the majority of the larger schemes score well on transparency 44 : they have third-party verification, they submit their methodologies to peer-review and public consultation, they publish their certification methodologies and all the documents related to the verification and certification of the projects, and they have a public registry that identifies each certificate with a serial number. However, other best practices (such as the publication of withdrawn certificates and their final destination) are only followed by a minority. Current procedures to avoid double counting still rely on manually checking if the registries from other schemes include certificates from the same project. In the public consultation, many stakeholders indicated that certificates should include transparent information on the carbon removal provider, on the certificate owner, and on the use of the certificate with a view to avoid double counting (respectively the 5th, 6th and 7th most selected types of information in a list of 12). See Annex 10 for an overview of the best practices to ensure transparency. |
| | 5.1.4.EU regulatory context |
| | An important consideration when creating a framework for the certification of carbon removals produced in the EU is to build on some elements that are already included in relevant EU legislation and that partially address the challenges identified as the first problem driver. It will be important to ensure consistency with this legislation so that synergies can be exploited and inconsistent legislation avoided. However, the current legislation does not provide a comprehensive framework for carbon removal certification: for instance, some relevant monitoring rules or indicators apply to the national level and not to the individual level or are of a voluntary nature. See Annexes 6 to 9 for more details. |
| | ·Quantification. The ETS Directive 45 explicitly includes carbon capture and storage (CCS) solutions, and therefore CO2 captured, transported and stored according to the CCS Directive 46 will be considered as not emitted. To this end, CCS should be quantified in accordance with a comprehensive methodology outlined in the Commission Implementing Regulation (EU) 2018/2066 47 on the monitoring and reporting of GHG emissions for the ETS (especially Articles 40 to 46 and Article 49 and Annex IV, Section 21). Based on these rules, the Commission has also developed detailed methodologies for the GHG quantification of BECCS and DACCS projects that apply to receive grants from the Innovation Fund 48 , and requires successful projects to maintain records of measurements and annual reports. For carbon farming solutions and harvested wood products, the LULUCF Regulation 49 provides a blueprint for accurate monitoring and reporting of carbon removals in line with IPCC guidelines and in synergy with biodiversity, renewable energy and adaptation policies. The rules encourage monitoring land use in a geographically-explicit way, at low cost and in a timely fashion, for example through digital databases and maps, combined with remote sensing, including the Copernicus Sentinel satellites or commercially available services. |
| | ·Additionality and baselines. The Common Agricultural Policy 50 provides a set of regulatory requirements referring to different pieces of environmental legislation (called Statutory Management requirements) and of conditionality requirements (called Good Agricultural and Environmental Conditions, GAECs) that farmers must comply with in order to be eligible for income support; these can be of inspiration when establishing that carbon farming projects are additional from a regulatory point of view (for example that they exceed legal obligations and/or conditionality requirements). |
| | ·Long-term storage. For geological storage, the already mentioned CCS Directive 51 establishes that the carbon removal project remains responsible for monitoring and reporting and liable to compensate for any re-emission, with a transfer of liability foreseen at the cessation of the activities. |
| | ·Sustainability impacts. The proposal for a Nature Restoration Law 52 defines a list of indicators to assess the improvement of agricultural ecosystems 53 and forest ecosystems 54 , with a duty for Member States to put measures in place to increase their trends at national level. . Once defined and developed, these indicators could be taken as a basis for the disclosure of co-benefits of carbon removal activities. The Taxonomy Regulation 55 establishes six environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems. Relevant activities for carbon removal certification in the first Taxonomy Delegated Act (for the climate-related objectives) were forestry, restoration of wetlands, and underground permanent geological storage of CO2. The Taxonomy Do No Significant Harm criteria can inspire a general approach to exclude activities with a significant negative impact on sustainability. The sustainability criteria for biomass from the Renewable Energy Directive 56 can be taken as a basis for sustainability safeguards for the biomass used for BECCS or for bio-based construction products. In the case of bio-based construction products, safeguards and co-benefit disclosure could also largely build on provisions from the Ecodesign for Sustainable Products Regulation185 and the Construction Products Regulation 57 , which the Commission is proposing to revise 58 . Finally, the Environmental Footprint method 59 defines the recommended modelling requirements, data quality requirements 60 , and life cycle impact assessment 61 to be followed when assessing the environmental performance of products and organization. Such methods allow to identify co-benefits and trade-off between climate change and the other 15 impact categories. |
| | Finally, when it comes to the Transparency criteria, experience with the Renewable Energy Directive but also with the EU ETS confirm the need to have robust registries in place to track certificates to avoid double-counting. The rules to harmonise registries for carbon removal certification could build on these experiences. See Annex 10 for more details. |
| | 5.2.Description of the policy options |
| | To achieve the general objectives stated in section 4.1, the EU will (i) develop a high-quality standard for carbon removals and (ii) ensure its enforcement. Accordingly, two sets of policy options will be assessed: |
| | ·Quality options: based on the QU.A.L.ITY criteria established in a legislative framework (Regulation), specific methodologies will be developed by either the certification schemes (option Q1) or the Commission (option Q2). |
| | ·Governance options: based on the Transparency criteria established in the framework, certification schemes will be recognised by either the Member States (option G1) or the Commission (option G2). |
| | The diagram in Figure 2 summarises the intervention logic of the Impact Assessment. |
| | Figure 2 - Overview of the intervention logic |
| | 5.2.1.Quality options Q1 and Q2 – Developing the tailored certification methodologies |
| | The development of the certification methodologies will build on the best practices from existing certification schemes and EU legislation. The existing approaches for each QU.A.L.ITY criterion, their strengths and weaknesses, and the best practices have been extensively assessed in dedicated annexes (Annexes 6 to 9). The results from this analysis are summarised in Table 1 . |
| | Table 1 - Summary of best practices for the QU.A.L.ITY criteria |
| | Quantification |
| | Goal: Quantify all relevant removals and emissions based on a life-cycle approach including direct and secondary emissions attributable to the carbon removal project. | Annex 6 analyses existing approaches to quantify carbon removals and concludes that the project boundaries should be set in a way that accounts for all removals and emissions attributable to the carbon removal activity, and that the climate benefit assessment of a carbon removal project should be conducted by comparing the net removals expected from the project activities to a representative baseline. In addition, the carbon removal project should provide a comprehensive monitoring plan describing in detail the procedures used for the measurement or the estimates of all GHG data and other information relevant to the project and the baseline, including a detailed breakdown of the emissions and removals attributable to the project. |
| | Essential elements for the development of tailored methodologies |
| | Permanent storage | Carbon farming | Carbon storage products |
| | The quantification can build on the methodologies already developed for the Innovation Fund (i.e. a life-cycle approach including direct and secondary emissions attributable to the carbon removal project). | The quantification should build on the scope of the LULUCF regulation. While increased non-LULUCF emissions due to the activity should be subtracted, decreases should be disclosed as a co-benefit. | The best available data and monitoring techniques should be in line with the Commission proposal for the LULUCF Regulation. To decrease costs and enable large participation, the full potential of remote sensing should be exploited. | More research and experience is needed to develop a dynamic life-cycle approach, identify the correct boundaries of the activity and recognise the temporary storage of carbon in long-lasting products. |
| | Additionality and baselines |
| | Goal: Deliver removals beyond the standard practices and channel incentives where they are needed to take up or maintain a carbon removal activity. | Annex 7 looks at approaches to define a real, transparent, conservative, and credible baseline (beyond standard practice), that encourages ambition over time – in line with the Paris agreement – and broad participation. It also argues for the importance to demonstrate that carbon removal activities are additional from a regulatory and a financial point of view. The annex concludes that a standardised baseline, which reflects the market and regulatory conditions in which the carbon removal activity takes place, has many advantages: it is objective and robust, it rewards the action of early-movers, and it reduces the need for complex tests on financial and regulatory additionality. |
| | Essential elements for the development of tailored methodologies |
| | Permanent storage | Carbon farming | Carbon storage products |
| | As these are nascent technologies developed with the specific aim of removing carbon, the baseline can generally be set at zero removals, and the activity considered additional. | The baseline should represent the standard practices in comparable land parcels based on integrated datasets and remote sensing. Absent these data, baselines can be based on available best practices (based e.g. on EU legislation), historical averages of national, regional or project-specific data that should be corrected for data uncertainties and higher ambition than business-as-usual. Design simplified approaches to determine additionality. | More experience is needed to identify best practices. |
| | Long-term storage |
| | Goal: Incentivize long-term storage through fair and transparent risk-sharing arrangements. | Annex 8 concludes that the choice of time-limited and renewable contracts for carbon farming activities can recognise the non-permanence of these practices and avoid land managers having to take a too long commitment that could discourage their interest in taking up these certification schemes, while at the same time providing incentives for the continuation of the carbon removal activities in order to obtain a renewal of the contract. In addition, thanks to the detailed rules of the CCS Directive on monitoring and liability for re-emissions, the EU framework can recognise the high quality of BECCS and DACCS and therefore simplify access to finance. |
| | Essential elements for the development of tailored methodologies |
| | Permanent storage | Carbon farming | Carbon storage products |
| | Operators are liable to compensate for any re-emission during the full period of carbon storage, with a transfer of liability foreseen at the cessation of the activities, as stipulated in the CCS Directive. | To keep liabilities manageable for land managers, they can commit to carbon storage for a limited time period, during which they are liable for re-emission. The certificate expires at the end of the commitment period or can be prolonged. Land managers are also free to commit to a longer period upfront. | More experience is needed to identify best practices. |
| | Sustainability |
| | Goal: Incentivise carbon removals with higher co-benefits (including biodiversity, water quality, zero-pollution, circularity, or food security) through a balance between safeguards from existing legislation, disclosure of co-benefits, and minimum sustainability requirements. | Annex 9 concludes that the inclusion of strong requirements on sustainability is necessary to tackle the climate crisis and the biodiversity crisis in a synergistic manner. While minimum requirements for co-benefits should be defined for carbon farming activities due to the strong potential for synergies, in the case of permanent storage solutions and carbon storage products relevant safeguards can build on existing legislation. |
| | Essential elements for the development of tailored methodologies |
| | Permanent storage | Carbon farming | Carbon storage products |
| | CCS, Renewable Energy Directive and Taxonomy provide the relevant safeguards and minimum requirements for safe geological carbon storage and sustainable supply of biomass (BECCS). | Only carbon farming activities that provide a neutral or positive impact on the environment are eligible. The minimum requirements should go beyond mandatory legal standards, and can be inspired by relevant taxonomy criteria or best practices from private certification schemes. Disclosure of co-benefits can build on relevant EU legislation (e.g. biodiversity indicators from proposed Nature Restoration Law). | Minimum requirements and indicators for co-benefits to be developed in close synergy with Sustainable Products Regulation and Construction Products Regulation. |
| | The legal framework will set out these QU.A.L.ITY criteria; based on them, certification methodologies tailored to each specific carbon removal solution have to be developed: |
| | Under option Q1, the certification schemes will develop new methodologies or adjust their existing methodologies in line with these criteria and elements if they want to be recognised under the EU certification framework. The certification schemes are free to submit their methodologies at any time to the responsible public authority for recognition (see governance options G1 and G2). |
| | Under option Q2, the Commission will develop the methodologies in close consultation with an expert group that includes experts from the Member States, independent experts, and stakeholders 62 . Q2 is the preferred option for the respondents to the public consultation: 64% of them believe that the methodologies should be established by public administration rather than private entities. The Commission will decide on the sequence and priority of the methodologies to be developed based on several criteria (see Box 4 ), in consultation with the expert group. |
| | Box 4 – Establishing the priority for tailored certification methodologies under Q2 | Respondents to the public consultation shared their views on the time horizon for including specific carbon removal solutions in the certification framework: both carbon farming solutions (especially sustainable forest management) and industrial solutions (with some exceptions) were broadly supported for implementation as soon as possible. The three most frequently selected criteria to prioritise the methodologies were robustness of MRV aspects (54% of all respondents), potential for deployment at large scale (49%), and technical readiness and economic feasibility (45%). Another important criterion, due to its relevance for the EU Green Deal, are the potential environmental co-benefits (the most selected criterion among NGOs). Carbon removal solutions perform very differently against these criteria: | ·BECCS and DACCS have a large mitigation potential, their certification can ensure robust MRV and, as shown in Table 2 , the QU.A.L.ITY criteria can largely build on existing legislation, but their economic feasibility is still a challenge. Thus, these methodologies can and should be built relatively quickly to attract investment. | ·While certification methodologies have already been developed and rolled out at a larger scale for some carbon farming solutions (e.g. forestry, afforestation), others are still applied at a smaller scale (e.g. agro-forestry, peatland rewetting, soil carbon 63 , biochar…). Besides the existing experience with certification, the choice of the specific carbon farming solutions to prioritise should be driven by the extent of the environmental and socio-economic co-benefits that these solutions can provide. | ·The certification of carbon storage in products is still in its infancy. While waiting for a more robust scientific consensus, no best practices can yet be identified. First, sophisticated quantification methods must be developed by experts and discussed with the relevant stakeholders. The 2022 Commission Work Program for CEN/CENELEC includes a mandate for developing a methodology to integrate carbon storage into LCA for construction materials. |
| | 5.2.2.Governance options G1 and G2 – Implementing the certification framework |
| | The EU framework will guarantee that certification schemes ensure a well-functioning certification process by establishing three Transparency criteria (see Annex 10): |
| | ·Reliable rules and procedures: certification schemes shall be operated on the basis of reliable rules and procedures in order to ensure their capacity to check that operators comply with the QU.A.L.ITY criteria. In particular, these include internal management and monitoring, complaints and appeals management, stakeholder consultation, transparency and publication of information, approval and training of certification bodies, management of non-conformities, and management of registries. |
| | ·Third-party verification and certification: certification schemes shall ensure that information and data submitted by operators for verification of the generated carbon removals and certification of the carbon removal activities are subject to independent auditing. Certification schemes shall also ensure that the verification and certification activities are carried out by accredited certification bodies in a cost-effective way. | ·Robust registries: certification schemes shall duly maintain a public registry of validated and verified carbon removals and certificates. The certificates in the registry should include all relevant information needed to assess the quality of the certificate, to identify it (e.g. a unique tracking number) and to track its use. Registries should be inter-operable to help preventing double-counting. | The definition of these transparency criteria largely draws from existing experience with the certification of sustainable biomass under the Renewable Energy Directive. In that context, the Commission carried out a review 64 of the certification schemes operating under the 2018 Renewable Energy Directive, which pointed to several good practice rules that are generally applicable to certification schemes operating in other fields. | In addition, public authorities can contribute to ensuring the credibility and integrity of certification schemes by: | 1.Recognising the certification schemes that comply with the Transparency criteria and that can therefore be used by operators to demonstrate compliance with the QU.A.L.ITY criteria and tailored methodologies; | 2.Taking appropriate measures or sanctions in case of irregularities; | 3.Producing reports about the implementation of the certification framework. | Depending on who is the public authority responsible for these three roles, two governance options will be assessed: | Under option G1, Member States are the public authority responsible for ensuring the credibility and integrity of certification schemes. Alternatively, under this option, each Member State may decide to establish a public certification scheme which would directly perform the typical functions of a certification scheme. | Under option G2, the Commission is the responsible public authority and the certification schemes recognised by the Commission could then be active across the whole Union. The EU recognition would be valid for a fixed number of years (e.g. five) and regularly monitored. |
| | 5.3.Options discarded at an early stage |
| | The option to establish a mandatory requirement on all EU operators that seek to certify carbon removals to do so in accordance with the EU framework was discarded. The Commission considered that more experience is needed in this novel and complex area before any effective mandatory requirement can be designed. In particular, before any mandatory use of the framework is proposed, the certification methodologies need to be already in place and tested. This initially voluntary phase will serve as a pilot phase during which operators and certification schemes can build capacity. Based on the lessons learnt, the Commission should undertake an evaluation and assess further policy options. |
| | The option to establish rules on how the certificates can be used by private and public organisations to report on their climate performance and to substantiate their climate-related claims was discarded, as this type of requirements would have largely overlapped with existing EU legislation. In particular, a Delegated Act on EU sustainability reporting standards will be published in June 2023; these standards will become a mandatory requirement for companies covered by the proposed Corporate Sustainability Reporting Directive 65 , and will define how to report information about the climate footprint of an organisation. A draft proposal 66 by EFRAG was submitted to public consultation in summer 2022, and included disclosure requirements on how to report on climate targets and on climate performance (e.g. requirement that undertakings do not include GHG removals, carbon credits or avoided emissions as means to achieve GHG emission reduction targets, reporting requirements on GHG removals in own operations and the value chain, GHG mitigation projects financed through carbon credits). The proposal for a Green Claims initiative will be adopted on the same day as the carbon removal certification framework and will aim to make environmental claims (including climate-related ones) reliable, comparable and verifiable across the EU, thus protecting consumers from the risk of greenwashing; the certification methodologies developed under the carbon removal certification framework should be designed in synergy with the provisions of the Green Claims initiative. |
| | The option to include the certification of emission reductions – such as from livestock management or use of fertilisers – in the framework was discarded because of the polluter-pays principle. In the EU climate policy framework, emission reductions are among others incentivised through the EU Emission Trading System, regulatory measures, such as the CO2 standards for cars, or national targets under the Effort Sharing Regulation. Following a recommendation by the European Court of Auditors 67 , the Commission is currently undertaking a study that assesses policy options to apply the polluter-pays principle to emissions from the agricultural sector. |
| | 6.What are the impacts of the policy options? |
| | 6.1.Identification of impacts |
| | A screening of the possible impacts of this initiative 68 has led to the identification of eight relevant categories of impacts related to seven Sustainable Development Goals (SDG). |
| | Table 3 associates each of these impact categories with the relevant policy choice: the QU.A.L.ITY criteria and methodologies in comparison with the baseline, the relative impacts of options Q1 vis à vis option Q2, the Transparency criteria in comparison with the baseline, and the relative impacts of options G1 vis à vis option G2. |
| | Table 3 - Identification of impacts |
| | Impact category | Sustainable Development Goals | QU.A.L.ITY | Q1 vs Q2 | Transparency | G1 vs G2 |
| | Environmental | Climate | 13 (Climate Action) | X | X | X |
| | The potential to increase the uptake of carbon removal activities by decreasing entry costs while requiring a high level of quality. |
| | Environment | 15 (Life on Land) | X | X | X |
| | Co-benefits of carbon removal activities for other environmental objectives, while ensuring that no harm is done to these same objectives. |
| | Economic | Sectoral competitiveness and internal market | 8 (Decent Work and Economic Growth) | X | X | X | X |
| | Contribution to a level-playing field for the certification of carbon removals. |
| | Conduct of business | 12 (Responsible Production and Consumption) | X | X | X | X |
| | Operators and certification schemes joining the voluntary framework may have to adjust their business model and their operations. |
| | Innovation and digital economy | 9 (Industry, Innovation and Infrastructure) | X | X |
| | New monitoring techniques, new technologies and products to remove carbon, availability of digital data on carbon removals in open access registries. |
| | Public authorities | 16 (Peace, Justice and Strong Institutions) | X | X | X |
| | Possible costs for public administrations in term of developing certification methodologies and/or recognising certification schemes. |
| | Social | Rural areas and food security | 2 (Zero Hunger) | X |
| | Economic diversification and new business opportunities in rural areas & improved soil productivity and resilience, but also possibly higher competition for land. |
| | Participation | 16 (Peace, Justice and Strong Institutions) | X | X |
| | Improved access to information for stakeholders by promoting transparency and by involving them in the development of the certification methodologies. |
| | As the market for certified carbon removals is currently at an early stage of development, the assessment of the options is primarily qualitative, based on the assessment of existing certification schemes, literature and expert reviews (see Annexes 3 to 11), and drawing from the analysis of the replies to the Open Public Consultation and the positions papers submitted to the Call for Evidence (see Annex 2). |
| | 6.2.Impacts of QU.A.L.ITY criteria and methodologies (Quality options) |
| | Climate. The main impact of this initiative on climate is the increased quality of certified carbon removals compared to the policy baseline. The QU.A.L.ITY criteria increase the clarity on the climate benefits of carbon removal activities and establish a higher standard for the development of methodologies: |
| | ·Quantification – clear principles for the calculation of the carbon removal benefits of activities, in accordance with international standards, requiring a detailed breakdown of all removals and emissions attributable to the activity and robust monitoring fitting the different types of carbon removals (see Annex 6). |
| | ·Baseline and Additionality – the demonstration of the additionality of carbon removals is simplified by promoting a representative benchmark of standard practices; this will reward first-movers and avoid subjectivity that result from baselines that are based on project-specific scenarios (see Annex 7). |
| | ·Long-term storage – the expected duration of carbon storage for which the operator takes liability, is clearly indicated and will allow for better risk-sharing arrangements (see Annex 8). |
| | Currently, the mitigation potential of carbon removal activities is far from being fully realised due to many existing barriers. The main climate impact of this initiative is delivered by addressing these barriers, with the aim of increasing the uptake of carbon removal activities and achieving the goals set in the Sustainable Carbon Cycle communication, while ensuring the high-quality of these activities. These barriers are specific to the different carbon removal activities and will be addressed as follows: |
| | A.Stakeholders interviewed in the context of a recent report by CarbonPlan 69 agreed that the main barriers to scale permanent storage solutions are lack of public sector support and the high cost of these technologies, but they also converged on the idea that certification standards could play an increasingly important role as the market for this type of certificates grows. To promote these solutions, the certification criteria recognise that these carbon removals are additional (as these technologies are currently still too expensive to enter the market without financial support) and permanent (with the liability rules of the CCS Directive applying), which will give them a competitive advantage in terms of quality and facilitate their financing. |
| | B.A study on carbon farming carried out on behalf of the Commission found that the main barriers to uptake are: the financial burden (cost of management practices and uncertainty about revenues); lack of public trust in the reliability of voluntary carbon markets; concerns around environmental integrity, additionality or permanence; the unavailability, complexity or high costs of monitoring, reporting and verification systems; the insufficiently tailored training and advisory services. Participants to the Thematic Group on carbon farming organised by the European Network for Rural Development 70 confirmed these findings and indicated that scaling these solutions requires (inter alia) better advisory services, lower costs of monitoring, reporting and verification 71 , the recognition of the action of early movers, approaches to ensure the long-term storage of carbon, the development of different funding models (i.e. not only voluntary carbon markets), and awareness of the environmental co-benefits. The EU certification criteria will address these barriers by increasing trust and predictability on the outcomes of carbon farming practices and how they are certified and rewarded; enabling easier access to different funding opportunities through a harmonised certification process; promoting the use of remote sensing techniques to lower monitoring costs compared to on-site checks; defining the baseline as a benchmark based on standard practices (preferably set on remote sensing data), which will bring clarity, and recognise the performance of first-movers; creating certificates that are based on the different duration of carbon storage and clear liability rules; and providing common methodologies to disclose environmental and sustainability co-benefits. |
| | ·In the case of carbon storage products, the main barrier is that, due to the complexity of certification, there is yet no consensus on methodologies to properly account for the temporary aspect of storage of carbon in products. A study conducted for the Commission 72 found that wood-based construction products have a low market share in the EU and that, to scale these solutions, there is a need to both improve capacity along the whole value chain and to refine current assessment methods for the climate performance of buildings. Such assessment could follow a dynamic life-cycle approach, but this is particularly difficult because there are various actors involved in the value chain, and those that influence the rate of carbon removals (biomass producers) are different than those that transform biomass into a storage product (wood manufacturers), who are still different than those that have control over the longevity of the products (the owners of the building). In the case of Carbon Capture and Utilisation (CCU), the main barrier is of a financial nature: the cost of capture is still quite high and the processing of non-fossil CO2 into products often requires a lot of energy, but the final product in practice is often indistinguishable from its fossil fuel equivalent and it is therefore difficult to gain a competitive advantage. A recent metareview 73 surveyed 26 policy reports on CCU covering the policy measures that are considered to be potential barriers or incentives for the development and deployment of CCU: most of these papers recommended policy measures such as public funding for R&D and for market upscale (which is available in the EU under the Horizon programme and the Innovation Fund) and inclusion of CCU technologies in the EU ETS (which was included in the proposal to amend the ETS under the Fit for 55 package); after these policy measures, the most recommended one was the development of standardised and transparent assessment methods. This initiative will address the barriers to carbon storage product certification by undertaking more work in this direction in the coming years. |
| | Tailored certification methodologies based on the QU.A.L.ITY criteria will enhance comparability. New certification schemes, or existing ones that want to expand their portfolio and cover new types of carbon removal solutions, can refer to a set of certification criteria (if Q1) or methodologies (if Q2) targeted to their needs, which will speed up the start of operations. Operators will have a clearer understanding of their business opportunities and the methodologies that they will need to follow, which will contribute to a decrease of uncertainty and risk-aversion that often holds back action in this field. The benefits of a harmonised regulatory framework in increasing uptake of carbon removal solutions was underlined by many businesses and companies that provided input to the Call for Evidence. 74 |
| | While the harmonised criteria improve comparability, they allow certification schemes and carbon removal operators to be more ambitious on certain criteria as requested by the financiers and uses of carbon removal, for instance in terms of baseline (e.g. increasing the ambition of the baseline level), or long-term storage (e.g. increase the duration of the commitment period). However, the underlying technical criteria (e.g. the type and level of details of the information to be provided, the certification processes) remain the same. This will make it easier for carbon removal providers to switch between different financiers with minimal transaction costs. |
| | Based on these approaches to lower costs and increase uptake while ensuring the quality of the certificates, quantities of carbon removed from the atmosphere are expected to increase because of this initiative, thanks to the enabling effect of harmonised and cost-effective certification methodologies. Another indirect and positive effect on the climate is represented by the wealth of accurate information that will be created by certification, which will improve the understanding of the effectiveness of climate action and the quality of national GHG inventories. This will indirectly help national authorities to target support where it is most effective, with positive impacts towards climate objectives. |
| | A potential risk is that the voluntary nature of the initiative could undermine its success and therefore its effectiveness in upscaling carbon removal solutions. As explained in section 5.3, it was judged more appropriate to start with a voluntary framework co-created in a step-wise fashion with experts, and any future shift to a mandatory framework will be based on the learnings of this voluntary phase. The uptake of the initiative can be encouraged by exploiting synergies with upcoming EU initiatives such as the Green Claims Initiatives, which can help to promote the EU certification framework as a valid way to substantiate green claims. The EU standards for corporate sustainability reporting will also contribute towards greater transparency from the side of companies using certificates, which will create more pressure on these users to only buy high-quality certificates. It will need to be further evaluated how these initiatives play together to inform the policy choices post-2030. |
| | Environment. By setting clear sustainability criteria that include minimum requirements for the environment (e.g. in relation to biodiversity status and trends, soil quality, water quality, nitrogen balance, and other ecosystem services) and disclose information about them, land managers will be incentivized to adopt more climate-friendly management practices that improve biodiversity, soils quality or water management. According to many stakeholders that submitted input to the Call for Evidence 75 , these win-win synergies should be encouraged for carbon removals to effectively contribute to the interconnected climate and biodiversity crises. |
| | The sustainability criteria and indicators can draw on an evolving set of EU legislation. For instance, applying selected minimum sustainability requirements from the Taxonomy climate delegated act would ensure that the planting of tree monocultures, or any other forestry activity with a significant negative impact on biodiversity, will not be certified. To keep administrative burden low and ensure policy consistency, it will be important to rely on existing indicators and criteria that can be easily monitored. |
| | Sectoral competitiveness and functioning of the internal market. The improved comparability of carbon removal certificates across different schemes and types of carbon removal activities will lead to better price signals and decrease the likelihood of low-quality carbon removal certificates. Several stakeholders 76 have stressed in their contribution to the Call for Evidence that reliable and comparable criteria will create legal certainty and a business case for investment in these technologies, strengthening the market and enabling a scalable industry. These developments are expected to boost the demand for carbon removals and for certification services, which will create economic benefits for all certification actors: |
| | ·Higher demand for carbon removal certificates will create additional revenues for operators (i.e. the providers of carbon removals). The voluntary carbon market has grown at significant pace in recent years. Over the period 2013 to 2018, average traded volumes stood around 68 MtCO2 per year, whereas the period 2018 to 2020 traded volumes more than doubled to on average 130 MtCO2 per year. These volumes look set to double again through 2021/2022 with an increasing role for carbon removals. 77 As discussed in section 2.2.4, other actors – food and biomass companies or public authorities – show also an increasing interest in financing carbon removals. |
| | ·Certification schemes would see increases in revenues arising from increased registry activities; the main actors on the market, Verra and Gold Standard, make 72% to 89% of their revenues from registry and issuance fees (see Annex 3). |
| | ·Certification bodies will have positive benefits arising from increased demand for certification services. Certification schemes and certification bodies who are already active in the fields of organic farming labelling or sustainable biomass certification could expand their business and include the certification of carbon removals in their offer. |
| | Finally, the improved quality of certification will also benefit the users of the certificates, such as the companies in the food and biomass processing industry who will be able to show their consumers and investors their improved climate performance in a reliable way. |
| | These assessments entail some uncertainty, however, and it is difficult to quantify more precisely the impact of voluntary EU certification rules on the development of the market for carbon removals. The expectation of benefits relies on the assumption that the market will need to scale up over the next years from a low level (see section 5.1) and that demand will be primarily driven in the next years by the financing decisions of private and public actors, including financing of carbon farming by food and biomass companies and Member States (to fulfil their LULUCF targets), and synergistic EU policies in the areas of food systems, agriculture and forestry, biodiversity, corporate sustainability reporting, circular bioeconomy and the Innovation Fund. As shown by existing projects, carbon removals produced in the EU are more expensive than the typical emission reduction credits that can be found on the voluntary carbon markets. There will likely be some competition from less expensive certificates from outside the EU, but the rising demand for high-quality carbon removal certificates can create a profitable business case around more expensive carbon removal certificates of higher quality. Furthermore, as explained below, it is not expected that carbon removals certified according to future EU standards will be significantly more expensive than those from current high-quality projects. |
| | Conduct of business. It is important to note that this initiative will be voluntary for both the operators and the certification schemes. This being said, if these actors do participate in the framework, they may incur adjustment costs, depending on the way they were conducting their business in the baseline. Annex 3 indicates that, while the absolute monitoring and reporting costs are subject to uncertainty, such costs are expected to remain the same under the EU certification framework for schemes that already implement the identified best practices. These costs can decrease for similar or better monitoring results if the EU framework promotes the adoption of promising digital monitoring and modelling technologies in replacement of traditional sampling (see below). |
| | Conversely, an operator who is currently with a certification scheme which does not require stringent quantification will experience higher costs, that should however be compensated by a higher price of the certificate thanks to the higher trust in the quality of the generated carbon removals. Annex 3 demonstrates that if the global carbon removal price could be estimated around 4 €/tCO2 in 2021 78 , marketplaces with high-quality carbon removals propose carbon removal certificates at a price that can reach 20 €/t to 70 €/t or more. 79 |
| | Many operators that provide carbon removals are small or micro-sized enterprises, and it is important that this be taken into account into the development of the certification methodologies. The proposed certification methodologies include some approaches to facilitate the participation of SMEs (especially in the area of carbon farming), such as: use of remote sensing technologies to decrease the burden of monitoring and reporting for individual operators; possibility of simpler verification procedures (e.g. for small-scale businesses); building on existing legal requirements to avoid duplication of approaches; participation into specific carbon removal programmes pooling the risk of carbon reversals but also providing advices to the farmer on how to increase at the same time carbon storage and economic benefits. As this initiative is considered highly relevant for SMEs, a more detailed analysis of impacts on SMEs (“SME test”) can be found in Annex 11. |
| | Innovation and digital economy. Increased certification activities can help spur innovation in the field of carbon removals. Europe hosts several key global carbon removal demonstration sites (e.g. EU-funded BECCS at Stockholm district heating plant; Project Drawdown for enhanced rock weathering in Germany; Orca DACCS project in Iceland) which already involve many leading EU research institutes. Many more such demonstrators are also in the planning. In particular, multiple research efforts are focussed on advancing our understanding of the efficacy, fate and behaviour of several emergent carbon removal solutions (e.g. enhanced rock weathering; ocean alkalinity enhancement; oceanic CO2 removal). The commercialisation pathway and the policy perspective offered by certification can help these research activities accelerate innovation towards market deployment. |
| | Furthermore, more stringent criteria on monitoring quality will spur research and innovation to enhance the available monitoring techniques. Developments in digital monitoring and reporting will be key to unlocking confidence, reliability and efficiency in land-based sequestration solutions. In the EU, remote sensing technology (e.g. the Earth observation systems under Copernicus) and uses of cloud computing systems and artificial intelligence to support interpretation and translation of systems such as the Copernicus Land Monitoring System (e.g. for real-time changes in land use activities, vegetation state, and coupling with climate and weather data etc) will likely be critical to lowering the cost and improving the accuracy of nature-based removals monitoring. The quantification of removals through soil carbon restoration, for example, will likely require the use of multiple tools to interpolate soil carbon stock changes between highly discrete sampling sites, and the use of predictive models to estimate changes of carbon stock under differing conditions. The use of remote sensing data to calibrate these predictive models against vegetation cover and weather conditions will likely prove vital to the effective scale-up of certification for these types of activities. 80 |
| | According to the World Bank 81 , the combination of innovative approaches and increased data availability is expected to overcome several serious challenges facing current MRV approaches, by enabling more frequent monitoring of carbon stocks, decreasing the time needed to generate estimates (potentially from months to weeks), decreasing the uncertainty of estimates, standardizing estimates to render them comparable at different scales, and providing spatially-explicit estimates to facilitate straightforward attribution. The implementation of these technologies is a crucial step to enable the digitisation of the MRV system. The EU, through enhancing the quality requirements of removals certification, can help to lead the way in developing and demonstrating advanced digital monitoring and reporting tools and methodologies, building upon the Union’s long track-record in climate innovation. |
| | Rural areas and food security. In the specific case of carbon farming, certification can be expected to contribute towards new business opportunities and economic diversification in rural areas, and to ensure long-term food security through better soil quality and resilience, in consistency with the objectives of the Farm to Fork Strategy 82 . The core priorities set out in the EU Long-Term Strategy for Rural Areas, and in particular the flagship initiative on building up carbon sinks by investing into rewetting wetlands and peatlands, will be complemented by the emergence of carbon removals certification. The process of monitoring and verifying carbon removals activities will also create new economic opportunities within rural communities, i.e. new types of high-quality jobs and new sources of income for rural economies. The high-profile and transparent nature of carbon removals certification should allow for experiences to be readily shared across operators within the EU, fostering knowledge transfer and driving innovation across the Union’s agricultural communities. Potential negative effects on rural communities relate to the fact that higher demand for land-based carbon sequestration may increase competition for land, especially in the case of afforestation and rewetting of organic soil, thus threatening food security, as underlined by several organisations responding to the Call for Evidence 83 . To deal with these impacts, the certification criteria to address potential sustainability impacts will promote activities that have no negative impacts on food security at Union level and recommended to build collaboration arrangements with rural communities. |
| | Even if the revenue from carbon farming can provide additional revenue to the farmer, it is unlikely to constitute a primary source of income. Experience from carbon farming projects shows that improved agricultural land management can generate a carbon benefit equivalent to 1t to 2t of CO2 per hectare that can currently be rewarded at a carbon price of 15 to 40 € per tonne of CO2 in emerging schemes that specifically target high-quality carbon removals 84 . Under these assumptions, a farmer can expect an additional revenue of approximately 50 €/ha/year, to be compared to a potential 1440 €/ha revenue from soft wheat production in 2021 85 or the average 297 €/ha/year income support from the CAP 86 that an EU young farmer could receive (with substantial variation across Member States). The higher carbon sequestration potential from afforestation of 5t to 10t of CO2 captured per hectare can generate an annual average of 250 €/ha for the first 30 years, with lot of uncertainty regarding the fluctuation of the carbon price during this long period. |
| | 6.3.Impacts of the choice between Q1 and Q2 |
| | Climate and environment. Under policy option Q2, the Commission decides which methodologies will be developed first based on, among other criteria, their potential for environmental co-benefits (see Box 5 ). Thus, carbon removal activities that have the highest potential for triple-win solutions (climate, environment, socio-economic benefits) will be prioritised. Policy option Q1, where certification schemes develop methodologies and submit them to the relevant public authority for recognition, gives more power to the certification schemes to decide on the development sequence. As certification schemes will be guided by their own interests, it is not guaranteed that those methodologies with the highest positive impact on climate and environment will be prioritised under policy option Q1. |
| | Sectoral competitiveness and the functioning of the internal market. The choice between policy option Q1 and Q2 will have an impact on the extent to which the initiative creates a level-playing field for the European market. Option Q1 could encourage the development of local or regional methodologies, which could address some specific circumstances (especially with carbon farming), but the resulting diversity of approved methodologies for the same carbon removal activity would maintain a certain level of confusion which could discourage the uptake of carbon removal solutions. On the other hand, option Q2 would give more direct guidance for the certification of carbon removals to underpin a well-functioning internal market and provide methodologies for the more mature carbon removals solutions, so that these can rapidly scale-up across the Union. |
| | Conduct of business. Under option Q1, the entry costs for new certification schemes related to developing new methodologies would be slightly reduced thanks to the guidance provided by the certification criteria. Existing certification schemes would need to adjust their methodologies to take into account the EU certification criteria. A recent review 87 reveals that several existing certification schemes already adopt some best practices to implement the QU.A.L.ITY principles, but the overview is quite heterogeneous, and no scheme already performs well against all criteria. Therefore, most existing certification schemes would face some one-off adjustment costs, and possibly some ongoing implementation costs if the revisions to their methodologies entail new elements (e.g. more accurate monitoring, new environmental safeguards). They will also face one-off and ongoing administrative costs associated with applying for the recognition that their scheme’s methodologies and procedures are in line with the EU certification framework. Instead, under option Q2, a benefit for new certification schemes is the avoidance of the cost of developing new methodologies, as they can simply adopt the methodology developed by the Commission. Another advantage with respect to Q1 is that they application procedure to be recognised by the relevant public authority would only concern the scheme’s internal rules and procedures (i.e. compliance with Transparency criteria) and not the recognition of the methodologies. Certifying projects according to the Commission’s methodologies may create some one-off adjustment costs and possibly ongoing implementation costs as under option Q1. |
| | 88 89 90 Public authorities. The choice between options Q1 and Q2 also implies different costs for public authorities. Under Q1, there would be potentially many certification schemes that would need recognition of their methodologies by the relevant authority which, depending on the choice between G1 or G2, could be national competent authorities or the Commission. The number of methodologies implementable within Europe has been growing over the past 5 to 10 years. For example, McDonald et al. (2021) identified a long list of 42 removals methodologies from 11 schemes, which was a selection, and not an exhaustive list. The extent to which new methodologies may be submitted for approval remains uncertain. However, it can be expected that the number of methodologies will continue to grow, also because the establishment of the EU certification framework is anticipated to result in increased demand for removals certification. While the common certification criteria would ensure some level of harmonisation amongst these methodologies, the potentially high number of methodologies submitted for recognition under Q1 could represent a high workload for authorities. Under option Q2, instead, the Commission would bear the cost of developing the certification methodologies with the support of the relevant experts. The process would minimise the costs of methodology development by exploiting synergies with existing legislation and procedures. |
| | Participation. The process to develop the methodologies will be more inclusive of the relevant stakeholders under option Q2. Under this option, the Commission would rely on the consultation of relevant experts in alignment with Better Regulation guidelines. |
| | 6.4.Impacts of Transparency criteria (Governance options) |
| | Climate and environment. The establishment of the Transparency criteria aims to create more trust in carbon removal certification, which will indirectly contribute to increasing demand for carbon removals and, accordingly, their supply. It will also ensure a higher quality of carbon removals overall. Therefore, it can be expected that the Transparency criteria can indirectly have positive effects on the climate and, through enforcement of the sustainability criteria, the environment. |
| | Sectoral competitiveness and the functioning of the internal market. Operators will benefit from more inter-operability regarding the rules and procedures of publicly recognised certification schemes, which will give them easier access to different types of financial opportunities linked to carbon removal activities. A harmonised regulatory environment will also benefit certification schemes by providing public guarantees to help them signal their quality, and will create new business for certification bodies which will be required for the verification of the carbon removal activities. |
| | Conduct of business. The Transparency criteria may create some new or additional administrative costs for operators and certification schemes, depending on the extent to which these requirements are already complied with in the baseline, especially in terms of regular verification. As explained in section 5.1.3, the majority of the large and well-established certification schemes already perform well in terms of transparency, and therefore complying with these requirements would not entail any significant adjustment cost for these certification schemes. However, no comprehensive overview exists for the level of transparency of smaller certification initiatives or new entrants. In addition, a set of harmonised rules to run registries may increase the costs of this activity but could also help in performing double-counting checks more effectively than in the baseline. Large certification schemes have already in place good quality registries, while smaller schemes can rely on third-party managed registry systems that offer registry capacity for relatively low prices. |
| | Innovation and digital economy. The rules to harmonise registries of carbon removal certificates, and in particular the requirements to ensure transparency of information and to avoid double counting, will be more effectively implemented through the use of digital technologies. This can spur the uptake of innovative technologies such as block-chain. |
| | Public authorities. While the specific administrative costs under the two Governance options will be discussed in the next section, a more indirect and positive impact of the Transparency criteria for registries will be the availability of better and more granular data on carbon removals which can improve the quality of national GHG inventories and hence the effectiveness of climate policy making. |
| | Participation. Thanks to the Transparency criteria, the EU certification framework can level up the quality of the internal administration of certification schemes and make information more easily accessible to stakeholders and other certification schemes. |
| | 6.5.Impacts of the choice between G1 and G2 |
| | Sectoral competitiveness and the functioning of the internal market. Under option G1, Member States would be in charge of ensuring the correct implementation of the certification framework. The decentralised nature of this option would address some possible barriers for certification schemes, such as language differences or the difficulty in taking part in EU application processes. However, this option would be less effective in ensuring a level-playing field, as different Member States may establish different control systems and recognition procedures. Under option G2, certification schemes recognised by the Commission would be able to operate everywhere on the EU territory, which would therefore be more appropriate for larger, international certification schemes (including new entrants), and work better in terms of promoting the internal market. |
| | Conduct of business, public authorities. Under option G1, there is a risk of duplication of work if the same certification scheme applies for recognition in several Member States, which could increase total administrative costs for both businesses and public authorities and discourage cross-border scale-up (especially if different Member States have different control systems and recognition procedures). Under G2, the administrative costs related to recognition processes would be smaller, both for certification schemes and for public authorities, as duplication of applications in different Member States would be avoided. Option G1 would also entail some costs for Member States authorities in terms of reporting regularly to the Commission about the results of the controls carried out and the measures taken in case of non-compliance. |
| | 7.How do the options compare? |
| | This section compares four possible policy packages: |
| | ·Q1+G1: Member States create their own public certification scheme and develop their own methodologies, or approve certification methodologies proposed by programme developers in compliance with the EU criteria (similarly to the functioning of the French “Label Bas Carbone”); alternatively they may also recognise private certification schemes with their own methodologies that comply with the EU criteria, and delegate the control system to them. |
| | ·Q1+G2: certification schemes develop their own methodologies and then apply for recognition of their methodologies and operations to the Commission; this model is similar to CORSIA, where a supranational organisation (ICAO) assesses whether existing certification schemes and their methodologies are compliant with a set of international certification criteria. 91 |
| | ·Q2+G1: the Commission (assisted by an expert group) develops the certification methodologies and the Member States have the primary responsibility for enforcing compliance by operators through a public certification scheme or by recognising private certification schemes. This model is similar to the one of the Organic Farming Regulation, where the Commission directly establishes the certification rules; based on these rules, Member States’ competent authorities can either certify organic farms themselves (as “control authorities”) or delegate this role to private “control bodies”. |
| | ·Q2+G2: the Commission (together with experts) develops the methodologies and then checks that certification schemes correctly apply them to certify operators. This is similar to the governance model for certifying sustainable bioenergy under the Renewable Energy Directive: here, the criteria and rules defining the sustainability of bioenergy are set in the Directive and in its delegated/implementing acts; the Commission recognises private or public certification schemes after assessment of the scheme’s internal rules and governance against the EU criteria and rules. |
| | These policy packages are illustrated in Figure 3 , which also summarises how they compare in terms of their effectiveness to achieve the specific objectives, their respective key impacts (efficiency) and their coherence with other policy initiatives and instruments, as also explained in the rest of this section. |
| | Figure 3 – Comparison of policy packages |
| | 7.1.Effectiveness |
| | Q1+G1 | Q1+G2 | Q2+G1 | Q2+G2 |
| | Quality of carbon removals | + | + | ++ | ++ |
| | Tailored methodologies | ++ | ++ | + | + |
| | Trust in the certification process | + | ++ | ++ | +++ |
| | Harmonisation | + | + |
| | The first objective of this initiative is to promote best practices to certify high-quality removals, and thereby provide guidance on how to address the four certification challenges related to quantification, additionality, long-term storage, and sustainability. In this respect, all packages bring about an improvement with respect to the baseline, because the initiative will set out certification criteria underlining the future development of certification methodologies. Yet, guidance will be more effective under the packages that include option Q2, where methodologies are developed by the Commission in consultation with the relevant experts and stakeholders: these will provide a common approach on how to translate these criteria into operational protocols, providing more comparability and consistency compared to packages that include Q1, where certification schemes can propose their own methodologies. |
| | The second objective is to deliver certification methodologies that are tailored to each type of carbon removal solution. Again, all packages deliver on this objective. If the Commission develops the methodologies (i.e. packages that include option Q2), then these will be tailored to specific carbon removal solutions, starting from those which are already mature in terms of certification best practices and that provide the highest sustainability co-benefits. However, those options that rely on several certification schemes for the development of the methodologies (i.e. packages that include option Q1) may be better able to tailor their methodology not only to a specific type of carbon removal solution, but also to the specific geographic or socio-economic context where such activities take place. |
| | The third objective is to ensure the transparency and reliability of certification processes, which can increase trust in certification activities. All packages deliver on this objective by creating some public guarantees about the quality of carbon removals. However, if the Commission recognises certification methodologies and/or certification schemes instead of the Member States (as in packages that include option G2), the recognition process will be carried out in the same way and based on the same criteria for all applications, which would improve trust in the system. In addition, if the Commission develops the certification methodologies giving priority to the highest potential for mitigation and sustainability (as in packages that include option Q2), this could create a more stable and predictable policy framework which would also have a positive impact on trust. |
| | The fourth and last objective is to harmonise certification rules and minimise transaction costs for operators (i.e. ensuring that the operator can easily move from one type of financing to another). This is less easy when many different certification methodologies exist (as in packages that include option Q1). This risk will be mitigated if the Commission develops standard methodologies that integrate information requirements and guarantees needed in different financing contexts. |
| | 7.2.Efficiency |
| | Q1+G1 | Q1+G2 | Q2+G1 | Q2+G2 |
| | Climate and Environment | + | + | ++ | ++ |
| | Internal market | + | ++ | ++ | +++ |
| | Conduct of business |
| | Development/adjustment of methodologies | - | - | + | + |
| | Recognition of methodologies | -- | - |
| | Recognition of certification schemes | -- | -- | - | - |
| | Member State budgets |
| | Approval/recognition of methodologies | - |
| | Recognition of certification schemes | - | - |
| | Participation | + | + |
| | The impacts on innovation and rural areas are not discussed in this section because they do not change significantly across the policy options. This section focuses on those impacts that depend on the choice of the policy options, as described in more details in sections 6.3 and 6.5. |
| | Option Q2, where the Commission leads the development of certification methodologies in consultation with experts, it will be possible to prioritise those carbon removals which have the highest positive impact on the climate and the environment. Therefore, packages including option Q2 are better suited to more quickly deliver the positive climate and environmental impacts of the framework. |
| | In terms of sectoral competitiveness and the functioning of the internal market, option Q1 provides a slight improvement with respect to the baseline because of the QU.A.L.ITY certification criteria based on best practice, and option G1 brings the benefits of decentralised recognition procedures for smaller and regional certification schemes (e.g. no language barrier, closer contacts with the administration); however, a package of these two options could give rise to many different methodologies recognised according to different procedures, which would not play in favour of well-functioning internal market. Options Q2 and G2 are better in this respect, because they ensure (respectively) a unified set of certification methodologies and a harmonised recognition process favouring the cross-border operations of larger certification schemes. Thus, the packages including one of these two options provide for more harmonisation, while the package including both performs best in terms of the functioning of the internal market. |
| | The framework will also affect the way that certification schemes 92 conduct their business and could create some administrative costs, mainly of three types: the development/adjustment of the methodologies, the application for recognition of methodologies, and the application for recognition of certification schemes. The first and second cost categories only apply under the packages that include Q1 (Q1+G1 and Q1+G2), where certification schemes develop their own methodologies. Under these packages, existing schemes would have to adjust their methodologies to the EU certification criteria, which should entail minimal adjustment costs for certification schemes that already have many best practices in place. Conversely, under the packages that include option Q2, new certification schemes would benefit from the existence of standardised methodologies developed by the Commission as this will save them the costs of developing their own methodology. In addition, under packages including option Q1, existing schemes would face some costs related to adjusting their procedures and standards and applying for recognition of their methodologies: these costs would be larger in package Q1+G1, where this process is managed by the Member States, because of the risk of multiple application procedures. Finally, in all packages, certification schemes would apply for recognition of their rules and procedures according to the Transparency criteria. Synergies are possible with certification schemes that are already active in related but different certification activities, especially in packages that include option Q2: when Q2 is combined with G1, certification schemes operating in the area of organic farming labelling can expand their operations to the field of carbon farming, and when it is combined with G2, synergistic opportunities arise for EU-wide certification schemes operating in the area of certifying sustainable biomass under the Renewable Energy Directive. |
| | The certification framework would also entail some costs for public authorities in the Member States. Under the combination of options Q1 and G1, the Member State may have to incur the cost of approving certification methodologies proposed by programme developers (if they set up a public certification scheme) or of recognising the certification methodologies applied by private certification schemes (if they delegate the control role to private schemes); in either case, there is a risk of a high number of methodologies to be approved or recognised, including for more complex carbon removal activities for which mature certification rules do not yet exist 93 , and the related costs would be repeated in each Member State. The cost of recognising certification schemes is relevant for Member States under the packages that include option G1 (where this recognition is responsibility of the Member States). |
| | Finally, under the packages that include option Q2, the Commission develops certification methodologies on the basis of systematic expert consultation, which guarantees the participation of relevant stakeholders in the development of certification methodologies and taking into account the latest state of knowledge and experience, in line with Better Regulation rules. |
| | Box 6 – The One-In-One-Out assessment | The “One-In-One-Out” principle means that newly introduced burdens from EU legislation should be offset by removing equivalent burdens in the same policy area. | Overall, the carbon removal certification initiative should generate only minimal administrative burdens to businesses compared to the baseline, because the initiative does not introduce new significant administrative requirements and it is of a voluntary nature. | ·Operators developing carbon removal solutions are already facing similar administrative requirements when applying today to existing certification schemes. | ·Certification schemes would face some administrative costs to apply for recognition to the competent public authority (Member States under G1 or the Commission under G2); they may also face adjustment costs under option Q1 (adjustment of their certification methodologies to the EU criteria). | ·Costs for public administrations would only occur under option G1 where Member States would have to recognise exiting certification schemes in case a Member States decides to set up a public certification scheme; in addition, in the combination Q1+G1, Member States may have to incur the cost of approving certification methodologies proposed by programme developers or of recognising the certification methodologies applied by private certification schemes. | The One-In-One-Out assessment for the preferred option is included in Annex 3. |
| | 7.3.Coherence |
| | All options are based on QU.A.L.ITY criteria, which are designed to build on existing legislation, such as the CCS Directive, the LULUCF Regulation, the Taxonomy Regulation, the Renewable Energy Directive, the Common Agricultural Policy. See Section 5.1.4 for more details. In addition, existing and future EU policies will benefit from the existence of the EU certification framework, e.g. for better company accounting under the European Sustainability Reporting Standard, better incentives for nature-based solutions to achieve the restoration targets under the Nature Restoration Law, or better removal data for the national LULUCF inventories. |
| | 8.Preferred option |
| | Considering the effectiveness, efficiency and coherence dimensions discussed in the previous section, it can be concluded that the package Q2+G2 performs better against all impact indicators and addresses more effectively almost all objectives. Thus, the preferred policy option is one where the Commission: (i) develops certification methodologies in consultation with experts and stakeholders, and (ii) ensures the correct implementation of the framework by recognising the certification schemes that comply with the Transparency criteria and that will certify the compliance of operators with the QU.A.L.ITY criteria. |
| | Member States may opt for the establishment of a public certification scheme to implement the framework, in order to provide operators on its territory with a closer contact point; such public scheme would need to be recognised by the Commission in the same manner as private certification schemes, to ensure a level-playing field across Member States. |
| | The framework would be established through several legal acts, in the following order: |
| | ·A Regulation establishing the QU.A.L.ITY criteria for carbon removals and the requirements for the certification of carbon removal activities, on the functioning of certification schemes and public registries, and on the process for their EU recognition; |
| | ·A number of delegated acts establishing the tailored certification methodologies for specific carbon removal activities. In developing these delegated acts, the Commission will be assisted by a new Expert Group on Carbon Removals; |
| | ·A number of implementing acts establishing harmonised technical rules on the functioning of the certification schemes, on the verification and certification process, on the management of registries and databases, and on the process of notification and recognition of certification schemes. |
| | Figure 4 shows an overview of the various actors and responsibilities of the EU certification framework under the preferred option. |
| | Figure 4 – Overview of the EU certification framework for carbon removals |
| | 9.How will actual impacts be monitored and evaluated? |
| | A plan will be designed to track the Commission’s implementation of the actions required against a specific timeframe (e.g. adoption of secondary legislation covering certification methodologies and implementing rules for the governance framework). |
| | In addition, the Commission will monitor the following impact indicators on a regular basis (annual or biannual) at the level of different types of carbon removal activities: |
| | ·Number of carbon removal projects, by type of solution and by MS |
| | ·Certificates issued by type of solution and by MS |
| | ·Size of carbon removal projects (t CO2 removed, by project, by solution, by MS) |
| | ·Environmental impacts of carbon removal projects (relevant environmental indicators, by project, by type of solution, by MS) |
| | ·Socio-economic impacts of carbon removal projects (relevant environmental indicators, by project, by type of solution, by MS) |
| | ·Use of certificate, type of financing (public, private) |
| | ·Certification costs, by type of solution |
| | ·Methodologies used by type of solution, by solution provider |
| | ·Number and type of complaints filed (over operators, over verifiers) |
| | ·Coherence with national GHG inventories |
| | Reports by certification schemes and from the certified carbon removal projects will provide the Commission with data on the climate, environmental and socio-economic impacts of the certification framework and on the overall quality of the certified projects and of the certification process (including information about the validation, verification, issuance and registry stages). |
| | A comprehensive evaluation of the Regulation should be informed by the outcomes of these monitoring activities, build upon solution-specific review studies and focus on the contribution of the framework to achieving the aspirational objectives set out in the Communication on Sustainable Carbon Cycles: |
| | 1.By 2028, every land manager should have access to verified emission and removal data to enable a wide uptake of carbon farming, |
| | 2.By 2030, carbon farming approaches should contribute to reaching the LULUCF target of ‑310 Mt CO2eq net removals, |
| | 3.By 2028, any ton of CO2 captured, transported, used and stored by industries should be reported and accounted by its fossil, biogenic or atmospheric origin, and |
| | 4.By 2030, industrial technologies should remove annually at least ‑5 Mt CO2eq by 2030. |
| | An initial evaluation of progress towards this objectives will take place in 2028. |
| | 10.References |
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| | (1) |
| | IPCC Working Group III, 2022. |
| | (2) |
| | McDonald et al., 2021 ( link ). |
| | (3) |
| | If the origin of carbon is fossil, then the technology can at best be considered overall carbon-neutral. |
| | (4) |
| | European Commission, 2021a, COM(2021) 572 final ( link ). |
| | (5) |
| | Regulation (EU) 2021/1119 ( link ). |
| | (6) |
| | European Commission, 2020a, COM(2020) 562 final ( link ). |
| | (7) |
| | Land Use, Land Use Change and Forestry. |
| | (8) |
| | European Commission, 2021b (
link ). |
| | (9) |
| | European Commission, 2021c, COM(2021) 800 final ( link ). |
| | (10) |
| | The two main initiatives in this area are the Integrity Council for the Voluntary Carbon Market ( link ), a coalition of government and non-governmental carbon market experts aiming to set and enforce global threshold standards, and the Carbon Credit Quality Initiative ( link ), established and run by EDF, WWF and the Oeko Institut to address credit quality and to provide a ranking dashboard with independent scores of different types of carbon credits. Carbon credit ratings services have also emerged that provide bespoke rating services for voluntary carbon market credit buyers (links: 1 , 2 , 3 , 4 , 5 ). |
| | (11) |
| | Oeko-Institut e.V., (2016) |
| | (12) |
| | Macquarie R., (2022) |
| | (13) |
| | ClientEarth, (2021) |
| | (14) |
| | https://www.spglobal.com/esg/insights/carbon-offsets-prove-risky-business-for-net-zero-targets |
| | (15) |
| | From McKinsey blueprint for scaling voluntary carbon markets points out that: “High-quality carbon credits are scarce because accounting and verification methodologies vary and because credits’ co-benefits (such as community economic development and biodiversity protection) are seldom well defined. When verifying the quality of new credits—an important step in maintaining the market’s integrity—suppliers endure long lead times. When selling those credits, suppliers face unpredictable demand and can seldom fetch economical prices. Overall, the market is characterized by low liquidity, scarce financing, inadequate risk-management services, and limited data availability.” |
| | (16) |
| | For instance, Microsoft, Stripes, Shopify. |
| | (17) |
| | Carbon Direct and Microsoft, 2022 ( link ). |
| | (18) |
| | Carbon Direct, 2022 ( link ). |
| | (19) |
| | Taskforce on Scaling Voluntary Carbon Markets, 2021 ( link ). |
| | (20) |
| | South Pole, 2022 ( link ). |
| | (21) |
| | In this Impact Assessment, the concept of baselines is discussed together with that of additionality as the two are closely related. |
| | (22) |
| | See more details in Annex 6. |
| | (23) |
| | Platt et al., 2021 ( link ); Spekreijse et al., 2019 ( link ). |
| | (24) |
| | Explained in more details in Annex 10. |
| | (25) |
| | Mitigation deterrence refers to the situation when organisations buy carbon certificates to offset their emissions instead of first making an effort to reduce their own emissions as much as possible, which undermines the achievement of climate objectives. Mitigation deterrence is a strong concern of stakeholders (NGOs and farming organisations). The option to regulate how companies can use offsets to achieve and claim climate targets was discarded because other EU initiatives are addressing this challenge, see section 5.3. |
| | (26) |
| | Conference on the Future of Europe, 2022 ( link ). |
| | (27) |
| | McDonald et al., 2021 ( link ). |
| | (28) |
| | GHG Protocol, 2022 ( link ) |
| | (29) |
| | ISO, 2019 ( link ). |
| | (30) |
| | Integrity Council for the Voluntary Carbon Market, 2022 ( link ). |
| | (31) |
| | 2021 data only, extracted from: The Voluntary Carbon Market Dashboard, 2022 ( link ). |
| | (32) |
| | Database at Label Bas Carbone link , consulted on 4 July 2022. |
| | (33) |
| | Arrêté du 28 novembre 2018 ( link ). |
| | (34) |
| | As of the end of 2021. Data extracted from the 2021 annual report: ( link ). |
| | (35) |
| | Estimated from Puro.earth, 2022a ( link ) Puro.earth, 2022b ( link ) [accessed May 2022]. |
| | (36) |
| | Estimated from MoorFutures, 2022a ( link ) and MoorFutures, 2022b ( link ). |
| | (37) |
| | For more details about these certification schemes, see the supporting review by McDonald et al., 2021 ( link ). |
| | (38) |
| | Estimated from IHS Markit, 2022 ( link ). Credits issued only includes Woodland Carbon Units (WCUs) and not provisional units (PIUs). Projects activity estimated due to the varying names of similar activities. |
| | (39) |
| | The Greenhouse Gas Protocol ( link ) established by the World Resources Institute (WRI) and the Business Council for Sustainable Development (WBCSD), and the international standard ISO 14064-2 ( link ). |
| | (40) |
| | The quality of existing certification schemes (covering not only carbon removals but also emission reduction and avoidance) was reviewed in a recent report carried out for the French Ministry of Ecological Transition, see DGEC, 2022 ( link ). |
| | (41) |
| | DGEC, 2022 ( link ). |
| | (42) |
| | Arcusa and Sprenkle-Hyppolite, 2021 ( link ). |
| | (43) |
| | Arcusa and Sprenkle-Hyppolite, 2021 ( link ). |
| | (44) |
| | Arcusa and Sprenkle-Hyppolite, 2021 ( link ). |
| | (45) |
| | Directive 2003/87/EC ( link ). |
| | (46) |
| | Directive 2009/31/EC ( link ). |
| | (47) |
| | Commission Implementing Regulation (EU) 2018/2066 ( link ). |
| | (48) |
| | European Commission, 2021d ( link ). |
| | (49) |
| | Regulation (EU) 2018/841 ( link ). |
| | (50) |
| | Regulation (EU) 2021/2116 ( link ) |
| | (51) |
| | Directive 2009/31/EC ( link ). |
| | (52) |
| | European Commission, 2022a ( link ). |
| | (53) |
| | Grassland butterfly index; share of agricultural land with high-diversity landscape features; farmland bird index at national level; stock of organic carbon. |
| | (54) |
| | Standing deadwood; lying deadwood; share of forest with uneven age structure; forest connectivity; common forest birds index; stock of organic carbon. |
| | (55) |
| | Regulation (EU) 2020/852 ( link ). |
| | (56) |
| | Directive (EU) 2018/2001 ( link ). |
| | (57) |
| | Regulation (EU) No 305/2011, consolidated text ( link ). |
| | (58) |
| | European Commission, 2022b, COM/2022/144 ( link ). |
| | (59) |
| | European Commission, 2021 ( link ) |
| | (60) |
| | JRC, 2020 ( link ) |
| | (61) |
| | The Environmental Footprint reference package includes the flow list, the life cycle impact assessment methods and other related xml files ( link ) |
| | (62) |
| | The call to set up this Expert Group can be found here: ( link ). FAQ: ( link ). |
| | (63) |
| | In this area, two recent calls under the Horizon mission “A soil deal for Europe” could help to prepare the technical work for the development of relevant certification methodologies. A call for establishing a carbon farming network has a budget of 3 million EUR; another call relate to the monitoring, reporting and verification of soil carbon and greenhouse gases balance will grant an EU contribution of up to 7 million EUR to two projects. The calls closed in September 2022 and the applications are currently under evaluation. |
| | (64) |
| | Guidehouse (2021) Report on the harmonisation and strengthening of sustainability certification for biofuels, bioliquids and biomass fuels under REDII |
| | (65) |
| | European Commission, 2021e, COM(2021) 189 final ( link ). |
| | (66) |
| | https://www.efrag.org/lab3 |
| | (67) |
| | European Court of Auditors, 2021 ( link ). |
| | (68) |
| | Based on the Better Regulation Tool #18, “Identification of impacts” (European Commission, 2021f, link ); this initiative is not expected to have any impact on fundamental rights. |
| | (69) |
| | Merchant et al., 2022 ( link ). |
| | (70) |
| | European Network for Rural Development, n.d. ( link ). |
| | (71) |
| | Many organisations representing the farming sector (e.g. European Coordination Via Campesina, Copa-Cogeca, CEJA, Austrian Chamber of Agriculture), the agro-food industry (Agoro Carbon Alliance, Carbon+ Farming coalition) but also research institutes or projects (Bellona Foundation, I4CE, LIFE Carbon Farming, Interreg North Sea Carbon Farming), underscored the issue of MRV costs and the need for an approach to reduce the administrative burden of implementation. |
| | (72) |
| | Trinomics et al., 2021 ( link ). |
| | (73) |
| | Olfe-Kraeutlein et al., B., (2021) |
| | (74) |
| | For instance, Syngenta wrote that a legislative framework could improve the commercial viability, scalability, and permanence of existing technologies and foster the development of novel technologies. The Negative Emission Platform recognised that common minimum standards can help with the timely implementation of carbon removal at the necessary scale. E.ON observed that certification is key to unlock private investment. GE stated that the framework can support the necessary developments of market unification and increased investment. |
| | (75) |
| | The views on this topic went from stressing the importance of environmental safeguards (e.g. Ecosystem Value Association, I4CE, Carbon Farming Coalition) to actively promoting co-benefits (European Environmental Bureau, Agreena, European University Institute (School of Transnational Governance), Veolia, Greifswald University, FoodDrink Europe). |
| | (76) |
| | E.g. Negative Emission Platform, Confederation of European Waste-to-Energy Plants, Veolia, European Biogas Association, Confederation of European Forest Owners. |
| | (77) |
| | Ecosystem Marketplace, 2021 ( link ). |
| | (78) |
| | Ecosystem Marketplace report Q3 2022 ( link ). |
| | (79) |
| | DGEC, 2021 ( link ). |
| | (80) |
| | In the feedback to the Call for Evidence, stakeholders such as the European Association of Remote Sensing Companies, Single.earth, Carbon Direct or Cleantech for Europe have provided information on innovative technologies that can already offer robust monitoring and verification for most carbon farming practices. |
| | (81) |
| | World Bank, 2021 ( link ) |
| | (82) |
| | European Commission, 2020b, COM/2020/381 final ( link ). |
| | (83) |
| | E.g. European Environmental Bureau, European Coordination Via Campesina, COPA-COGECA, Austrian Chamber of Agriculture, EUSTAFOR, Tetrapak. |
| | (84) |
| | Such as Label Bas Carbone, Soil Capital, Indigo Ag or Nori. |
| | (85) |
| | Soft wheat is the main cereal produced in Europe, in 2021; the average yield was 6t/ha (Baruth et al., 2022, link ) and the average price of soft wheat on MATIF was approximately 240 €/t (BASF, n.d., link ). |
| | (86) |
| | Farmers applying to CAP support in the EU receive an average basic payment of approx. 143 €/ha, an additional 80€/ha via greening payments, and additional financial support of 74 €/ha/year if they are under 41 (DG AGRI CATS data CY2020, determined areas and payments extracted in 18 July 2022). |
| | (87) |
| | DGEC, 2021 ( link ). |
| | (88) |
| | E.g. as evidenced by e.g. Puro.earth, Woodland Carbon Code, MoorFutures, Label bas-carbone, and as documented in e.g. McDonald et al., 2021 ( link ), Cevallos, Grimault and Bellassen, 2019 ( link ). |
| | (89) |
| | Seven of these methodologies were for emission reduction based activities (e.g. peatland rewetting and CCU). |
| | (90) |
| | E.g., Verra’s VCS has 13 methodologies for land-based mitigation that could include carbon removals (Verra, n.d., link ). |
| | (91) |
| | The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is managed by the International Civil Aviation Organisation (ICAO). ICAO has established some eligibility criteria (called Emission Unit Criteria) under which certification schemes and their methodologies are assessed. Only certificates considered eligible with this compliance standard can be used by the international aviation sector towards the goal of offsetting all emissions occurring beyond a baseline level (2019). |
| | (92) |
| | The impact on operators depends mostly on the introduction of the quality criteria, which are equivalent across all options. Therefore, this aspect is not taken into account in the comparison of options. |
| | (93) |
| | A Member State could also decide to directly develop certification methodologies, which would mitigate this risk; this would still entail some costs, albeit lower. |
| | |
| | EUROPEAN COMMISSION |
| | Brussels, 30.11.2022 |
| | SWD(2022) 377 final |
| | COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT |
| | Accompanying the document |
| | Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL |
| | establishing a Union certfication framework for carbon removals |
| | {COM(2022) 672 final} - {SEC(2022) 423 final} - {SWD(2022) 378 final} |
| | Contents |
| | Annex 1: Procedural information |
| | 1.Lead DG, Decide Planning/CWP references |
| | 2.Organisation and timing |
| | 3.Consultation of the RSB |
| | 4.Evidence, sources and quality |
| | Annex 2: Stakeholder consultation (Synopsis report) |
| | 1.Introduction |
| | 2.Overview of replies |
| | 3.Overview of results |
| | 4.Call for evidence – feedback |
| | 5.Analysis of position papers |
| | 6.Conference on sustainable carbon cycles |
| | Annex 3: Who is affected and how? |
| | 1.Practical implications of the initiative |
| | 2.Summary of costs and benefits |
| | 3.Relevant sustainable development goals |
| | Annex 4: Analytical methods |
| | 1.Assessment of EU needs in carbon removals to achieve the objective of climate neutrality |
| | 2.Review and Analysis of carbon removal solutions |
| | 3.Review and analysis of existing schemes for the certification of carbon removals |
| | Annex 5: Background on carbon removals |
| | 1Importance of carbon removals for 2050 climate neutrality |
| | 2Types of carbon removal solutions |
| | Annex 6: Quality Criteria – Quantification |
| | 1Introduction |
| | 2Certification challenges |
| | 3Existing certification approaches |
| | 4Quantification criteria for an EU framework |
| | Annex 7: Quality Criteria – Baselines and Additionality |
| | 1.Introduction |
| | 2.Certification challenges |
| | 3.Existing approaches |
| | 4.Baselines and Additionality criteria for an EU framework |
| | Annex 8: Quality Criteria – Long-term sequestration |
| | 1Introduction |
| | 2Certification challenges |
| | 3Existing approaches |
| | 4Long-term sequestration criteria for an EU framework |
| | Annex 9: Quality Criteria – Sustainability |
| | 1Introduction |
| | 2Certification challenges |
| | 3Existing approaches |
| | 4Sustainability criteria for an EU framework |
| | Annex 10: Transparency criteria |
| | 1Introduction |
| | 2Functioning of certification schemes |
| | 3Verification of carbon removals |
| | 4Traceability of certificates through registries |
| | 5Transparency criteria for an EU framework |
| | Annex 11: SME TEST |
| | 1Identification of affected businesses |
| | 2Consultation of SME Stakeholders |
| | 3Assessment of the impact on SMEs |
| | 4Minimising negative impacts on SMEs |
| | Annex 1: Procedural information |
| | 1.Lead DG, Decide Planning/CWP references |
| | This initiative is led by DG CLIMA. |
| | Decide planning reference: PLAN/2021/11727 |
| | Commission Work Programme reference: COM(2021) 645 final, Annex I, initiative number 2(d) |
| | 2.Organisation and timing |
| | This initiative has been first announced in the Circular Economy Action Plan that the Commission adopted in March 2020 (COM/2020/98 final) 1 . In December 2021, this initiative was also presented in the Commission’s Communication on Sustainable Carbon Cycles as “an essential stepping stone” towards the 2050 climate neutrality objective of the EU Climate Law. |
| | The publication of the Sustainable Carbon Cycles Communication was followed in January 2022 by a high-level online conference attended by over 2000 participants. The open public consultation and call for evidence were open for feedback on the Have your Say portal between the 7th of February and 2nd of May 2022. |
| | The Inter-Service Steering Group met on the 11th of May 2 and on the 11th of July 3 . During the first meeting, DG CLIMA presented the first draft of sections 1-5 of the Impact Assessment. During the second meeting, the draft of the entire Impact Assessment and of the Annexes were presented. |
| | 3.Consultation of the RSB |
| | An upstream meeting with the Regulatory Scrutiny Board took place on the 19th April 2022. Following this meeting, DG CLIMA redefined the policy options to clarify their added value with respect to the baseline and their difference with respect to each other. It also reviewed systematically the different approaches to implement the quality criteria and identified best practices in dedicated annexes, while bringing the main conclusions of these annexes in the main text in a clear way. |
| | The first draft of this Impact Assessement was submitted to the Regulatory Scrutiny Board on the 20th July 2022. The Board provided a positive opinion on the Impact Assessment report on the 16th September 2022 and provided a list of recommendations that were integrated in the revised report as follows: |
| | •in the introduction, the context of the initiative (i.e. role of carbon removals in the 2050 climate neutrality objective and in the current policy baseline) and the voluntary nature of the initiative were made clearer; |
| | •in the problem definition, new references have been added to confirm the existence and the scale of the identified problems (in particular the lack of trust) and to highlight the importance of internationally harmonising framework in the views expressed by stakeholders; |
| | •in the section about objectives, it was clarified that the shortlisting of the four QU.A.L.ITY criteria follows a general consensus about what constitutes high-quality certification according to most existing certification methodologies, and the presentation of the criteria in the section describing the policy options now includes more arguments from the dedicated annexes; |
| | •to take into account the voluntary nature of the framework, several clarifications were added (e.g. the objective of “level-playing field” has been rephrased as “harmonisation”); |
| | •the section about discarded policy options better explains why a mandatory use of the certification framework policy was discarded; |
| | •the section on the assessment of the impacts cites the voluntary nature as a risk that could undermine the success of the initiatives, and measures to mitigate this risk; |
| | •the assessment of policy options better identifies the barriers to upscale of carbon removal activities, and explains how the certification framework will address these barriers; this section also clarifies the uncertainty related to the qualitative statements about expected benefits and costs; |
| | •the section on the one-in-one-out approach has been moved from an annex to the main text; |
| | •the section on monitoring and evaluation of the initiative includes more elaborated operational objectives. |
| | 4.Evidence, sources and quality |
| | This impact assessment was carried out with the support of a 14-month service contract signed in December 2020 and extended for 10 month in January 2022. The consortium providing the service consisted of Umweltbundesamt GmbH (lead), Ramboll, Ecologic and Carbon Counts. |
| | The service contract consisted of 5 main tasks: |
| | ·Task 1: Review of existing mechanisms for the certification of carbon removals |
| | ·Task 2: Synoptic assessment of technological and nature-based solutions for carbon removals |
| | ·Task 3: Organise expert workshop and provide support to stakeholder consultation |
| | ·Task 4: Support to assess options to design EU carbon removal certification mechanism |
| | ·Task 5: Support the design of a pilot phase |
| | Annex 2: Stakeholder consultation (Synopsis report) |
| | 1.Introduction |
| | The public consultation (PC) was carried out between the 7th of February and 2nd of May 2022 in all official EU languages and using EU Survey, via the European Commission’s website. The purpose of the public consultation was to gather insights from a broad range of stakeholders to inform the initiative aimed at proposing EU rules on certifying carbon removals, notably to monitor, report and verify the authenticity of the removals. The consulted stakeholders include EU citizens, companies that may provide or use carbon removal certificates in the future, NGOs and environmental organisations, research and academia, public authorities, trade unions, and consumer organisations. |
| | 2.Overview of replies |
| | In total 396 responses were submitted. All questions were asked to all stakeholder categories and did not depend on previous answers. However, as not all respondents answered all questions, the specific response rate for each question was below 396 in some cases. Companies and business organisations were the largest group, consisting of 38% of all respondents, followed by business associations (20%) and EU citizens (18%). These were the most strongly represented stakeholder types. Non-governmental organisations (NGOs) submitted 10% of the responses, while academia, public authorities and other stakeholder types each accounted for 4%. The smallest groups represented were environmental organisations, trade unions and non-EU citizens. |
| | The geographical distribution of the respondents covered 21 of the 27 EU Member States (N=357), as well as 9 non-EU countries (N=39). The largest share of responses came from Germany (N=79, 20%), followed by Belgium (N=68, 17%). The latter is the origin of many cross-European business associations and NGOs, which explains its high response number relative to its population size. The largest number of responses from non-EU countries was received from Norway (N=11), Switzerland (N=9) and the United States (N=8). |
| | Figure 1 Stakeholder types and geographical distribution |
| | The analysis of responses uncovered several small clusters of coordinated responses, but no campaign that would skew the overall results. Therefore, all submissions were analysed and reported, while dividing trends by stakeholder type. |
| | 3.Overview of results |
| | The public consultation consisted of 11 questions grouped in four blocks plus a final open question allowing additional remarks. The four blocks were (1) scope, (2) benefits of a certification framework, (3) role of the EU in the certification of carbon removals, and (4) certification methodologies. At the end of blocks (1), (3) and (4), respondents further had the option to provide open comments on the topic of that block. |
| | 3.1.Scope |
| | Q1 asked respondents about the main challenges in integrating carbon removals in the EU climate policy framework. Respondents could select up to three options. The three most frequently selected challenges were ensuring precise, accurate and timely measurement for removals (45% of all respondents), ensuring that strong action to reduce emissions is not undermined by shifting focus on carbon removals (41%), and providing sufficient guarantees for the duration of carbon storage and the prevention of reversals (39%). The precise, accurate and timely measuring was also the most selected challenge for companies and business associations with 53% of each stakeholder type selecting this option. For NGOs and academia, the top challenge was ensuring that strong action to reduce emissions is not undermined by shifting focus on carbon removals (63% of NGO respondents; 69% of academia respondents), while the most selected challenge for EU citizens was setting appropriate baseline and demonstrating the additionality of removals (49% of EU citizen respondents). For public authorities, the most selected challenge was providing sufficient guarantees for the duration of carbon storage and the prevention of reversals (43% of public authority respondents). |
| | Q2 asked about the main criteria that should be used for defining and certifying carbon removal solutions. Again, up to three answers were possible. The three most frequently selected criteria to guide the definition of types of removals were robustness of monitoring, reporting and verification (MRV) aspects (54% of all respondents), the potential for deployment at large scale (49%), and technical readiness and economic feasibility (45%). The most selected option (robustness of monitoring, reporting and verification aspects) was also the most selected one for business associations (71% of these respondents) and academia (50% of academia respondents). Companies mostly selected the potential for deployment at large scale (60% of company respondents). NGOs selected the potential environmental co-benefits most often (58% of NGO respondents), while public authorities mostly selected technical readiness and economic feasibility (63% of public authority responses). These last two options were also the preferred by EU citizens, both at 49% of respondents from this stakeholder type. |
| | Q3 gave respondents the possibility to share their views on a series of carbon removal solutions and the time horizon for including them in a certification mechanism. The solutions were split between carbon farming solutions and industrial solutions for carbon removals. For each solution, one-time horizon (as soon as possible, after 2030, towards 2050, or never) could be selected (or no opinion). It should be noted that substantial shares of respondents did not indicate an opinion on some solutions. All carbon farming solutions were broadly supported for an implementation as soon as possible (between 87% and 67% of the respondents who had an opinion on the solution concerned). Out of the carbon farming solutions, immediate inclusion of sustainable forest management was backed by most stakeholders of all types (87% of respondents). With some exceptions, industrial solutions also received support for immediate inclusion from all stakeholder types. Specifically, direct air capture with long-term or permanent carbon storage (47% of respondents selected as soon as possible; 11% never) and enhanced rock weathering (35% of respondents selected as soon as possible; 22% never) received the lowest shares for immediate inclusion. These less favourable responses were largely from NGOs and EU citizens, while companies and business associations generally supported the inclusion of all solutions as soon as possible. |
| | 3.2.Benefits of a certification framework |
| | Q4 asked respondents for their agreement with the statement “establishing a robust and credible certification system for carbon removals is the first essential stepping stone towards achieving a net contribution from carbon removals in line with the EU climate-neutrality objective”. A large majority of 89% of respondents agreed with the statement. This included clear majorities from all stakeholder types. Only NGO respondents showed some disagreement, with 39% of these respondents selecting no. |
| | Q5 gave respondents the opportunity to select up to three answers to define the main objectives for the certification of carbon removals. Three answers stood out with 48-51% of all respondents selecting: (1) to allow comparability and competition between different carbon removal solutions, (2) to increase the transparency and level playing field of voluntary carbon markets, and (3) to provide better public incentives for nature-based and industrial carbon removals in EU and national funding programmes. The three most selected objectives were all strongly backed by business associations and companies/business organisations (57% and 49% of, respectively, companies and business association respondents). EU citizens also supported to allow the comparability and competition between different carbon removal solutions as well as to increase transparency in corporate sustainability reporting and foster the credibility of climate-neutrality claims (55% of EU citizen respondents). The third most selected option (to provide better public incentives for nature-based and industrial carbon removals in EU and national funding programmes) was more strongly supported by NGOs (79% of NGO respondents). |
| | 3.3.Role of the EU in the certification of carbon removals |
| | Q6 asked respondents about the role they envisage for the EU in the certification of carbon removals. The question offered three options (1) the EU should establish comprehensive standard requirements for carbon removals, e.g. on monitoring, reporting and verification, on the duration of the removal or baseline setting and additionality, (2) the EU should establish minimum standard requirements on reporting transparency for carbon removals, or (3) voluntary carbon markets work well. There is no need for an additional intervention by the EU. Respondents could select one of the three options. A majority of respondents (55%, 210 in total) mandated the EU to establish comprehensive standard requirements for carbon removals; this option received the majority of responses from all stakeholder types. A more limited role for the EU to establish minimum standard requirements on reporting transparency was favoured by 40% of respondents (155 in total). Companies made up a notable share of the stakeholders who selected this option with a similar absolute number as for the more comprehensive one (69 and 71 responses). EU citizens also had a largely comparable number of responses, while all other stakeholder types with more than five respondents in total had substantially lower numbers. Voluntary carbon markets without further intervention were preferred by only 5% of respondents. |
| | Q7 asked stakeholders about what type of entity (public or private) should carry out the functions in the certification process. Public administration was seen as the most adequate for the establishment of certification methodologies. The overall majority (59%) as well as the majority within each stakeholder type considered the public administration as most adequate for this function. Conversely, 33% considered independent private entities to be the most adequate. This group consisted mostly of respondents from business associations, companies and EU citizens. 8% of respondents had no opinion. A large majority of stakeholders considered public administration to be most adequate for the establishment of the system for the accreditation of certification bodies. 78% were of this opinion, which builds on a strong majority from all stakeholder types. 15% thought that independent private entities are more adequate organisations to undertake this function. Here, notable shares of respondents came from companies and EU citizens. 7% indicated no opinion on this function. In contrast to the previous functions, independent private entities were seen as most adequate for the verification of removals made (ex-post). 65% of stakeholders expressed this view, with strong support from business associations, companies and EU citizens. Also, public authorities supported the responsibility of independent private entities for this task. On the contrary, 23% of the respondents considered public administration to be better placed. Here, NGOs were a key group that supported public responsibility for ex-post verification of removals. Moreover, a majority of respondents from academia and research institutions also shared this view. 12% had no opinion. Lastly, the validation of the carbon removal projects (ex-ante) was also seen as best placed in the hands of independent private entities. The number and shares of responses as well as the positions of stakeholder types were nearly identical to those of the ex-post verification. |
| | 3.4.Certification methodologies |
| | Figure 2 Q8: Do you think an EU certification framework should allow different types of certificates for different types of removals? (N=376) |
| | |
| | Q8 asked respondents whether an EU certification framework should allow different types of certificates for different types of removals. Respondents were limited to one response; 376 respondents answered the question. The results are illustrated in Figure 2 , which shows that 55% of respondents believe that an EU certification framework should allow for different types of certificates. 23% of respondents called for a single certificate type, while 22% called for minimum criteria rather than comprehensively defined certificates. There were some differences across different stakeholder types: the most noticeable result was that NGOs and academic/research institutions are less in favour of allowing only a single type of certificate. |
| | Figure 3 Q9: What approach could better manage this risk of intentional or unintentional reversal of carbon removals? (N=396) |
| | Q9 In the ninth question, respondents were asked to identify the best approaches for managing the permanence of carbon removals. Respondents could select multiple responses, and on average each respondent selected 1.9 options. Respondents were also able to provide additional responses in an open text input section; 21% (80) of the 396 respondents provided additional input. The results are illustrated in Figure 3 . The results were mixed, with no option selected by more than 43% of respondents. The most popular options were buffer accounts or discounts (43% of respondents); 33% of respondents called for a related approach of insurance or pooling systems. The second most popular response calls for multi-year monitoring plans (36%), though only 23% of respondents would make removal providers liable for offsetting reversals (the least popular options). 33% of the respondents called for certificates with specific durations. There were significant differences between stakeholder types. Discount/buffer accounts was not the most commonly selected response for some stakeholder types, e.g. business associations, environmental organisations, public authorities, and trade unions. For business associations and public authorities, the most selected option was to go for certificates with specific durations. Conversely, this was the least popular option for NGOs and for academic/research organisations. |
| | Figure 4 Q10: To what extent do you think the EU certification framework should include the concepts of baseline and additionality? (N = 379) |
| | Q10 asked to what extent respondents think the EU certification framework should include the concepts of baseline and additionality. Respondents were asked to select between three different options, or “other”. The results are illustrated in Figure 4 . The most popular response was that the EU certification framework should allow for a variety of baselines and additionality criteria to cater for different types of removals (48% of responses). A further 23% indicated that the EU certification should establish a single methodology to define the baselines and assess additionality. Overall, 71% of respondents called for some EU guidance on baseline and additionality criteria within the carbon removals certification mechanism. 16% of respondents selected the “other” option and provided additional information in an open response; these responses varied widely. Most respondent types answered similarly. One exception was the stakeholder group NGOs, which disproportionately responded “other” (50% of their responses). |
| | Q11 asked respondents what information the certification for carbon removals should disclose and provided a list of 13 possible options (including one “other” option). Respondents could tick as many options as they felt necessary; on average, they provided 8 responses. Most respondents indicated that the certification should disclose the quantity of carbon removed (94% of respondents), closely followed by the type of carbon removals (89% of respondents). Around three-quarters of respondents answered that this should include information on MRV processes, the duration of carbon storage and information on the carbon removal provider. Approximately half of respondents indicated that the certification should provide information on the certificate owner, the baseline and additionality of the removal, the use of the certificate and its contribution to the Paris Agreement, environmental benefits and risk coverage and sustainability objectives. Respondents seemed less interested in the social benefits and the price of the certificate (40% and 29% of respondents, respectively). 52 respondents used the “other” option to provide additional feedback: no major differences emerged between the views of stakeholder types on what information the certification for carbon removal should disclose. However, some stakeholders on average picked more answers than others (e.g. NGOs selected more options compared to company/business organisations). |
| | Respondents were also able to provide additional comments on certification methodologies (i.e. questions 8-11) in an open text input section; 145 respondents provided additional input. These covered many different topics, in some cases overlapping with other sections of the questionnaire. Topics addressed by respondents included (but were not limited to): general comments on how to implement the certification framework, methodologies, registries and certificates (including the trade thereof), co-benefits and the certification framework, and existing standards. Moreover, some respondents provided additional insights into their responses or used the opportunity to highlight specific issues. At the end of the questionnaire, respondents were asked whether there are any other important aspects that should be considered in establishing a regulatory framework for the certification of carbon removals in the EU. In total, 267 respondents provided final remarks. The two topics that were most often addressed are the expected objectives of the certification (75 mentions) and the risk of negative impacts on stakeholders (60 mentions). |
| | 3.5.Summary of views per stakeholder type |
| | This section summarises the key overall positions of the stakeholder types for which more than five submissions were made. Reflecting the similar background and different number of replies, some stakeholder types are grouped together. |
| | Companies (150 respondents) and business associations (81) expressed their preference for a clear mechanism that offers incentives to a wide range of solutions while being robust and credible. The most selected criteria for incentivising removal solutions were the robustness of MRV and the potential for large scale deployment. These stakeholders called for the immediate inclusion of almost all solutions. Only DACCS (53% of respondents with an opinion did not select as soon as possible) and geological storage of non-fossil CO2 (32%) received notable shares of replies for later inclusion. Comparable and competitive carbon removal markets were the primary objective for companies and business associations. The views on the distribution of functions were clear cut: public administration was seen as appropriate to define certification methodologies and accredit certification bodies, while independent private entities should validate and verify removal projects and quantities. Different baselines for different removal types were preferred by companies and business associations. Opinions on how to address reversals varied with relatively even shares, with a slight preference for requiring discounting or buffers to account for the risk of reversals. Disclosure of the quantity, types, MRV and provider of the removal was seen as essential, while items such as the duration, baseline or the owner received substantial shares of responses as well. In additional remarks, companies most often pointed to the expected objectives of creating incentives for growth in the market of carbon removals. |
| | EU citizens (73) had more diverse views than the other stakeholder groups. For instance, in response to the criteria for incentivising specific solutions, three answer options were almost equally popular: potential environmental co-benefits, technical readiness and economic feasibility, and robustness of MRV aspects. While the majority of EU citizens were in favour of including a wide range of both carbon farming and industrial removal solutions in the certification mechanism, a substantial share of respondents called for the later inclusion of industrial solutions 4 . In the allocation of functions, EU citizens showed the same trend as companies and business associations. A notable difference, however, was that for the establishment of certification methodologies, 50% selected public administration while independent private entities were close with 45% of respondents. For reversals and additionality, the variety of views of EU citizens was again apparent: in both cases, two options received comparable numbers of selections. For reversals, discounting or buffer accounts and insurance or multi-project pooling were the preferred options. For additionality, different baselines for different removal types and a single baseline received the same number of selections. EU citizens asked for the disclosure of a wide range of items. Only the social benefits and the trading price items were selected by less than 50% of EU citizen respondents. Most additional responses submitted related to the risk of negative impacts on other stakeholders caused by giving priority to the offsetting needs of carbon intensive industries over the economic, social and cultural contributions of the agricultural or forestry sector. |
| | NGOs (38) and environmental organisations (2) expressed preference for an approach that is comprehensive, transparent and driven by public authorities. A key topic for these stakeholder groups was the priority of GHG emission reductions over removals. Respondents from NGOs and environmental organisations most often selected potential environmental co-benefits as the criteria for determining which specific solutions to incentivise through the certification mechanism. Like EU citizens, the majority of NGO respondents called for including a wide range of both carbon farming and industrial removal solutions in the certification mechanism, but the selection was more cautious than other stakeholder types. Particularly industrial solutions received more replies for later or no inclusion than the overall responses. The majority of NGOs and environmental organisations expressed a preference for public administration to take over all functions in relation to certifying removals. In the views of these stakeholders, defining additionality and preventing reversals were important challenges that need to be tackled as comprehensively as possible. Similarly, the disclosure should enable full transparency on all aspects of the removal. Regarding what information should be disclosed, NGOs and environmental organisations had the highest average number of options selected with 9.7 and 10.5 out of 13 options. Additional remarks from NGO respondents most often related to nature-based solutions and the potential to create effective co-benefits for ecosystem restoration and biodiversity. |
| | Respondents from academia and research institutions (16) were for the majority of questions closely aligned with the trend of NGOs responses. A few considerable differences existed, however. First, academia respondents were more widely of the opinion that also industrial removal solutions should be implemented as soon as possible. Second, to reflect the risk of reversals, research stakeholders preferred the option of discounting removals or setting up buffer accounts (63% of research respondents selected this option). Finally, in relation to additionality, a variety of baselines was the most selected option (43%). Remarks most often related to the integration of carbon removals with EU and international climate instruments such as the Paris Agreement. |
| | Public authority respondents (16) on the other hand were more closely aligned with companies and business organisations. For instance, they considered independent private entities as most appropriate to carry out verification and validation steps. Divergence from other responses lied primarily in the approach to the risk of reversals. Public authority respondents selected the option of specific durations of certificates with options for renewal most often. |
| | 4.Call for evidence – feedback |
| | In addition to the public consultation, stakeholders had the opportunity to share feedback and input on the initiative for the certification of carbon removals through a call for evidence. In total, 231 submissions were made. After removing duplicate submissions, 219 distinct feedbacks remained. Like in the public consultation, the countries with the most submissions were Germany (42) and Belgium (41), while the Netherlands (16), Sweden (13), Italy (13), Finland (12) and France (12) were also well represented. Several of these simply referred to the position paper of the organisation. The summary of the analysis of these papers is provided in Chapter 5 because of the large overlap between submissions through the call for evidence and the public consultation. |
| | 110 submissions were made by companies (64 submissions) and business associations (46). The key topics of these responses related to the support towards the initiative, while seeing a priority for GHG emissions reductions. For the certification mechanism, business stakeholders generally called for a market-based approach with competition for removals as well as verification activities. Therefore, a flexible and technology-neutral design is preferred by these stakeholders. At the same time, credibility and acceptance were often mentioned as key parameters to grow the market for carbon removals. The growth of removal development was a strong motivation expressed by businesses that would buy removal certificates to offset emissions. For these, the alignment with instruments such as the EU ETS was also of concern. Removal providers from farming and forestry sectors expressed that the removal certification would have to create viable financial incentives to have an impact. Concerns over reducing the availability of biomass for use in product value chains were also expressed. |
| | 44 submissions came from NGOs and environmental organisations. These stakeholders also widely supported the Commission’s initiative. NGOs highlighted the importance of an ambitious mechanism that contains robust provisions for MRV, additionality and permanence. Further topics raised were the importance of emissions reductions to achieve climate targets and the need for holistic assessments of environmental impacts of removal solutions beyond the carbon balance. |
| | 35 submissions were made by EU citizens. These responses included very large divergence as some respondents stated their full support in short words while others expressed their rejection of any climate policy. More elaborate answers called for clear and useable rules to support the climate mitigation efforts while being transparent to citizens. |
| | 11 submissions came from academia and research institutions, which expressed strong support to the coordination and certification of carbon removals. These stakeholders called for detailed certification rules based on the global scientific evidence body and aligned with the international climate policy framework. |
| | From the other stakeholder groups, a total of 18 submissions were received, of which 14 selected “other” as their stakeholder category. These reflected largely the key topics of the main stakeholder type to which they most closely belonged. |
| | 5.Analysis of position papers |
| | Position papers were submitted via multiple channels. In total, 108 stakeholders attached position papers to their survey answers (of which 95 were distinct); 74 were submitted through the call for feedback on the roadmap for sustainable carbon cycles in 2021 5 ; 45 additional papers came from the call for evidence; and 11 additional papers were identified as highly relevant by the support study project team. As such, a total of 221 position papers formed the basis of the position paper analysis. Their distribution across stakeholder types is shown in Figure 5 . |
| | Figure 5: Number of position papers per stakeholder type (N=221) |
| | The majority of position papers were submitted by companies/business organisations and business associations. Together, these stakeholder types represented 74% of the distinct documents submitted. Of the papers submitted, several key topics emerged. Some of the most discussed areas included certification rules, accounting, technology-based solutions, as well as monitoring, reporting and verification. A further breakdown of the topics covered by the position papers is shown in Figure 6 . |
| | The expected objectives of the certification were similar across all position papers, with two main themes. First, stakeholders expressed support for carbon certification as a way to provide economic opportunities for sectors such as agriculture, forestry, and land-use sectors. In essence, these stakeholders stressed that a certification for carbon removals should be used as a tool to accompany other measures and investments that reduce emissions. Second, another key objective across stakeholders was the importance of internationally harmonising the frameworks regarding carbon removals. Some other notable objectives included sufficiently and credibly rationalising and incentivising negative emissions for investors, as well as the desire for government engagement to promote stability within the system. |
| | Figure 6: Topics covered by position papers and per stakeholder type |
| | Some risks were flagged throughout the papers. Stakeholders were concerned about the risk of greenwashing and lower mitigation efforts if removals are valued higher than emissions reduction. Another risk that appeared in papers related to carbon farming solutions is the risk to farmers. High certification costs can act as a bottleneck for farmers, and rewarding carbon removals without maintaining instruments that manage and enhance existing carbon sinks can disincentivise the farmers that have already successfully removed carbon through other smart climate practices. |
| | Most stakeholders expressed that carbon farming solutions should be included in the framework. The potential for carbon sequestration in soil is recognized as a viable, cost-effective approach towards carbon neutrality. However, concerns were raised that the global credit economy (as it exists today) is not set up for carbon removal, because carbon farming offset options lack international standards, and they are riskier in terms of permanence. For industrial solutions, there was widespread support for BECCS and DACCS. |
| | Stakeholders are generally calling for robust and transparent MRV rules because of the critical support that these provide to the credibility of removals. Two ideas seen throughout the papers are 1) the recommendation that the MRV system should be built on existing LCA principles, and 2) the idea that the system should allow for different modelling approaches to help reduce the cost barrier associated with MRV. Stakeholders generally agreed that carbon removal units must prove to be additional, and that clear guidance on project additionality can help reduce the risks and complexity in project development, while enabling credit operators to invest into the schemes. Regarding permanence, it is important to distinguish between true carbon removals and avoided emissions. Regarding transparency within the framework, many stakeholders listed double-counting as their main concern. As such, it is integral to ensure the traceability of issued carbon credits to minimize the risk of double counting. Other suggestions included aligning the framework with the European carbon accounting system; creating a carbon removal authority; and establishing and outsourcing third-party verification to accredited independent entities. Some stakeholders referred to California as an example, whereby they suggested integrating the carbon sequestration from soil in the EU ETS, as is the case with the state’s cap-and-trade system. |
| | Stakeholders stressed the importance of international harmonisation of the framework and the need to integrate carbon removals into climate policies towards 2050 to scale demand-driven negative emissions. Some suggested for the Commission to create a carbon bank to guarantee a minimum price for carbon removals and retaining policies incentivising the conservation of existing carbon stocks. Many expressed that the Commission should focus on clearly defining the concepts related to the purpose, functionality and integrity of the system. Some closing remarks in the papers voiced support for increasing research and development for carbon removal projects, especially for industrial solutions. Lastly, carbon removal projects should respect indigenous rights and support ecological integrity through strict safeguards. |
| | 5.1.Sectoral analysis |
| | The agriculture sector highlighted the risks and concerns regarding the cost of the MRV process for farmers as the current costs of recognized modelling approaches for direct measuring are very expensive. An alternative is to allow for indirect proxies, physical indicators, or technologies. Although they are less accurate than soil sampling, it will often be cheaper and simpler than direct measurements, thus reducing the barriers of high MRV costs for the project developers, which will help facilitate the development of carbon projects. |
| | The food sector largely echoed the sentiments expressed by the agricultural sector. MRV is expected to be data intensive and expensive, therefore it is important that the method is kept simple, to avoid administrative burden for producers. It is important to make sure that such a certification scheme represents a long-term positive business model for both farming and processing activities. |
| | The forestry sector highlighted the need to ensure that the reduction of fossil emissions remains the number one priority. Carbon farming solutions should not just lead to increased carbon removals, but also help reverse the degradation of ecosystems (particularly forests) and the co-benefits that come with them. |
| | The industrial sector, especially energy, minerals & materials, expressed high support for both carbon farming and industrial solutions, as all of them should be promoted based on their technological potential and cost-effectiveness. For technological solutions such as BECCS, greater incentives are required. The certification for carbon removals must be complementary to the EU ETS system, as the two are needed to reach the climate objectives. Additionally, it is essential to consider transport and storage infrastructures for hard-to-abate industrial sectors. |
| | Climate organisations highlighted that an overreliance on removals risks a deeper climate breakdown and shifts the risks and burden to the underprivileged and future generations. The certification for carbon removals should consider the importance of environmental benefits (and not just focus on carbon) and prioritize carbon farming solutions. Many organisations highlighted the opportunity of scaling up industrial solutions such as DACCS and BECCS, however they also identified the risks of greenwashing and failing to bring the technologies to scale. |
| | 6.Conference on sustainable carbon cycles |
| | The Sustainable Carbon Cycles Conference took place online on 31st of January 2022. Over 2000 participants attended the event organised around four main panel sessions, whereby public authorities, industry and civil society exchanged on the role and potential of carbon removals in the EU. First, a plenary session was held as a high-level panel discussion on sustainable carbon cycles. Keynote speakers and panellists from EU policymakers and international businesses discussed how public and private stakeholders can work together to scale up carbon farming initiatives and industrial solutions. Session 2 was split to focus on the areas of carbon farming and industrial solutions. Speakers and panellists included policymakers, researchers, and the industry sector representatives that could offer carbon removals under the respective solutions. The removal potential and main opportunities and challenges of deploying such solutions in practice at the EU level were discussed. A third session focused on the expectations from society. Speakers and panellists from NGOs and companies discussed the needs and expectations of different stakeholders for the deployment of carbon removals. Finally, a fourth session on the potential EU certification brought together representatives from current removal certifiers, NGOs, and experts to discuss the design of a possible regulatory framework ensuring the high quality of carbon removals deployed in the EU. The importance of scaling up carbon farming and industrial solutions was recognised by all speakers and panellists during the conference. Many highlighted how carbon removals will play a crucial role in the journey towards climate neutrality by 2050 for the EU, and for company-level net zero or net negative strategies in the coming decades. |
| | Annex 3: Who is affected and how? |
| | 1.Practical implications of the initiative |
| | An EU framework for the certification of carbon removals will bring additional benefits from increased trust in the quality of procedures and certification methodologies. This section reports potential costs and benefits from this initiative for each actor that choose to voluntarily opt in. |
| | 1.1.Economic operators |
| | The operators develop and operate activities to remove carbon from the atmosphere. The two types of operators potentially affected by the initiative are: |
| | oProject operators. Entities that establish, manage and implement carbon removals activities. They can include technology developers (e.g. for industrial removal solutions) or landowners, foresters and farmers that host nature-based removals solutions. |
| | oProgramme developers. Entities acting as intermediate and specialising in the identification, development, registration and implementation of emission carbon removal crediting activities. These firms often develop methodologies and help to aggregate activities across multiple operators. They usually take a share of the revenues received from the sale of resulting credits. |
| | Business scenarios |
| | Based on the objectives set out in the Communication on Sustainable Carbon Cycles (5 Mt of permanent storage and contribution towards the additional net removals of 42 Mt in LULUCF), the following scenarios on revenues and costs can be developed: |
| | ·Scenario 1: The aspirational objective of 5 MtCO2 of carbon removal by 2030 from industrial solutions set in the Communication on sustainable Carbon Cycles is reached with 3.5 Mt of BECCS, 1.5 Mt of DACCS with carbon removal credits sold at 150 EUR/tCO2. |
| | ·Scenario 2: 5 MtCO2 of carbon removals from Afforestation (3,75 Mt), Agroforestry (0,75 Mt) and Soil Carbon (0.5 Mt) sold at 50 EUR/tCO2 |
| | ·Scenario 3: 20 MtCO2 of carbon removals from Afforestation (15 Mt), Agroforestry (3 Mt) and Soil Carbon (2 Mt) sold at 50 EUR/tCO2 |
| | A separate line shows the costs for Monitoring, Reporting, and Verification (MRV). Those MRV costs are based on estimates from current certification schemes that use best practices (as explained in the sections on the QUALITY criteria) and should also be representative of the MRV costs under the preferred option Q2+G2. |
| | Also based on current experience, the remaining margins should be sufficient to cover investment and operating costs. |
| | 5 Mt of Industrial removals 6 | 5 Mt Carbon Farming 7 | 20 Mt Carbon Farming 8 |
| | Typical project capacity | 1 MtCO2 | 25-500 tCO2 | 25-500 tCO2 |
| | Number of individual projects | 5 | 42.500 | 170.000 |
| | Rough estimate of revenues generated 9 | 750 M€ | 250 M€ | 1.000 M€ |
| | Estimate of MRV costs | 500.000 € | 40 M€ | 160 M€ |
| | MRV costs |
| | Going into more detail on the estimation of the MRV costs, the table below shows that the MRV cost can vary significantly among carbon removal solutions. These estimates only provide general indications with a high level of uncertainty. |
| | Table 1‑1 Potential ranges of monitoring, reporting and verification (MRV) costs by removal activity types 10 , 11 , 12 |
| | Activity type | Activity size (tCO2 removed/yr) | MRV cost (per activity) | Monitoring frequency | (years) | Cost | (€/tCO2 removed) |
| | Upfront | (€) | Recurring | (€) | Annualised | (€/yr) |
| | Afforestation | 50-10,000 | (av. 500) | 1000-1250 | 3700-7800 | 877-1711 | 5 | 0.1-34 |
| | Agroforestry | 5-445 | (av. 50) | 1000 | 3700-7800 | 877-1657 | 5 | 2-330 |
| | Soil carbon | 8-116 | (av. 25) | 1000 | 3700-7800 | 877-1657 | 5 | 4-200 |
| | BECCS | 100,000-500,000 | (av. 200,000) | 200,000 | 50,000 | 73,000 | 1 | 0.1-0.7 |
| | DACCS | 5,000-500,000 | (av. 200,000) | 0.1-15 |
| | In the most extreme cases, the costs of meeting elevated MRV requirements could prove prohibitive to the certification to some types of carbon farming solutions; this arises because of the need to apply dedicated MRV to each activity site even where these are individually delivering only low levels of removals. In these circumstances, MRV costs become the most significant part of overall implementation costs. This is particularly true for activities sequestering carbon in soil (including agroforestry). Soil sampling and testing can be very expensive, above 100 euro per soil sample. However, innovative technologies combining remote sensing and artificial intelligence can significantly decrease this cost 13 and an average MRV cost of 20 to 30 euro per tonne of CO2 removed and sequestered in soils can probably be achieved in the future. Existing monitoring and reporting under the LULUCF, the land parcel information system under the Common Agriculture Policy, the LUCAS soil survey, national forest inventories, as well as data from the Copernicus space observations could help building a reliable monitoring system, which will become more granular and more affordable over time. |
| | As MRV costs can become prohibitive for small-scale activities, certification schemes have developed two solutions in this respect: |
| | ·Some certification schemes such as the Clean Development Mechanism and the Woodland Carbon Code include simplified methods for small-scale activities. Adopting simplified MRV procedures for some small-scale activities can increase the adoption of carbon removal practices but can reduce the levels of accuracy and a balanced compromise need to be found to preserve climate benefits. |
| | ·Carbon removal programmes aggregate multiple projects of the same carbon removal activity in a single collective project. This approach can reduce the MRV costs for small individual projects without sacrificing the quality of the MRV. Such programmes often provide in parallel advice to the farmer on how to manage the land to increase carbon sequestration and therefore potential climate benefits but also economic benefits for the land manager. Part of the economic risk is carried by the programme developer and the project operators face less uncertainties. Most of carbon farming projects targeting soil carbon sequestration build on these programmes. The cost for the individual economic operator to join the programme can be fixed (e.g. Soil Capital requires about EUR 1400 14 per year to join its programme and the sale of the certificate goes to the farmer with a minimum of EUR 27 per carbon certificate guaranteed; other programmes such as Nori or Indigo Ag have a fee for each certificate sold, typically between 5% and 25%). |
| | Finally, for other types of activities, for example BECCS and DACCS, the MRV cost represent only a small fraction of the overall cost and are diluted by the large volume of removals that can be generated by individual activities. |
| | Impact of the preferred options on benefits and costs |
| | An economic operator applying the EU certification standards, in net, will see benefits associated with increased visibility and trust that an EU framework for the certification of carbon removal would provide. They would be able to access a larger pool of potential investors in carbon removals that would create additional demand for their activities. The recognised quality of their carbon removals would also allow them to get a better price for their removals than economic operators opting to register their removals to a certification scheme not recognised by the EU framework. The Ecosystem Marketplace 2021 report 15 indicates that the global average price of a ton of CO2 removal on voluntary markets was approximately 8 €/t in the period 2020 – 2021. However, market places specialised on high-quality carbon removal with robust MRV requirements such as Puro.earth, Label Bas Carbon, Indigo Ag, Soil Capital or Woodland Carbon Code display price between 20 and 70 euro or more. 16 Specific purchase contracts supporting the development of permanent carbon removal solutions can reach 500 €/t to 2.000 €/t. 17 |
| | Furthermore, in particular for carbon farming, the proposed option for time-limited contracts could be attractive for many land managers because it reduces their risks and offers a continuous income in case of contract renewal. |
| | Economic operators participating in the EU certification scheme could have additional indirect benefits such as better access to finance. As the governance options have been designed in such a way that certifiers and verifiers, who are already active as regards organic farming labelling or bio-energy sustainability, will be able to expand their business and include the certification of carbon removals in their offers, the economic operators should have the choice from a large number of certification schemes and expect a healthy competition between those schemes. |
| | The MRV costs under an EU certification scheme are expected to be equal to those MRV of current schemes that already implement the identified best practices, in particular with regard to regular verification. Of course, a project operator who is currently using a certification scheme which e.g. does not require third-party verification will experience higher MRV costs; these should however be offset by a higher carbon price thanks to the higher trust in the quality of the generated carbon removals. |
| | 1.2.Financiers of carbon removals |
| | The investors in carbon removals would get a reputational benefit from investing in high-quality that would offset the extra-cost of these removals compare to cheaper removals of lower quality. This is something particularly important for food and biomass processors that want to establish net-zero value chains in full transparency. This is also something beneficial for investors supporting the development of industrial removals such as through the “Frontier” initiative. 18 |
| | An EU certification framework recognising certification scheme with high-quality carbon removals can also reduce the search costs for organisations willing to invest in high-quality certified removals to avoid the risk of being accused of greenwashing. |
| | 1.3.Certification schemes and Validation & Verification bodies |
| | The cost for adjusting the certification schemes to the transparency and reliability requirements of an EU framework should be relatively low for existing and large certification schemes since many have already in place robust and transparent processes for the validation of projects and verification of the removals. Large certification schemes have already in place high-quality registries able to ensure the registration of the activities and the traceability of removals generated. Other schemes can rely on third-party managed systems that offer registry capacity for relatively low prices (e.g. 0.07 euro per tonne of CO2 registered or transferred for Woodland Carbon Code 19 ). |
| | Once recognized under the EU legal certification framework, certification schemes could benefit from increased certification activity. Benefits would accrue from increased visibility and trust (from removals buyers and sellers), potential access to a larger pool of buyers and sellers, and resultant potential increases in supply, demand, and the overall volume and scale associated with their schemes. The net result for certification schemes is likely to be increases in revenue arising from increased registry fees relative to the baseline. Registries typically charge a one-off fee for account per new account, plus ongoing fees at the time of issuance. Issuance fees are usually per issued certificate, with tiered pricing according to volume. For instance Verra requires USD 500 for each accounted opened in its registry and then USD 0.05 for the first 10,000 certificate issued to USD 0,025 per certificate after 1,000,000 certificates have been issued. 20 The Verra’s 2020 Financial report indicates that 89% of Verra’s revenues comes from registration (4%) and issuance (85%) fees. 21 For Gold Standard the revenues from the registration (18%) and the issuance (54%) fees represent 72% of the total revenues. 22 |
| | It should also be considered that the governance options have been designed in such a way that certifiers and verifiers, who are already active with organic farming labelling or bio-energy sustainability, will be able to expand their business and include the certification of carbon removals in their offers. |
| | The development of standard methodologies by public administration is another benefit through cost saving for certification schemes that will not need to carry the cost of their development or the administrative cost of their approval. |
| | Most existing certification schemes in the voluntary carbon market require the use of validation and verification bodies as third-party accredited auditors to evaluate documentation at various stages in the activity cycle, primarily at activity registration (often referred to as validation) and to support issuance of credits based on the results of monitoring (verification). Some existing schemes also involve VVBs in the methodology development process. |
| | An increase in trust for certification scheme recognised by the EU framework could increase the demand for certification and therefore the business of independent validation and verification bodies. |
| | Taken together, it is not expected that the larger and existing certification schemes will experience significant adjustment costs should they opt for the recognition in line with the EU legal framework. The data on smaller certification schemes is not complete and some of them can have larger adjustment costs if they want to upgrade to the best practices of the EU certification scheme. |
| | Experience from the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) application process can provide indications on administrative costs expected for certification schemes to prove their compliance with the requirements of a future EU Framework. Under CORSIA, schemes are required to complete a questionnaire with a series of closed and open questions related to1) descriptive information, 2) a summary of the scheme, 3) a detailed description of procedural aspects of the scheme (methodology development, transparent methods, registry, verification/validation procedures, governance etc), 4), description of scheme integrity criteria (i.e. management of double-counting, leakage, MRV, etc), and 5) an open comments section. Schemes are required to provide evidence, including descriptions, links to additional documentation, etc. The completed questionnaires are approximately 60-90 pages long, and potentially require approximately 1-3 person months to complete (e.g. gathering of evidence preparing submission). The precise amount of time would depend on whether the certification scheme already has all necessary evidence and information, form complexity, and if initial submissions are unsuccessful and need to be resubmitted. Using the EU standard cost model 23 , this equates to an initial one-off cost of approximately €4,000-€12,000 per scheme operator. It could be expected that the accreditation costs would recur every five years, resulting in annual costs of €800-€2400 per scheme operator. |
| | Between 2019-2022, 32 schemes applied for approval from CORSIA’s Technical Advisory Board. In addition, between 2020-2022, there have been 13 schemes that have submitted additional information for reassessment. These applicants are generally the larger, international voluntary carbon crediting schemes; so far, the smaller, national or sub-national schemes present in Europe (e.g. Label bas Carbone, MoorFutures, Woodland Carbon Code) have not applied for CORSIA accreditation. It is important to note that the scope of CORSIA’s accreditation goes beyond only carbon removals, including emission reductions and avoided emissions (including from carbon stock conservation by avoided nature loss). Another indication is provided by the certification of biofuels under the Renewable Energy Directive with 16 applications from certification schemes received by the Commission since 2011. Based on this numbers, the total administrative cost for certification schemes to be recognised in the EU certification framework could be roughly estimated to a one-off cost of €64,000 to €364,000 and recurring costs of €12,800 to €76,800 every five years. Lot of uncertainty remain in these estimates and variations will depend in particular on the specificities of the future carbon removal methodologies that the certification scheme will have to implement. |
| | 1.4.National authorities |
| | As the setup of public certification schemes is not mandatory, only those Member States who see a benefit in national certification schemes will incur the related costs. |
| | 2.Summary of costs and benefits |
| | I. Overview of Benefits (total for all provisions) – Preferred Option |
| | Description | Amount | Comments |
| | Direct benefits |
| | Development of certification methodologies by EU | Certification schemes: Increase in issuance of carbon removal certificates and therefore in registry revenues (very significant) | Economic operators and certification schemes: Avoid the cost of developing and approving carbon removal methodologies (moderate) | Recognised certification schemes would benefit from increased visibility and trust (from removals buyers and sellers), potential access to a larger pool of buyers and sellers, and resultant potential increases in supply, demand, and the overall volume and scale associated with their schemes. The net result for certification schemes will be increases in revenue arising from increased registry fees relative to the baseline. Registries typically charge a one-off fee for account per new account, plus ongoing fees at the time of issuance. | Economic operators have clearly indicated in their reply to the public consultation their preference for public administrations to establish carbon removal methodologies. |
| | Implementation of EU certification methodologies | Economic operators: Establish a level playing field in the EU and recognise the specificities of different types of carbon removal solutions for fair competition (very significant). | Economic operators will have their carbon removal solutions better recognised on the basis of their characteristics on long-term sequestration or co-benefit generated. It would ensure fair competition among carbon removal solutions and the use of carbon removal certificates in full consideration of specific carbon removal properties. |
| | Indirect benefits |
| | Development of certification methodologies by EU | Financiers: It reinforces the trust in the whole certification process and therefore the reputational benefits of investing in carbon removals (significant) | Economic operator: Avoid that certification schemes pass-through the cost of developing and approving methodologies (minimal) | The main driver to establish trust in the system should be the recognition of certification schemes but this trust would be reinforced if the methodologies are developed by public administration in full consultation with stakeholders. |
| | Implementation of EU certification methodology | Economic operators will benefit from increased visibility and trust in certification schemes that would generate a higher demand for carbon removals. Reputational benefits and potential to attract new investors. (significant) | Validation and Verification Bodies: An increase in trust for certification scheme would increase the demand for certification and therefore the business of independent validation and verification bodies (very significant) | Participation in a recognised certification scheme could have additional indirect benefits such as a better access to other types of finance. |
| | Administrative cost savings related to the ‘one in, one out’ approach* |
| | Development and implementation of EU certification methodologies | Economic operator. Reduction of search costs between schemes thanks to harmonised methodologies. | Financiers: reduction of search costs to finance high-quality carbon removals. | Certification schemes: Reduction of costs related to developing and approving certification methodologies | EU certification will reduce the search costs for economic operator willing to engage in a certification process as well as for investor in carbon removal certificate. |
| | (1) Estimates are gross values relative to the baseline for the preferred option as a whole (i.e. the impact of individual actions/obligations of the preferred option are aggregated together); (2) Please indicate which stakeholder group is the main recipient of the benefit in the comment section;(3) For reductions in regulatory costs, please describe details as to how the saving arises (e.g. reductions in adjustment costs, administrative costs, regulatory charges, enforcement costs, etc.;); (4) Cost savings related to the ’one in, one out’ approach are detailed in Tool #58 and #59 of the ‘better regulation’ toolbox. * if relevant |
| | The most relevant and quantifiable costs additional to baseline are indicated in Table II. The baseline assumes that, in the absence of an EU regulatory framework, carbon removal projects would get certified by large and existing private schemes that require comparable third-party verification as under the future EU certification scheme (which is the major cost part of certification). |
| | On the costs related to the ‘one in, one out’ approach, overall the initiative should generate only minimal costs to businesses compared to baseline since the initiative does not introduce new significant administrative requirements and in any case is of voluntary nature. Economic operators developing carbon removal solutions are already facing similar administrative requirements when applying today to existing certification schemes. The adjustment costs to voluntarily comply with more stringent quality criteria for a robust certification will be largely offset by the opportunities generated by the future EU framework for the certification of carbon removals. |
| | II. Overview of costs – Preferred option |
| | Citizens/Consumers | Businesses | Administrations |
| | One-off | Recurrent | One-off | Recurrent | One-off | Recurrent |
| | Implementation of EU Certification Schemes | Direct adjustment costs | | | | |
| | Direct administrative costs | | | + | + | +* | +* |
| | Direct regulatory fees and charges | | | | | | |
| | Direct enforcement costs | | | | | +* | +* |
| | Indirect costs | | | | | | |
| | Development of Methodologies | Direct adjustment costs | | | | |
| | Direct administrative costs | | | - | | | |
| | Direct regulatory fees and charges | | | | | | |
| | Direct enforcement costs | | | | | | |
| | Indirect costs | | | | | | |
| | Costs related to the ‘one in, one out’ approach |
| | Total | Direct adjustment costs | +/- | +/- |
| | Indirect adjustment costs |
| | Administrative costs (for offsetting) | +/- | +/- |
| | * only if a new competent authority is set up (optional) |
| | 3.Relevant sustainable development goals |
| | III. Overview of relevant Sustainable Development Goals – Preferred Option(s) |
| | Relevant SDG | Expected progress towards the Goal | Comments |
| | 2 (Zero Hunger) | Name of relevant impact indicator in the Impact Assessment: Rural areas and food security | In the specific case of carbon farming, certification can create new business opportunities and economic diversification in rural areas, and ensure long-term food security through better soil quality and resilience. | However, even if a payment from carbon farming can provide additional revenue to the farmer, it cannot constitute a primary source of income, which lowers the risk of land use change away from food production. | The initiative can enable the EU Long-Term Strategy for Rural Areas flagship initiative on building up carbon sinks by investing into rewetting wetlands and peatlands. The process of monitoring and verifying carbon removals activities will also create new economic opportunities within rural communities, i.e. new types of high-quality jobs and new sources of income for rural economies. | A farmer can expect an additional revenue of approximately 50 €/ha/year, to be compared to a potential 1440 €/ha revenue from soft wheat production in 2021 or the average 297 €/ha/year income support from the CAP that an EU young farmer could receive. The higher carbon sequestration potential from afforestation of 5t to 10t of CO2 captured per hectare can generate an annual average of 250 €/ha for the first 30 years, with lot of uncertainty regarding the fluctuation of the carbon price during this long period. |
| | 8 (Decent Work and Economic Growth) | Name of relevant impact indicator in the Impact Assessment: Sectoral competitiveness and internal market | The preferred option ensures a unified set of certification methodologies and a harmonised recognition process favouring the cross-border operations of larger certification schemes. Thus, it performs better than the other options in terms of creating a well-functioning internal market for carbon removal certification, which will create more demand and a larger market size for all actors involved in this process (economic operators, certification schemes, validation and verification bodies). | See overview of benefits in Table I above. |
| | 9 (Industry, Innovation and Infrastructure) | Name of relevant impact indicator in the Impact Assessment: Innovation and digital economy | Increased certification activities can help spur innovation in the field of carbon removals. The commercialisation pathway and the policy perspective offered by certification can help these research activities accelerate innovation towards market deployment. | Furthermore, more stringent criteria on monitoring quality will spur research and innovation to enhance the available monitoring techniques. | Europe hosts several key global carbon removal demonstration sites which already involve many leading EU research institutes, and many more such demonstrators are in the planning. | In the EU, remote sensing technology (e.g. the Earth observation systems under Copernicus) and uses of cloud computing systems and artificial intelligence will likely be critical to lowering the cost and improving the accuracy of nature-based removals monitoring. |
| | 12 (Responsible Production and Consumption) | Name of relevant impact indicator in the Impact Assessment: Conduct of business | The higher requirements against the quality criteria may result in adjustment costs for economic operators and/or certification schemes that are not currently applying the best practices. The governance framework will also create some administrative costs in terms for certification schemes related to the application for the recognition of their activities. | See overview of costs in Table I above. |
| | 13 (Climate Action) | Name of relevant impact indicator in the Impact Assessment: Climate | The framework will promote carbon removal activities by requiring a higher quality of the certified carbon removals, by lowering the barriers to the uptake of carbon removal activities, and by lowering transaction costs. It will also indirectly promote climate action by increasing the demand for carbon removal certificates through the creation of more trust in the certification of carbon removals. | Higher quality of carbon removals: | -High accuracy of quantification | -Net climate effect compared to best standard practices | -Clear duration and liability rules | Addressing barriers to uptake: | -Competitive advantage to permanent solutions | -For carbon farming: baseline that recognises first-movers, short-term commitments, remote sensing to decrease MRV costs | -Research into certification methods for carbon storage products | Lowering transaction costs: | -Lower search costs for financers looking for high-quality carbon removals | Lower switching costs for providers of carbon removals that seek alternative or complementary sources of finance |
| | 15 (Life on Land) | Name of relevant impact indicator in the Impact Assessment: Environment | The sustainability criteria will include minimum requirements to provide co-benefits for the environment, and safeguards to avoid the certification of activities that harm environmental objectives. The Commission will prioritise the order of the certification methodologies to be developed through Delegated acts based on their potential to provide co-benefits for the environment. | Indicators to identify and monitor co-benefits should be coherent with the indicators from existing environmental legislation, such as the proposed Nature Restoration Law, in order to ensure synergies. Similarly, criteria to identify and exclude activities that harm environmental objectives can be based on the relevant Do No Significant Harm criteria from the Taxonomy Regulation. |
| | 16 (Peace, Justice and Strong Institutions) | Name of relevant impact indicator in the Impact Assessment: Public authorities; Participation | The preferred option will not create administrative costs for public authorities in the Member States as the governance framework will be implemented directly by the Commission. Only those Member States who see a benefit in setting up a national certification schemes will incur the related costs. | The Commission will develop the certification methodologies in consultation with the relevant experts and stakeholders through a dedicated Expert Group. Thanks to the Transparency criteria, the EU certification framework can level up the quality of the internal administration of certification schemes and make information more easily accessible to stakeholders and other certification schemes. |
| | Annex 4: Analytical methods |
| | 1.Assessment of EU needs in carbon removals to achieve the objective of climate neutrality |
| | The modelling framework and scenario used for the estimation of the future needs of the European Union in carbon removals - with a view to compensate for residual emissions and reach climate neutrality in 2050 – are originating from previous assessments carried out in the context of the EU long-term strategy “A Clean Planet for All” 24 and the package of legislative proposals to deliver the European Green Deal 25 . The modelling framework used has a successful record of use in the Commission's energy and climate policy impact assessments and covers: |
| | ·The entire energy system (energy demand, supply, prices and investments to the future) and all GHG emissions and removals. |
| | ·Time horizon: 1990 to 2070 (5-year time steps) |
| | ·Geography: individually all EU Member States, EU candidate countries and, where relevant Norway, Switzerland and Bosnia and Herzegovina |
| | ·Models used: PRIMES (all energy sectors), CAPRI (agriculture), GLOBIOM-G4M (forestry land use), GAINS (non-CO2 emissions); E3ME and GEM-E3 (macro-economy). |
| | A detailed description of the models can be found on DG CLIMA website 26 . A summary of the needs for carbon farming and industrial removals is presented in Annex 5. More information can be found in the Staff Working Document “Sustainable carbon cycles for a 2050 climate-neutral EU - Technical Assessment”. 27 |
| | 2.Review and Analysis of carbon removal solutions |
| | Scientists, landowners and entrepreneurs have identified and developed various carbon farming and industrial solutions to remove carbon from the atmosphere. Each of which differs in potential to remove GHGs from the atmosphere, costs, co-benefits and negative externalities (e.g. biodiversity impacts, farm productivity, land demand, etc.) as well as in the uncertainty in quantifying removals. These solutions pose different challenges and opportunities for a carbon removal certification framework, requiring different design elements to ensure that carbon removals fulfil high-quality standards on quantification, additionality, long-term sequestration and environmental sustainability. A comprehensive review has been conducted in order to systematically evaluate carbon removal solutions and build a solid understanding of the potential and suitability of carbon farming practices and industrial technologies in the EU. |
| | With the support of a consultant 28 , a short-list of the most relevant carbon removal solutions was established using five screening criteria: 1) global carbon removal potential, 2) technological feasibility, 3) Main challenge for implementation, 4) long-term sequestration, and 5) costs. The short-list resulting from this screening is presented in Table 2 . |
| | For each short-listed solution, a fiche covering all aspects relevant to understand potential and suitability for inclusion in a certification framework was prepared. 29 To complete the fiches, the consultant researched each short-listed solution in a broad corpus of existing scientific and grey literature. The investigation focused primarily on available meta-studies, which would typically provide a review of several carbon removal solutions. Additionally, they reviewed scientific articles and other publications focusing on individual solutions, and presented the results of our research to a panel of experts and their feedback has been taken on board in the final version now available online, with the full set of references. A summary of the main characteristics of the carbon removal solutions is provided in Annex 5. |
| | Table 2: Short-list of carbon removal solutions analysed |
| | Type of solution | Name | EU GHG removal potential | Cost | Technological Feasibility | Main challenge to implementation | Long-term sequestration |
| | Carbon Farming | Afforestation | High | Low | High | Land competition, | High |
| | Carbon Farming | Agroforestry | Medium | Low | High | Potential impact on production | Medium/ High |
| | Carbon Farming | Blue Carbon | Low | Medium/High | Medium/High | Competition for coastal waters | Medium/ High |
| | Carbon Farming | Soil carbon on mineral soils and grassland management | Medium | Low | High | Short-term impact on production | Low/ Medium |
| | Carbon Farming | Peatland rewetting | Medium | Low | High | Impact production | High |
| | Carbon Farming | Improved forest management | Medium | Low | High | Reduced near-term yields | Medium/ High |
| | Industrial | Direct air carbon capture and storage (DACCS) | High | High/ Very High | Medium | Energy requirements | Very high |
| | Industrial | Bioenergy with carbon capture and storage (BECCS) | High | Medium | Medium | Biomass requirements | Very high |
| | Industrial | Enhanced rock weathering | Medium | Medium | Low | Large mineral requirements | Very high |
| | Industrial | Biochar | Medium/High | Medium | Medium/High | Biomass requirements | Medium/High |
| | Industrial | Biomass in buildings | Low | Medium | Medium | Biomass requirement | Medium |
| | Industrial | Carbon Capture & Utilisation (CCU) | Low/Medium | High | Medium | Energy requirement | Low/ medium |
| | 3.Review and analysis of existing schemes for the certification of carbon removals |
| | Within the landscape of existing certification schemes, certificates and credits are predominantly issued for emission reductions in various sectors worldwide. However, an increasing number of those cover industrial and carbon farming solutions for carbon removals. These diverse regulatory and voluntary certification mechanisms typically provide a set of rules, procedures and requirements for a range of eligible activities in order to verify that they have reduced emissions or removed GHGs through sink enhancements and are eligible for certification/payment. These mechanisms have two main objectives: first, to ensure that carbon credits are real, measurable, additional, sustainable, not resulting in leakage, not double-counted, and long-term; second, to achieve wide scale uptake and implementation, to maximise potential impact on the climate. To achieve these objectives, certification schemes operate at two levels: |
| | ·Methodologies – The schemes provide methodologies for quantifying and certifying on-the-ground emission reductions or carbon removals. These methodologies are specific to particular carbon removal solutions and contexts, including specific rules for eligibility. They are technical, including calculation methods, default data (e.g. emissions factors), and instructions to quantify removals, as well rules and tests to demonstrate the quality of removals (e.g. related to additionality, sustainability, leakage, etc.). A single certification scheme can have single or multiple methodologies, each focussing on different solutions or contexts. |
| | ·Governance mechanism– Every certification scheme also has an overarching governance mechanism that applies principles and approval frameworks to evaluate and certify methodologies and their associated removals to ensure that that they are of acceptable quality. The architectures of certification schemes differ depending on factors such as scale or objectives but generally feature governance structures to validate projects/participants, verify and register removals, approve, develop or manage new methodologies, and facilitate uptake, among other roles. |
| | In order to inform the Impact Assessment on the functioning of existing certification schemes, an in-depth review and analysis of these existing schemes has been carried out with the support of a consultant 30 . This review proceeded in two steps: |
| | 1.Identification and prioritisation of mechanisms/methodologies: Having identified a long-list of potential schemes/methods to evaluate, the consultants selected a shortlist of 11 mechanisms (see Table 3 ) and 16 methodologies (see Table 4 ) based on screening criteria such as market size, maturity, scope coverage, availability of information, etc. The short-list covers all major carbon farming and industrial, as well as different governance scales and approaches (including voluntary and regulatory, project-based, jurisdictional and national scales). Where there were multiple mechanisms/methodologies focussed on the same solution, priority was given to those methodologies with more sophisticated Monitoring, Reporting, and Verification (MRV) approach, bigger market size, and how established the method/mechanism was. |
| | 2.Fiches: Fiches were completed based on a desk research, including existing studies conducted by the Commission, documentation of the certification mechanisms and their methodologies, and related academic and grey literature. All fiches are fully referenced to enable the reader to access additional knowledge related to specific areas of the synopsis provided in the fiche. Where necessary, interviews with external experts were carried out or mechanism administrators reviewed fiches and provided additional information to enrich the quality of information provided in the fiche, as well as using input and feedback gathered at an Expert Roundtable organised by the Commission. In addition, selected fiches have been externally reviewed by experts and they are now available online 31 , with the full set of references. |
| | Table 3: Overview table of assessed architecture and governance mechanisms form various certification schemes |
| | Certification scheme | Verified Carbon Standard (Verra) | Label Bas Carbone | Australian Emissions Reduction Fund | New Zealand ETS/ NZ Permanent Forest Sink Initiative | MoorFutures | Woodland Carbon Code |
| | Short Scheme description | International, project-based voluntary mechanism for carbon mitigation and removals ( | Founded in 2005 by consortium including IETA, World Economic Forum, World Business Council. Now the largest voluntary mechanism worldwide. | Framework for voluntary carbon reduction and removal projects that was adopted by the French Government in November 2018. | Current methods are focused on carbon removals and GHG emission reductions in the forestry and agriculture sector. | The Australian ERF, created in 2015, is a voluntary scheme that aims to provide incentives to adopt new practices and technologies to reduce emissions, with the overarching objective to achieve the lowest cost abatement possible, achieved using reverse auctions | New Zealand Emissions Trading Scheme (NZ ETS) has operated since 2008. It was intended to be an all sector, all gas system, including the forestry sector as both a source and sink. Removals by forestry, alongside free government allocation, are the key source of credits within the NZ ETS. | MoorFutures is a result-based voluntary scheme to incentivise the rewetting of peatlands to reduce GHG emissions. Projects are rewarded in the form of voluntary carbon credits for the reduction in GHG fluxes that arises from rewetting. Created in 2010, the Mscheme operates in three states in Germany. | The UK Woodland Carbon Code incentivises UK land-owners for woodland planting (i.e. afforestation and reforestation – for simplicity referred to as af-forestation throughout this fiche) for carbon removal through a voluntary stand-ard. |
| | Baselines | Method dependent e.g. Wetlands: historical (20 years data), project specific Jurisdictional method: historic data (10 years data); project specific /standardised | Method dependent e.g. Forestry methods: Scenario, specific CarbonAgri: Historic data, participant-specific, revised after 5 years | Differs per method | Historical baseline (based on Kyoto eligibility e.g. baseline = 1990 forest status) Standardised | Scenario, project-specific. Baseline reset minimum every ten years | Scenario, standardised (i.e. based on previous land-use, look-up tables) Small participants: assume baseline= 0 |
| | Additionality | Relative to baseline + additionality assessment tool: Financial additionality: cost-benefit/investment test Barrier test: qualitative explanation | Relative to baseline +financial additionality +regulatory (e.g. discounting if participant also receives other funding) | Regulatory additionality (guidelines exist) Uncommon practice test (e.g. <20% penetration rates) | No additionality test: Kyoto aligned: all forests planted post-1989 are considered additional. No other additionality tests apply (as ETS designed to cover all sectors). | Relative to baseline +financial additionality | Relative to baseline + Regulatory additionality +Financial additionality: carbon payments>15% of project establishment/planting costs AND investment test + Barrier test, if financial additionality failed |
| | Leakage | Quantitative: Method-specific leakage assessment criteria and management (incl. leakage assessment tool) | Qualitative leakage identification/management | no information found | No leakage management (as ETS designed to cover all sectors) | Quantitative identification of leakage, which is deducted from net removals | Small projects: assume no leakage Standard: Qualitative/quantitative assessment (identify induced land use change assessment; if >5% of removals, deduct) |
| | Uncertainty | Identify/quantify uncertainty Discounts apply if uncertainty high | Quantify uncertainty Discounting (depending on qualitative level of uncertainty) | Method dependent | No specific information found | Conservative assumptions and uncertainty discount buffer account (equal to 30% of removals) to cover later recalculations | 20% buffer withheld, then retired |
| | Permanence management | Pooled buffer account (retired at end of project), range 10-60% Project contribution determined by Non-Permanence Risk Tool, considering project risks (management, op. cost), external risks (natural disaster, politics, ...) | Buffer Required to inform subsequent landowner | Long project duration (25/100 years) Participant liability (during project duration) if reversals >5% | ETS: Participant liable for reversals through ETS (for perpetuity) PFSI: Long project duration (99 years) | Discounting (30% buffer) Conservative estimates Long project duration (30-100 years) - credit max. 50 years of avoided emissions | 20% buffer, retired at end of project. Participants liable during project Other forestry legislation limits post-project reversals |
| | Sustainability | Identify/manage externalities Stakeholder consulting | Identify co-benefits, recorded on removal certificates Simple (co-benefit matrix) and complex (farm audit tool) tools | Negative lists (e.g. no tree planting in drought stressed locations) | No specific information found | Quantification of non-climate benefits (incl. Biodiversity, flooding, etc.). Recorded on MoorFutures certificates. Other ecosystem-services are not negatively impacted by rewetting | Ex ante validation assesses co-benefits, managed negative externalities |
| | Crediting periods | Agriculture, forestry, land use: 20 to 100 years Agricultural Land (re. CH4 and N2O emissions reduction):10 year (fixed) or 7 years (2x renewable) | Method dependent e.g. Forestry: 30 years Agriculture: 5 years | 25 years or 100 years | Annual payment | 50 years max | Around 40 years (min: length of clear fell cycle - max 100 years) |
| | Validation | Ex ante project evaluation (internal and 3rd party) | Ex ante project/participant evaluation (internal or 3rd party) | Basic ex ante assessment (internal) | No ex ante validation | Ex ante project evaluation (by experts) | Ex ante validation (external) |
| | Verification | Ex post verification (by 3rd party), incl. site visit; timing: see crediting period | Ex post verification (3rd party) incl. site visit; timing method dependent (CarbonAgri 5 years) | External verification (3rd party, site visit); minimum 3 audits per project duration | Self-verification + random auditing | External verification; site visit (5 years, then every 10 years) | Ex post verification (3rd party; site visit); after 5 years then every 10 years |
| | Payment timing | Ex post (on verification) | Forestry: ex ante award for 30 years Ag: ex post (after 5 years) | Ex post (annually) | Annual payment | Ex ante payment | Ex ante payment (Pending issuance units) Converted into ex post credits on verification |
| | Certification scheme | Nori Carbon Removal | Gold Standard | Clean Development Mechanism (CDM) | Joint Implementation | California’s Compliance Offset Programme |
| | Short scheme description | The Nori Carbon Removal Marketplace was established in 2017 in the USA and is currently in a pilot phase. It exclusively focuses on removing CO2 from the atmosphere. For now, only agricultural projects that focus on storing carbon dioxide in soils can apply. | Nori uses blockchain technology to replace an offset market registry. | Gold Standard was established in 2003 by WWF and other international NGOs to certify and provide a mechanism for voluntary offsetting. Gold Standard is active globally and is the second largest independent offset mechanism by emissions reductions/removals. Gold Standard credits are predominantly used voluntarily but some are also accepted in some regulatory regimes. | CDM, running since 2004, is one of the three flexibility mechanisms that were established under the Kyoto Protocol (KP). | CDM is project-based. It promotes carbon removal projects that assist developing countries in realising social, environmental, economic, and sustainable development while generating certified emission reductions (CERs) for investments from industrialised countries. | The JI was one of three international flexible project-based market-mechanisms estab-lished under the Kyoto Protocol (KP), that were in place between 2000 and 2012. Industrialized countries could earn emission reduction units (ERU) from emission reduction or removal units (RMU) from removal projects in another industrialized country and use them to meet part of their emission reduction targets and KP commitments | The California Compliance Offset Scheme (CCOP) is a crediting mechanism which began in 2013 and is complementary to the California Cap-and-Trade program that aims to re-duce emissions by 40% and 80% below 1990 levels by 2030 and 2050, respectively |
| | Baselines | Scenario, participant-specific, scenario, dynamic (adjusted each year due to weather) | Differ per methodology. Generally project-specific scenario All land use/forestry must have baselines reset every five years | Scenario, project-specific and methodology-specific, conservative baseline | Scenario (BAU baseline), project-specific | Scenario (BAU baseline), project-specific and standardised (differ by methodology) |
| | Additionality | Relative to baseline +Adoption of new management/production/technology test | Relative to baseline +Financial additionality (i.e. narrative evidence that offset credits necessary) | Relative to baseline + barrier test, investment and common practice analyses | Relative to baseline + CDM Additionality tool (depending on Track) | Sector-specific +Regulatory additionality |
| | Leakage | Assume no leakage | Quantitative leakage calculation, deducted from gross removals | Quantitative leakage calculation necessary, methodology-specific, Project Design Document elaborates on procedure | Qualitative leakage identification | No specific method, i.e. no transparent and project-specific quantification of leakage effects |
| | Uncertainty | 20% buffer | Quantitative calculation (standard deviation at 90% level of confidence), based on monitoring, sampling, data. Discounts apply if uncertainty >20% Buffer: 20% for land-use/forestry projects, retired | Conservative assumptions, quantitative calculation (standard deviation at 90%/95% level of confidence), no overall data certainty requirements | Project developers must explain quality and undertake control procedures for data and variable monitoring and error sampling. | Conservative BAU assumptions |
| | Permanence management | Participant liable for project duration plus ten years | Project developers liability | Temporary credits: periodically expire, re-issuance upon verification, expire after 5 years Long-term credits: expire after either 30 or 60 years | Project developers liable | Long project duration (storage for 100 years following credit issuance), compensation for reversals, Forest Buffer Account (10.5% to 21.2%) |
| | Sustainability | Monitored at mechanism level but not managed | Must contribute to 2 additional SDGs. Qualitative identification/management of externalities Stakeholder involvement | Sustainable development criteria mandatory, managed negative externalities (impact assessment, mitigation action plan) | Sustainable development criteria not mandatory, anticipation of environmental impacts for LULUCF projects, management of externalities | Promote co-benefits: Revenues in Greenhouse Gas Reduction Fund: 60% towards sustainable communities, housing, public transport; 35% to disadvantaged communities |
| | Crediting periods | 10 years; renewable (with new baseline) | Method dependent: Either fixed 10 years or 3 x renewable 7 year (total 21 years). | Method-dependent: Standard period: 10 years or 7 years and extended 2x Sink projects: 30 years or 20 years + 2x review and extension | 5 and 8 years in accordance with KP period (extension possible) | Sequestration: 10 to 30 years (forestry: 25-year average); Non-sequestration: 7 to 10 years |
| | Validation | Ex ante validation (internal) | Ex ante validation (3rd party and internal) | Ex ante validation (approved 3rd party) | Ex ante validation (approved 3rd party) | Ex ante validation (approved 3rd party) |
| | Verification | Ex post validation every 3 years: internal; at project end i.e. 10 years: 3rd party, site visit) | Ex post verification (external, site visit, after 2 years, then every 3 years (agriculture) or 5 years (forestry)) | Ex post periodic, independent verification | Ex post verification (quality differs according to track) | Ex-post (internal, 3rd party), restriction per verifier up to 6 years |
| | Payment timing | Ex post (upon internal verification) | Ex ante (max 20%) Ex post (upon verification) | Ex post | Ex post | Information not found. Offsetting via a private market exchange between emitters and offset project owners. |
| | Table 4: Short list of certification methodologies reviewed. |
| | Type of mechanism | Category | Name | Coverage of carbon removal solutions | MRV Sophistication | Implementation stage | Market size |
| | Carbon farming methodologies | Global | VCS Jurisdictional Nested REDD+ method | sustainable forest management | high | mature | large |
| | Regulatory | New Zealand Emission Trading Scheme – Forestry methodology (New Zealand, regulatory afforestation) | afforestation | high | mature | large |
| | Regulatory | New Zealand Permanent Forest Sink Initiative methodology (New Zealand, regulatory afforestation) | afforestation | high | mature | medium |
| | Regulatory | Label bas Carbone methodology e.g. CarbonAgri methodology on voluntary agro-forestry | agroforestry | high | new | small |
| | Voluntary | MoorFutures (Germany, voluntary peatlands) | peat | high | mature | small |
| | Voluntary | Woodland Carbon Code (UK, voluntary afforestation) | afforestation | high | mature | medium |
| | Voluntary | Nori Carbon Removal Marketplace (USA, soil) | soil | high | nascent | large |
| | Voluntary | Indigo Ag – VCS Methodology for improved agricultural land management (Global, soil/grass) | soil/grass | high/medium | new | medium |
| | Industrial removals methodologies | Global | Clean Development Mechanism (CDM) – specific modalities and procedures (i.e. rules) for carbon capture and geological storage project activities | Geological storage | high | mature | large |
| | Global | Voluntary Carbon Standard (VCS) - Methodology for Greenhouse Gas Capture and Utilization in Plastic Materials (v1.0), and Methodology for CO2 Utilization in Concrete Production (in development) | CCU Plastics, concrete | medium | new | large |
| | Global | Puro Earth – Methodologies for biochar, carbonated building elements, and wooden building elements | Biochar in buildings | medium | new | large |
| | National | Alberta Emission Offset System – Methodology for CO2 Capture and Permanent Storage in Deep Saline Aquifers | Geological burial, Saline aquifers | high/medium | medium | small |
| | National | Carbon Capture and Sequestration Protocol under the Low Carbon Fuel Standard | Direct air capture, Geological burial | high/medium | new | medium |
| | National | US 45Q tax credit system – MRV guidance on the tax credit requirements (covers the capture and disposal, injection (Enhanced Oil Recovery), or utilization of CO2, captured from the atmosphere or from industrial installation and which would have otherwise be released to the atmosphere) | Direct air capture, Geological burial | high/medium | new | medium |
| | Annex 5: Background on carbon removals |
| | 1Importance of carbon removals for 2050 climate neutrality |
| | Reaching climate neutrality in the EU by 2050 has been an aspiration for the Commission since the publication of ‘A Clean Planet for all 32 ’ in late 2018. Reducing the Union emissions to net zero by mid-century is now a formal commitment under the European Green Deal, and the European Climate Law adopted in 2021 sets the EU objective of climate-neutrality by requiring the reduction of Union-wide greenhouse gas emissions to net zero by 2050 and the aim of achieving net removals (negative emissions) thereafter. The analysis carried out by the European Commission 33 , 34 shows how this objective of climate neutrality can be achieved. Any pathway towards climate neutrality entails a drastic reduction of Greenhouse Gases (GHG) emissions in all sectors, with an EU economy-wide emission reduction ranging from 85% to 95% compared to 1990 35 . Carbon dioxide removals will close the gap to reaching net zero GHG emissions through, in the mid-term, the enhancement of the natural sink and, in the longer term, the deployment of industrial solutions able to capture and store CO2 permanently. The quantity of CO2 to be removed from the atmosphere and the respective role of ecosystems and industrial solutions for carbon removals vary following assumptions on technological uptakes and consumption patterns for transport, food diet and other goods or services. |
| | Globally, while latest findings by the IPCC 36 point towards a decreasing likeliness of limiting global warming to 1.5°C unless rapid GHG emission reductions occur, the importance of carbon removal is only increasing. In order to still reach the goal of limiting global warming to 1.5°C, 20-660 Gt CO2 net negative emissions need to be generated in the timeframe 2020-2100. 37 |
| | The scenario analysis on the need for carbon removals in a 2050 climate neutral EU carried out in the context of the Communication on Sustainable Carbon Cycles and presented in more details in Staff Working Document “Sustainable carbon cycles for a 2050 climate-neutral EU - Technical Assessment” shows variation depending on future societal choices, all options require a substantial enhancement of the carbon sink function of our ecosystems and a large development of industrial solutions to capture, use and store carbon. |
| | The scenario ECOSYS assumes priority is given to the enhancement of the carbon removals through the restoration of ecosystems. This is also a scenario where changes in lifestyle and consumer choices are beneficial for the climate. It includes less carbon intensive diets that free land for the regeneration of natural ecosystems. The scenario INDUS relies more heavily on large scale deployments of industrial solutions to capture, recycle and store CO2. |
| | The achievement of the EU climate-neutrality objective will require the industrial carbon capture of at least 300 MtCO2 for ECOSYS and more than 500 MtCO2 for INDUS from various sources (power generation, industrial processes or directly from the air) for storage or to supply innovative routes to produce materials and fuels. By 2050, the uptake of renewable energies such as wind and solar in the power sector as well as innovation in industry will strongly reduce the use of fossil fuel and limit the CO2 emitted from point source installation. Even though some process emissions will remain, an EU economy aiming at restoring sustainable carbon cycles will need to source most of its carbon directly from the air and from biogenic sources as long as it stays within acceptable boundaries without negative impact on biodiversity and other environmental assets. |
| | The CO2 captured can also be stored either permanently in geological sites or in new long-lasting products to eventually provide industrial carbon removals when it is directly or indirectly captured from the atmosphere. They play a more important role in INDUS that is requiring more than 300 MtCO2 to be stored each year in geological storage sites or products to neutralise the relatively high residual emissions in sectors such as agriculture and aviation. The reliance on industrial carbon removal is lower in ECOSYS but the scenario still requires to store each year more than 100 MtCO2 ( Figure 7 ). |
| | Figure 7: Industrial capture, use and storage CO2 by 2050 in EU carbon neutral scenarios |
| | Figure 8 presents the LULUCF sink projected for the scenarios INDUS and ECOSYS at various carbon prices aiming to incentivise action in the sector. The potential at “No carbon price” corresponds to the level of net removals with no specific measures deployed to support the enhancement of carbon removals in ecosystems. |
| | The “No carbon price” level of LULUCF sink for the scenario INDUS is lower than the removals projected in the EU Reference scenario 2020 due to the greater use of bioenergy. On the contrary, in ECOSYS the LULUCF sink benefits from a lower demand in bioenergy and from the release to natural vegetation of agriculture land driven by changes in the food consumption pattern of this demand driven scenario. |
| | If appropriate supporting action is taken, the land-use modelling suggests a potential to increase the net removals of the LULUCF sector by about 185 Mt of additional CO2 sequestration towards 2050 at a maximum marginal cost of EUR 150/tCO2e. But the starting point matters, and removal potential can be higher or lower depending on lifestyle changes and bio-energy requirements impacting land use requirements. |
| | Figure 8: Potential for EU LULUCF sink enhancement at various carbon prices in INDUS and ECOSYS scenarios |
| | 2Types of carbon removal solutions |
| | Carbon removal solutions remove carbon from the atmosphere through biological, chemical or geochemical processes to store it either in biomass, soils, products, minerals, geological reservoirs or marine sediments. 38 Different storage media lead to different timescales of carbon storage and different risks of releasing CO2 back to the atmosphere. The storage of carbon in geological reservoirs, sediments or in a mineral form can last several millennia and be considered permanent. Storage of carbon in products or in soil and vegetation is by nature more dynamic and can last from years to decades or centuries. This section presents the characteristics of various carbon removal solutions as well as an assessment of their cost and potential. Unless specified differently, the information presented is referring to the following sources: |
| | -Technology Readiness Level (TRL), Cost (EUR/tCO2) and Global Potential (MtCO2/yr): Sixth Assessment Report of IPCCC Working Group III on Mitigation of Climate Change38 |
| | -EU potential (MtCO2/yr): Economic potentials as assessed in the modelling work of the European Commission and reported in various documents such as the in-depth analysis accompanying the Communication “A Clean Planet for All”33, the Impact assessment prepared for the revision of the LULUCF Regulation 39 and the Technical Assessment accompanying the Communication “Sustainable Carbon Cycles” 40 as well as Synoptic review of carbon removal solutions prepared by Environment Agency Austria.Error! Bookmark not defined. |
| | The large ranges reported, in particular for costs and potentials, reflect the high level of uncertainties attached to the estimates. The numbers reported are long-term potentials and costs, often from 2050 modelling. Short-term potentials are lower for most of the carbon removal solutions presented, in particular for industrial removals but also for some carbon farming practices such as afforestation. |
| | 2.1Permanent Geological storage of carbon |
| | Bioenergy with carbon capture and storage (BECCS) |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Biological | Geological | 5-6 | 15-400 | 500-11,000 | 5-276 |
| | BECCS (Bio-energy carbon capture and storage) is the combination of generating energy from biomass with carbon capture and storage. A relatively pure stream of CO2 from industrial and energy-related sources at bioenergy facilities is separated (captured), conditioned, compressed and transported to a storage location for long-term isolation from the atmosphere. Feedstocks include dedicated bioenergy crops, residual products and forest biomass, municipal waste and algae. The CO2 for BECCS can stem from biological processes such as fermentation (e.g. for the production of biofuels) but also from the combustion of biomass for the generation of heat and power. |
| | Whether BECCS can actually yield negative emissions across its lifecycle depends on the biomass feedstock but also on other factors such as biomass yield, fertiliser application, and biomass drying (for high moisture biomass). Other elements to consider are the transport and processing of the biomass. Even though plants take up CO2 while they are growing, the process steps of planting, growing, harvesting and transporting biomass requires energy which in turn causes emissions. Besides the impact of harvesting the biomass on the land carbon stocks, another important factor to consider is indirect land use change (ILUC), which has been widely discussed in the context of first generation biofuels: where pasture or agricultural land previously destined for food and feed markets is diverted to biofuel production, the non-fuel demand will still need to be satisfied either through intensification of current production or by bringing non-agricultural land into production elsewhere. The latter case constitutes indirect land-use change and when it involves the conversion of land with high carbon stock it can lead to significant GHG emissions. The IPCC special report on Climate Change and Land 41 found that negative impacts on biodiversity and food security through land competition might arise if BECCS is deployed globally at large-scale. The availability of sustainable biomass is one of the major limiting factors for the deployment of BECCS that contributes to removing carbon from the atmosphere. |
| | Project sizes for BECCS installations range from 0.1 to 4 Mt CO2 per year. 42 |
| | Examples of solutions already operational or in planning |
| | Currently, there are more than 10 facilities, most involve the capture of fermentation derived CO2 from ethanol plants, and only one is large-scale. |
| | -Stockholm Exergi BECCS plant (SE): expected to start operations in 2026, the plant combines CO2 capture with heat recovery, reducing GHG emissions by 7.83 Mt of CO2eq during its first ten years of operation. |
| | -Klemetsrud WtE plant (NO): expected to be operational in 2023/2024 (if approved for investment), planned CO2 capture capacity: 0.4 MtCO2/year (from both fossil and biological materials). |
| | -Twence WtE plant (NL): uses Aker’s Just Catch modular carbon capture plant to capture CO2. CO2 will be captured from flue gas, commissioning expected in 2021, CO2 capture capacity: 0.1 MtCO2/year. |
| | -Drax BECCS plant (UK), operational since 2019, pilot project. Drax power station converted from coal-fired to biomass. Plan to capture 4 MtCO2/year at one of the power station units with storage in a North Sea oil field, with a start date in 2027. Plan to operate CCS units on all four bioenergy power units by mid-2030s. |
| | -Illinois Industrial Carbon Capture and Storage, implemented by Archer Daniels Midland and funded by the Department of Energy (US): operational since 2017, capture capacity: 1Mt CO2/year, CO2 captured from ethanol production and stored into the Mount Simon Sandstone saline aquifer in the Illinois Basin. |
| | Existing certification schemes |
| | -In an EU context, the Innovation Fund methodology for carbon capture and storage assesses projects characterised by the capture of CO2 in industrial processes or power generation, or directly from ambient air. Storage sites are permitted under the CCS Directive 2009/31/EC and can be different types of geological formations: saline aquifers, depleted oil and gas reservoirs, un-mineable coal beds, or mafic rocks (e.g. basalts). |
| | -Puro.earth has developed a methodology for carbon removal solutions with geologically stored carbon |
| | Direct air carbon capture and storage (DACCS) |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Chemical | Geological | 6 | 84-386 | 5,000-40,000 | 83-264 |
| | DACCS uses engineering processes relying on chemical capture to remove CO2 directly from the atmosphere using a separating agent that is regenerated with heat, water, or both. The CO2 is subsequently desorbed from the agent and released as a high purity stream. There are two main methods to capture CO2 from the air: |
| | ·Liquid systems: the air passes through chemical solutions (e.g. a hydroxide solution), which removes the CO2 and returns the rest of the air to the environment. |
| | ·Solid system: the air passes through filters composed of solid sorbents which chemically bind with CO2. |
| | The process to separate CO2 from the other components of ambient air is either done through absorption or adsorption. The main disadvantage of these adsorption and absorption processes is that the regeneration of the sorbents requires large amounts of energy and thereby leads to high costs of direct air capture technologies. Further practical barriers include the need for an abundant supply of renewable energy. Even though DACCS installations per se do not require a lot of space, the supply of required renewable energy translates to around 2,000 km2 of non-arable land that could be needed to remove 1 Gt of CO2 net from the atmosphere. 43 Furthermore, the water input to different DACCS technologies needs to be considered. Capture technologies that use electrochemical processes to regenerate the sorbent are promising to reduce energy requirements for DACCS and thereby cost. However, these processes are still nascent and not deployed at industrial scale. |
| | Current DACCS facilities in various locations around the world capture between 3-4,000 t CO2/yr. Targeted installation capacities for 2030 are about 1-2 Mt CO2/yr. |
| | Examples of solutions already operational or in planning |
| | Existing DAC plants are small. The global capture capacity lies below 10,000 tCO2/year. CO2 is either utilised in industrial processes (e.g. carbonating drinks, Power-to-X, greenhouse fertilisation) or permanently stored. Example of important projects are: |
| | -The Orca project is a collaboration between Climeworks and the Carbfix project (Iceland): It has been operational since September 2021 with a carbon removal capacity of 4000t CO2/year, running on renewable geothermal energy with CO2 storage via mineralization. |
| | -Carbon Engineering, in partnership with 1PointFive, plans to begin the construction of their first large-scale commercial DACCS plant. It is under development and will be located in the Permian Basin, U.S. with an expected capacity to capture one million tons of carbon dioxide from the air annually when completed. |
| | Existing certification schemes |
| | -In an EU context, the Innovation Fund methodology for carbon capture and storage assesses projects characterised by the capture of CO2 in industrial processes or power generation, or directly from ambient air. Storage sites are permitted under the CCS Directive 2009/31/EC and can be different types of geological formations: saline aquifers, depleted oil and gas reservoirs, un-mineable coal beds, or mafic rocks (e.g. basalts). |
| | -Puro.earth has developed a methodology for carbon removal solutions for geologically stored carbon |
| | -California Carbon Capture and Sequestration Protocol under the Low Carbon Fuel Standard |
| | -US 45Q tax credit system |
| | 2.2Other permanent storage |
| | Enhanced Rock weathering |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Geochemical | Mineral | 3-4 | 24-578 | 1,000-95,000 | n.a. |
| | Enhanced Rock weathering (ERW) refers to carbon removal solutions targeting the enhancement of geochemical processes that naturally absorb CO2 from the atmosphere. ERW spreads fine-grained silicate rocks containing calcium or magnesium on land (e.g. cropland) which react with CO2 by forming carbonate minerals and hence remove CO2 from the atmosphere. Similar methods can be applied to the open ocean (see Ocean alkalinisation). |
| | Upscaling these carbon removal solutions may require additional mining of new rocks, which requires significant energy for mining, grinding and transportation steps and creates additional CO2 emissions and environmental impacts. In order to better assess the overall potential and effects of ERW, further research needs to be conducted. Two of the potential impacts, which need to be better understood, are: |
| | -Impacts on human health in case of particles of respirable size and potential impacts on groundwater when particles are washed away. |
| | -Potential release of heavy metals, changes in soil hydraulic properties, soil contamination and disturbed ecosystems |
| | Examples of solutions already operational or in planning |
| | -GreenSand (Netherlands): Offers carbon credits to customers from applying crushed olivine as replacement for sand and gravel in construction or landscaping projects (credits sold 42 EUR/tCO2). The company has since 2007 scattered 45,452 tonnes of greenSand Olivine and claims to have removed 3,284 tonnes CO2 from the atmosphere. |
| | -Working Lands Innovation Center: ERW demonstration experiment in coastal California, the Central Valley, and Imperial Valley. The project is in partnership with farmers, ranchers, government, mining industry, and Native American tribes. It tests the GHG removal effect of rock dust and compost amendments from soil, including other aspects such as crop yields, and plant and microbial health. The project supports the commercialization of soil amendment technologies. |
| | -University of Sheffield - Leverhulme Centre for Climate Change Mitigation, 10-year programme established in 2016: Large-scale field trials to measure rates of rock weathering in agricultural soils under natural conditions and how nutrient release and pH change may increase crop productivity. The project utilises basalt rock dust generated as a by-product, meaning there are no additional CO2 emissions from mining and grinding. The project aims to estimate carbon removals based on field studies. |
| | Existing certification schemes |
| | GreenSand sells credits in the form of ‘Cleanup Certificates’, but limited information is available. They are affiliated with NL Greenlabel, an organisation which develops a form of ecolabelling. |
| | Ocean alkalinisation |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Geochemical | Mineral | 1-2 | 40-260 | 1,000-100,000 | n.a |
| | Ocean alkalinization is the deposition of alkaline minerals or their dissociation products at the ocean surface. This increases total surface alkalinity, and may thus increase ocean CO2 uptake and ameliorate surface ocean acidification as co-benefit. The residence time of dissolved inorganic carbon in the deep ocean lies at around 100,000 years. Ecological and biogeochemical consequences of ocean alkalinisation largely depend on the minerals used. When natural minerals such as olivine are used, the release of additional silicon and iron could have fertilising effects. In addition to perturbations to marine ecosystems via reorganisation of community structure, potentially adverse effects of ocean alkalinisation that should be studied include the release of toxic trace metals from some deposited minerals. However, as also expressed by the relatively low TRL, the understanding of effects and risks of ERW at large scales is still poorly understood. Further difficulties for large-scale application under certification arise from limitations in marine law and questions of how to conduct MRV for ERW. |
| | Examples of solutions already operational or in planning |
| | None. |
| | Existing certification schemes |
| | None. |
| | Ocean Fertilisation |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Biological | Sediments | 1-2 | 50-500 | 1,000-3,000 | n.a |
| | Ocean fertilisation is a carbon removal method that depends on the intentional addition of nutrients to the near-surface ocean with the goal of sequestering further CO2 from the atmosphere through biological production. 44 Macro-nutrients or micronutrients may be directly added to the near-surface ocean. In order to ensure the successful long-term removal of carbon from the atmosphere, the additionally sequestered carbon must reach the deep ocean. There, it may be stored on climatically relevant time-scales. Ocean fertilisation however also has several anticipated side-effects: toxic species of diatoms may appear more commonly, with knowledge gaps on the effects on food webs and marine biology, as well as the potential for creating anoxic ocean regions and disruption of marine ecosystems. As ocean alkalinization, the application of ocean fertilisation is furthermore limited by practical barriers such as international marine law. |
| | Examples of solutions already operational or in planning |
| | None. |
| | Existing certification schemes |
| | None. |
| | Other |
| | Carbon removal research community is looking at few other solutions to remove carbon from the atmosphere, in particular ocean based solutions. However the understanding on their feasibility, mitigation potential, risk or impacts is rather low and this solutions are currently not relevant in the context of an EU framework for the certification of carbon removals. |
| | Artificial upwelling |
| | Artificial upwelling uses pipes to transport water from the deep ocean, which is rich in nutrients, to surface waters, where it acts as a fertiliser.44 In order for this solution to deliver carbon removals on a Gt scale, it would need to be applied extensively, as previous calculations suggested that in the best-case scenario, more than half of the ocean would be needed to deliver carbon removals of 10 Gt CO2/yr. Artificial upwelling may furthermore significantly affect precipitation and atmospheric circulation. |
| | Terrestrial biomass dumping |
| | Another carbon removal solution is the sinking of terrestrial biomass, such as logs, crop residues or biochar, into the deep ocean.44 Cold water temperatures, as well as the lack of oxygen and relevant decomposing bacteria, halt the decomposition of the biomass, leading to projected storage timescales of hundreds or even thousands of years. Many aspects of this carbon removal solution, such as effects on land nutrient availability as well as on marine chemistry, ecosystems and circulation, require further research. |
| | Marine biomass |
| | For this solution, marine algae could be utilized in several ways: either by sinking cultured macroalgae to great ocean depths, by cultivating macroalgae, or by utilizing algae as biochar feedstock. These algae could also be fertilized or dumped at great ocean depths.44 The potential of carbon removal by marine biomass could reach up to 19 GtCO2, using 9% of the oceans for macroalgal aquaculture. 45 Currently, further research is being conducted on the potential of this carbon removal solution. |
| | Extraction of CO2 from seawater |
| | CO2 can be removed from seawater using a vacuum or gas with low CO2 contents, mineral acid or via electrolysis or electrodialysis.44 Due to the reduction of CO2 in ocean surface waters, atmospheric CO2 enters the ocean to restore the equilibrium, thereby decreasing atmospheric CO2 concentrations. |
| | Methane removals |
| | Methane (CH4) is the second most dominant GHG after CO2. 46 It can be removed from the atmosphere as CH4 or be oxidized, e.g. to CO2. If a total of 3.2 Gt CH4 were removed from the atmosphere, pre-industrial levels would be re-established and total global radiative forcing would decrease by one sixth, despite adding 8.2 Gt CO2 to the atmosphere in the case of oxidation to CO2. Industrial methane removal is however more complicated than CO2 removal as capture is complicated by differing chemical properties of CH4 and its overall lower concentration in the atmosphere. |
| | 2.3Carbon Farming |
| | Afforestation and reforestation |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Biological | Vegetation | 8-9 | 0-240 | 500-10,000 | 18-36 |
| | Afforestation and Reforestation describe the planting trees/establishing forests in areas where there previously were no trees (afforestation) or conversion of land to forest that previously contained forest but has been converted to other use (reforestation), to capture CO2. The two are among the most prominent land mitigation actions and imply a long-term land use change. In Europe, afforestation takes place mainly on marginal land or land that may not be used for crop production anymore. Care should be taken when choosing locations, species and methodology for afforestation projects to avoid negative and unintended impact: Afforestation may reduce valuable agricultural area if afforestation occurs on fertile arable land, may negatively affect biodiversity, e.g. on former biodiverse grasslands or peatlands, or lead to net positive GHG emissions, if afforestation takes place on organic soils. |
| | Total mitigation potential of afforestation is also limited by the availability of land. Most of afforestation in the EU takes place through natural or spontaneous forest growth. This however requires that land managers allow trees to spread and grow, hence require a land management strategy of no action. Once a dense low story forest has developed, land managers may intervene to optimize the management of the nascent forest (see improved forest management). |
| | Assisted afforestation by tree planting is currently rather limited in the EU but it ensures higher survival rates per seedlings and is therefore a useful means to complement natural forest growth. Afforestation by tree planting requires comparatively high initial investments. |
| | Examples of solutions already operational or in planning |
| | Afforestation and reforestation are widespread across Europe. |
| | Existing certification mechanisms |
| | Afforestation and reforestation are already part of many existing certification mechanisms, including Label Bas Carbone, the Woodland Carbon Code, New Zealand Emissions Trading Scheme, and the Australian Reduction Fund. |
| | -Label bas Carbone focuses on the certification of carbon offset projects in afforestation, reforestation of destroyed or impacted forests, or conversion of coppice to high stands in forests. To date, 173 individual forestry projects are certified, representing a potential of 320 302 tCO2. 47 |
| | -Woodland Carbon Code (WCC) incentivises UK land-owners for woodland planting for carbon removal through a voluntary standard. Since its 2011 launch, 187 projects covering 8,261ha have been validated, with expected carbon sequestration of 3.4million tCO2. |
| | -New Zealand Emissions Trading Scheme: afforestation is included in New Zealand’s ETS as a carbon removal option (sequestration is rewarded with credits). Since 2008, this has resulted in 18.3 Mt CO2-eq removals. |
| | -Gold Standard and VCS mechanisms include methodologies for afforestation and reforestation. |
| | Improved forest management |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Biological | Vegetation | 8-9 | n.a. | 100-2,100 | 20-80 |
| | Carbon friendly changes to management practices of existing forests are a powerful means to achieve additional mitigation. They do not result in any visual changes of the landscape (no land use change) but can have significant consequences for biodiversity, the environment and the socio-economy either positive or negative, depending on the measures applied. Changes in the land management may imply additional actions, and hence operational costs that would commonly be attributed to forest maintenance budgets – or no actions with cost-savings; both resulting in possibly significant long-term consequences. Forest thinning is the main management practice influencing tree growth 48 and health of the forest, affecting the prevalence of species and impacting wood production and wood value. Further key actions include better harvesting practices (e.g. actions to decrease emissions per unit of timber), lowering harvest intensity (longer forest rotations, selective cutting), reducing disturbances (e.g. fire/pest management), and increasing biomass growth (e.g. thinning, drainage, replanting with new species). |
| | Protection of forests, especially of those of particular ecological value, is another strategy of increasing long-term carbon storage in forest ecosystems. Even though the sink function of old unmanaged forests tends towards zero as they mature and reach an equilibrium 49 , forest protection offers short- to medium-term carbon sink benefits until the saturation point is reached, while providing high biodiversity value and increased forest resilience as the forest develops old-growth attributes 50 , 51 . |
| | Changes in forest management have rather small mitigation benefits per hectare. On the other hand, a significant roll out can be expected due to the overall low cost for action, the need to adapt to changing climatic conditions, and long-term revenues and co-benefits with the environment. This combination results in the highest total land mitigation benefit for forest management from changes in the practices in Europe, compared to all other actions on land use as modelled in the LULUCF Impact Assessment 52 . |
| | Examples of solutions already operational or in planning |
| | Forest management is widespread across Europe. |
| | Existing certification mechanisms |
| | -Label Bas Carbone has a methodology for converting coppice forests into uneven-aged high stands. |
| | -The Woodland Carbon Code also covers some forest management improvements. |
| | -International methods include e.g. VCS, which has a general methodology for improved forest management, as well as a number of specific methods including reduced impact logging, fire management, forest conversion, avoided forest degradation, extension of rotation age and other. |
| | Agroforestry |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Biological | Vegetation and Soil | 8-9 | n.a | 300-9,400 | 7.8-235 |
| | Agroforestry describes a form of land use intentionally combining the growth of woody perennials with crop production or animal husbandry on the same land area. 53 It is a prime example of integrated land management and likely the mitigation action with benefits in several policy fields. At the same parcel and time agroforestry can deliver on: |
| | -climate mitigation and adaptation by increased carbon removals, better potentials to retain the stored carbon, nitrogen fixation, and lower risks for disturbances |
| | -biodiversity and wider environmental improvement agenda by increasing species richness, better water retention, reduced erosion and natural nutrient management |
| | -bioeconomy by providing biomass and fiber which may be converted into long-lasting biobased products |
| | -food sector by providing crops from arable land, ground for grazing or animal feed from grasslands, and high value marketable products from fruit and nut trees, but lower intensity |
| | -energy by providing feedstock from low value biomass |
| | There is a multitude of forms of agroforestry and a wide variety of its implementation across the world. Of relevance in the EU and at scale are silvo-arable systems, i.e. the mix between trees and crops (frequently planted in alleys), and silvo-pasture systems, which are a mix between trees and permanent pasture that may be grazed or mowed for hay or silage. Other forms such as forest gardening, forest farming tree rows or hedges for property separation, or windbreaks or riparian buffer strips, are of smaller importance for carbon but of high value for biodiversity and the environment. Maintenance of agroforestry systems does in most cases not require substantial management actions, hence operating costs are low. |
| | Beyond cost-effectiveness, land transformation to agroforestry systems could be restrained by biophysical barriers. For instance, agricultural land on organic soils should not be converted into agroforestry systems, which require machinery or foraging animals to some extent that could lead to soil disturbance and erosion. |
| | Examples of solutions already operational or in planning |
| | Agroforestry is widely implemented across Europe. |
| | Existing certification mechanisms |
| | -The CarboCage project in France is a publicly-funded project (2016-2020) developing and implementing a method for carbon storage through sustainable hedge management, where carbon removals will be sold in local voluntary carbon markets. |
| | -Other projects include: Coop project (Switzerland), where the coop retailer has been supporting farmers within their supply chain to plant trees on their land to deliver GHG emission reductions, and crediting the removals against coop emissions. Other ongoing research projects include one focussed on the Montado (by University of Evora) and CarboHedge (by Thunen Institut). |
| | Organic soils, peatlands and wetlands |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU 54 |
| | Biological | Soil | 8-9 | n.a. | 500-2,100 | 52-54 |
| | The rewetting of peatlands and wetlands predominantly avoids emissions, rather than removing carbon from the atmosphere. As peatlands and wetlands are drained (e.g. for agriculture, urban expansion) or degrade, they release stored carbon (and nitrous oxide). Rewetting or restoring drained peatlands swiftly stops the release of this carbon into the atmosphere (i.e. avoided emissions). Rewetting also leads to sequestration through plant growth and increases in carbon stock, although these are small and variable and only occur over longer timescales. The build of the carbon stock in the period immediately after restoration takes 20-50 years and is initially hardly measurable. 55 |
| | These mitigation strategies predominantly focus on carbon emission reductions from decaying organic material, in most cases due to drainage and intensive land use. Therefore, the most efficient mitigation practices such as fallowing of organic soils under cropland and grassland aim at avoiding drainage. Rewetting will accelerate the process of rising water tables, but in some cases requires technical deployment of measures, which may be costly and invasive to the ecosystem. A decision on the most appropriate mitigation action and intensity thereof needs to be made on a case-by-case basis. |
| | Carbon benefits should not be assessed in isolation; instead, an assessment of the overall greenhouse gas balance, also taking into account emissions of CH4 and N2O, is required. Increasing the water table will gradually lower emissions and eventually sequester carbon. This net reduction in CO2 emissions to the atmosphere, however, is countered by emissions of CH4 and N2O due to the anaerobic conditions in the soil, though on balance peatland rewetting is expected to deliver large net mitigation results and higher carbon stocks in soils. Increasing the water table will gradually lower emissions. An optimal total net greenhouse gas balance can be reached through careful control of the optimal water table, which can be achieved by various technical controls. |
| | Besides carbon benefits and the greenhouse gas balance, action on organic soils needs a holistic view on co-benefits with the biodiversity and environment and potential economic implications. Most mitigation actions will require an extensification or stop of today’s land use practices. In many cases this will be beneficial for biodiversity, although some species from today’s land uses will not be able to cope with the new, generally wetter conditions. There are also co-benefits for water filtration and retention capacity and air quality. Economic losses of income foregone may be at least partially mitigated by opportunities for paludiculture or very extensive seasonal grazing land. |
| | Examples of solutions already operational or in planning |
| | Peatland rewetting is widespread across Europe. |
| | Existing certification mechanisms |
| | -MoorFutures in Germany, a voluntary offset standard which since establishment in 2010 has certified projects with lifetime mitigation impact of 68,889tCO2-eq. |
| | -Peatland Code in the UK, aims to have 2 million ha of UK peatlands under restoration management by 2040. |
| | -MaxMoor in Switzerland focuses on restoring degraded peatlands that are no longer in agricultural use, with estimated potential of avoiding up to 19,000t CO2-eq per year. |
| | -Verra’s Verified Carbon Standard has five methods for peatland/wetland rewetting and coastal restoration. Most relevant for the EU is VM0036 Methodology for Rewetting Drained Temperate Peatlands v1.014 (published in 2017); as of time of writing, there were no registered projects for this methodology in the Verra registry. |
| | Mineral soil carbon sequestration |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Biological | Soil | 8-9 | 45-100 | 600-9,300 | 9-116 |
| | There is a variety of potential practices to increase soil organic carbon in mineral soils under agricultural use, including the conversion to permanent grassland, the rotation between cropland and grassland, crop residue management, planting cover crops to reduce erosion and fix nitrogen, crop rotations, reduced or no tillage, etc. While the conversion of cropland to grassland or forests holds the highest mitigation potential (excluding for intensive grasing purposes), it also implies a permanent conversion of the land use and implicitly a loss of its value for the land manager. Other changes in the practices maintain cropland land use and can be applied in parallel or rotation. Yet, they generally require some extensification by reducing the soil disturbance or by temporally planting other crops. |
| | In most Member States grassland systems sequester more CO2 in mineral soils than they emit. Often, such systems also require significant management action with implications on carbon storage. Mowing and removals of biomass for hay making or silage, soil compaction by the use of heavy machinery or shallow tillage may reduce storage capacities. On the other hand, these practices are needed to maintain grassland landscapes and allow for limited economic benefits from this land. In many cases grazing animals may be preferred, but inadequate management can cause damages e.g. by soil compaction, overgrazing or erosion when roaming on steeper slopes. |
| | A change in the land management practices requires a holistic view. Specific land use practices such as nitrogen fixing catch crops may bring about significant short-term benefits for CO2 removals while, if not properly controlled, N2O emissions could also increase, resulting in net greenhouse gas emissions after a few decades 56 . While soils hold a significant carbon stock which can be increased, sequestration capacities will reach limits after a few decades, with the long-term challenge of ensuring permanence. Yet, today’s main challenge is the considerable roll out of actions that would be needed to achieve significant additional removals from mineral soils. |
| | Examples of solutions already operational or in planning |
| | Many practices to increase soil carbon stocks are already implemented across the EU, e.g. cover cropping. Some CAP funding supports soil-health/soil carbon stock enhancements e.g. organic farming, cropping rotations, fertiliser management etc.. |
| | Existing certification mechanisms |
| | -Indigo Ag |
| | -Soil capital |
| | -Label Bas Carbon |
| | -Gold Standard |
| | Box 1 – EU support to R&I for carbon farming | Research and innovation on carbon farming and related nature-based solutions for carbon removals has been supported for some time under the EU’s framework programmes for R&I. Relevant activities funded under Horizon 2020 (2014–2020) include, for example, a project on land-based negative emission solutions. 57 Horizon Europe will fund the creation of a demonstration network on climate-smart farming, with calls for proposals so far covering pilot farms and advisory services. The Horizon Europe Mission “A Soil Deal for Europe” in 2022 has allocated funding to the creation of a network on carbon farming for agricultural and forest soils and to projects on the monitoring, reporting and verification of soil carbon and greenhouse gases balance. 58 Calls for proposals dedicated to carbon farming are to be included also in the work programmes for the next years. | In the next two years, projects supported by the European Joint Programme on Agricultural Soil Management (EJP SOIL, co-funded by the Commission with 40m EUR and by the Member States with the same amount 59 ) will deliver: a report on the state of the art of the use of proximal/remote sensing techniques to estimate Soil Organic Carbon; an accuracy/cost analysis of the use of proximal/remote sensing techniques to estimate soil properties in field (ProbeField); a study on the cost-effectiveness of carbon farming schemes in the presence of MRV costs (Road4Scheme); national scale estimates of the technical and feasible SOC sequestering potential (CarboSeq); studies on potential trade-offs of carbon storage in soils such as additional N2O emissions and N-leaching (Sommit, TRACE-soil and INSURE). | Further support measures on cooperation for innovation are programmed in the context of the Common Agricultural Policy. The European Innovation Partnership EIP-AGRI facilitates the piloting and testing on the ground of practices for carbon sequestration and protection, with the direct involvement of farmers supported by advisors, local researchers and solution providers. 60 Several thematic focus groups have been launched and are producing factsheets and reports, which constitute a good basis for knowledge transfer within the farming community. 61 |
| | Biochar |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Biological | Vegetation | 7-9 | 10-345 | 300-6,600 | 79 62 |
| | The pyrolysis of organic matter can result in biochar, a stable solid form of carbon (like charcoal) that is relatively resistant to decomposition and which can stabilise organic matter when added to soil as amendment. While further research is needed to increase the understanding of biochar, biochar can improve the physico-chemical properties of soils and potentially combine many advantages with the long-term storage of carbon from biogenic origin in a product that improves the carbon sequestration capacity of soils as well as their water-holding capacities and their resilience to drought. However, the effect of biochar depends on the feedstock used for its production and on the soil and crop to which it is applied. The potential for biochar depends on availability of feedstock biomass and the competition with other uses of biogenic residues. |
| | Biochar production can produce electricity and/or heat as by-product of the pyrolysis process. Biochar can also be a by-product of the gasification of biomass to produce bio-methane. |
| | Examples of solutions already operational or in planning |
| | In 2020 in Europe, there were 72 biochar production plants in operation, capable of producing 20,000t of biochar annually. Currently, 69% of European production (including Switzerland) occurs in four countries: Germany, Sweden, Switzerland, Austria. |
| | Existing certification mechanisms |
| | -Puro.earth: Has seven different sellers of biochar credits, with prices ranging from €96-150/tCO2-eq. Total amount of removals is unclear. |
| | -Other: Verra is creating a biochar methodology for VCS, to be ready for public review in Q4 2021. |
| | -The European Biochar Certificate (EBC) sets minimum standards for biochar production and composition, while the EBC ‘C-Sink’ quantifies the magnitude and duration of carbon storage through biochar use. |
| | Blue carbon farming |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Biological | Vegetation and sediments | 2-3 | n.a | <1,000 | n.a |
| | Blue carbon refers to carbon dioxide removed from the atmosphere by the world's ocean ecosystems, mostly phytoplankton, algae, macroalgae, mangroves, seagrasses meadows, and tidal marshes, through plant growth and the accumulation and burial of organic matter in the soil and sediment. In the oceans, carbon could be sequestered in the natural environments 63 , as a result of micro- and macroalgae aquaculture, or in marine permaculture 64 . |
| | Of particular importance are coastal biogenic habitats, or blue carbon habitats (seagrass, mangrove, tidal marshes) with high intensity biogenic carbon sequestration. It should be noted that other biogenic species are storing carbon not only organically but also through biomineralisation in shells and skeletons (coral, oysters reef, Honeycomb worm reefs). |
| | Development of blue carbon strategies, initiatives, and projects has the potential to lead to multiple co-benefits, like carbon fixing and storage, ocean health improvement (removal of excess nutrients causing eutrophication, generating oxygen), improvement of ecosystem services (bringing back marine life), development of environmental services creating new, green local jobs etc. Development of regenerative seaweed aquaculture in addition to the above, will bring to the market healthy food alternatives and low-carbon feed and other algae-derived products. |
| | A significant challenge for the potential of blue carbon is the degradation of blue carbon ecosystems leading to release of stored carbon back into the atmosphere and to reduced carbon fixation and storage capacity. For instance, decline in seagrass meadow area has been widespread and substantial over the last century with 19% of globally surveyed meadows lost since 1880. Whilst natural events, including outbreaks of disease and eruptions of grazing urchins enhanced by pollution and overfishing, can result in significant local seagrass decline, the major drivers of seagrass loss are anthropogenic: eutrophication, coastal development, land erosion (leading to enhanced sedimentation), and mechanical damage due to dredging, seining, boat mooring, and anchoring. |
| | Examples of solutions already operational or in planning |
| | -The seaweed company: Carbon sequestration in seaweed 65 |
| | Existing certification mechanisms |
| | None. |
| | 2.4Carbon storage products |
| | Biobased products |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Biological | Products | 4-9 | n.a | 70-110066 | n.a. |
| | Increasing carbon stocks in (long-lasting) biobased products is a way of storing carbon. The carbon pool of biobased products can act as a temporary reservoir that delays emissions of the renewable biogenic carbon to the atmosphere. The size of the biobased products’ carbon pool depends on the quantity of carbon stored in newly-produced products entering the pool, the duration of storage and their end of life options (landfilling, energy recovery, recycling, re-use). |
| | Biobased products also bring climate benefits through avoided emissions by replacing GHG-intensive materials with biobased materials. The substitution effect of biobased products can be uncertain and depends on several variables such as the type of product being substituted, the energy-mix used in the production of the substituted product, and the life cycle emissions of the biobased material. |
| | The biomass for biobased products must come from a combination of sustainable sources from agriculture, animal farming, aquaculture and forestry while ensuring the maintenance and the enhancement of natural sinks and preserving healthy ecosystems. Applications that can both reduce greenhouse gas emissions in the short term while not damaging, or even improving, the condition of forest ecosystems include for example collecting fine wood debris within the limits of locally recommended thresholds, afforesting former agricultural land with mixed species plantations or with naturally regenerating forests. Solutions based on circular economy principles applied to biobased products such as the cascading principle are also beneficial. |
| | The building sector is one of the most promising sectors to foster the use of carbon removal products and materials. While wood is one of the most popular construction materials which removes carbon during its growth, many other materials, traditional or innovative, can also contribute at various storage durations, e.g. cellulose fibre, cardboard and construction paper, bamboo, hemp, cork, straw, sheep wool, seaweed, herbaceous plants, composites from agriculture residues or from mycelium. |
| | Examples of solutions already operational or in planning |
| | There are limited examples of biomass in building projects with carbon removal claims (estimated using different methods) but this is a fast-growing sector. Some examples of recent wooden construction projects are: |
| | -Brock Commons Tallwood House, construction management by Urban One Builders (Canada): 18-story mass timber hybrid residence at University of British Columbia, completed in 2017, wooden inputs (Cross Laminated Timber (CLT) and Glulam): 2,233 m3, avoided and sequestered CO2 estimated using the Wood Carbon Calculator for Buildings: 679 tCO2 avoided and 1,753 tCO2 sequestered over the life cycle |
| | -Oakwood Tower in London, Cambridge University’s Department of Architecture, PLP Architecture, Smith and Wallwork (UK) - proposal: 80-story wooden building, wooden inputs: 65,000 m3 of structural timber (softwood), estimated sequestration of 50,000 tCO2 (no indication on the method) |
| | -Dalston Works, Waugh Thistleton Architects, Ramboll, B&K Structures (UK): 10-story wooden building, largest CLT project globally, material inputs (CLT): approx. 3,850 m3, sequestered CO2 estimated: 2,866 tCO2 (no indication on the method). |
| | -Mjøstårnet, Brumunddal (Norway): 18-story wooden building, wooden inputs (CLT, Glulam, Trä8), Moelven subcontractor for structural timber components: Follows the Puro.earth methodology requirements, audited for carbon removals of 541 kg/m3 with a 10% safety buffer and permanence of 50 years. |
| | -The French Plan “Immeubles de Grande Hauteur en bois” (High-rise Timber Building Plan) plan aims to demonstrate the feasibility of high-rise timber buildings, in a very concrete way. It also aims to showcase the most appropriate technical solutions. The plan was implemented by the ADIVbois Association (Association for the Development of Wooden Buildings), a dedicated organisation created in 2016 in the context of the governmental initiative, “New Industrial France”. |
| | Existing certification mechanisms |
| | -Puro Earth – methodology for wooden building elements |
| | -Past experience from CARBOMARK project 2009-2011. Emission credits trading platform (voluntary carbon market). Italy (regional: Veneto, Friuli Venezia Giulia). At the end of the project, 21 private companies and 27 public forest owners had joined the CARBOMARK market, and three buying contracts had been signed. According to these contracts, 350 tonnes of carbon have been stocked. |
| | CCU products |
| | Capture | Storage | TRL | Cost (€/tCO2) | Potential (MtCO2/yr) | Global EU |
| | Chemical | Products | 4-8 | n.a. | 100-1400 66 | n.a |
| | Set of technologies involving the utilisation of CO2 from air or biogenic sources in diverse production processes. Temporary carbon removal can be achieved when applications use CO2 as a feedstock to convert it into value-added products which then retain CO2 for decades or centuries. |
| | CO2 can be used as an alternative to fossil fuels in the production of chemicals that require carbon to provide their structure and properties, e.g. primary chemicals such as ethylene and methanol, which are building blocks to produce a range of longlived end-use products such as plastics. |
| | CO2 can also be used in the production of building materials as feedstock in its constituents (i.e. cement and construction aggregates) via reaction between CO2 and minerals or waste streams (e.g. concrete waste) to form carbonates. Another way that CO2 can be used in building materials consists in adding CO2 to concrete during curing, This technique also reduces the quantity of cement needed to reach similar product strength requirements. |
| | Examples of solutions already operational or in planning |
| | -9 operational pilot/commercial projects referenced as operational/ongoing on Smart CO2 Transformation platform |
| | -Error! Bookmark not defined.Covestro facility in Dormagen (Germany)Error! Bookmark not defined.: operational since 2016, produces around 5,000 t/year of polyether polycarbonate polyol (cardyon® ) where CO2 substitutes up to 20% of fossil feedstock normally used in the process (TRL = 6-7). The polyol can be converted into flexible polyurethane foam. |
| | Existing certification mechanisms |
| | -The Innovation Fund has developed a methodology for the quantification of climate benefits from CCU projects for products whose conventional production is covered by the EU ETS Directive. |
| | -Puro Earth methodology on carbonated building elements |
| | -VCS methodology for CO2 Utilization in Concrete Production (in development) and for Greenhouse Gas Capture and Utilization in Plastic Materials |
| | Annex 6: Quality Criteria – Quantification |
| | 1Introduction |
| | Quantifying, monitoring and reporting the climate benefits of a carbon-removing project are the most essential tasks of the certification process. Therefore, it will be necessary to implement accurate, cost-efficient quantification and monitoring of the climate benefits to generate the necessary trust in carbon removals and to increase their uptake. |
| | Quantification is a multi-step process: The first key element is to assess (ex-ante) the potential total climate impact of the carbon removal activity over the period of the project. |
| | Second, during the execution of the project, the carbon removal activity should monitor and report removals and emissions taking place within the scope of the activity with a sufficient level of timeliness, resolution and accuracy. It can build on established or innovative monitoring systems and should remain affordable for smaller projects as well. Independent verification is essential to create the necessary trust in the quantification of the climate impacts (see Annex on Transparency). |
| | Quantification, monitoring and reporting methodologies for an EU certification framework should require reporting modalities avoiding double counting and compatible with national GHG inventories. In this way, the widespread application of the EU certification framework will improve the quality of national inventories by providing high-quality monitoring information on carbon removal activities. This improvement will allow Member States to better target their climate policy implementation and to see the contribution of carbon removal activities in the achievement of their domestic or EU climate targets. |
| | The two main normative references for the quantification, monitoring and reporting of GHG emission reductions and removal enhancements are the Greenhouse Gas Protocol established by the World Resources Institute (WRI) and the Business Council for Sustainable Development (WBCSD) and the international standard ISO 14064-2 67 . The two documents are consistent and complementing each other. |
| | The Greenhouse Gas Protocol Initiative is a multi-stakeholder partnership of businesses, nongovernmental organisations (NGOs), governments, academics, and others convened by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI). Launched in 1998, the Initiative’s mission is to develop internationally accepted greenhouse gas (GHG) accounting and reporting standards and/or protocols, and to promote their broad adoption 68 . The GHG Protocol for Project Accounting 69 is a comprehensive, policy-neutral accounting tool for quantifying the greenhouse gas benefits of climate change mitigation projects. It provides specific principles, concepts, and methods for quantifying and reporting GHG emission reductions or increases in removals from climate change mitigation projects. Complementary to the GHG Protocol for Project Accounting, the Land Use, Land-Use Change, and Forestry Guidance for GHG Project Accounting 70 provides more specific guidance and uses more appropriate terminology and concepts to quantify and report GHG reductions from LULUCF project activities. |
| | The ISO 14064-2 specifies principles and requirements and provides guidance at the project level for the quantification, monitoring and reporting of activities intended to cause greenhouse gas (GHG) emission reductions or removal enhancements. It includes requirements for planning a GHG project, identifying and selecting GHG sources, sinks and reservoirs (SSRs) relevant to the project and baseline scenario, monitoring, quantifying, documenting and reporting GHG project performance and managing data quality. This standard is designed to be neutral and compatible among a range of programmes by avoiding programme-specific definitions and requirements. |
| | Both standards build on six principles underpinning all aspects of the accounting, quantification, and reporting of project based GHG reductions: |
| | ·Relevance: Use data, methods, criteria, and assumptions that are appropriate for the intended use of reported information |
| | ·Completeness: Consider all relevant information that may affect the accounting and quantification of GHG reductions, and complete all requirements |
| | ·Consistency: Use data, methods, criteria, and assumptions that allow meaningful and valid comparisons |
| | ·Transparency: Provide clear and sufficient information for reviewers to assess the credibility and reliability of GHG reduction claims |
| | ·Accuracy: Reduce uncertainties as much as is practical |
| | ·Conservativeness: Use conservative assumptions, values, and procedures when uncertainty is high |
| | 2Certification challenges |
| | The quantification of a project’s benefits follows a common approach across the WRI Greenhouse Gas Protocol and ISO 14064-2, summarized in response to three key challenges: |
| | ·Set the boundaries of the system by selecting the GHG sources and sinks to be accounted in the estimate of the GHG effect. Carbon removal is often the outcome of the aggregation of carbon removals from sinks with GHG emissions from various sources. These fluxes, moreover, may present potentially different dynamics and timescales, and may even have varying impacts in geographical extent. The system boundaries should be chosen to ensure the best comparison and identification of the climate benefits. |
| | ·Define a baseline against which the climate performance of the carbon removal project is assessed. A key element is to quantify emissions and removals in the baseline. Baseline setting is a complex exercise which must balance an appropriate level of ambition with the desire to stimulate broad participation. More on the concept of baselines can be found in the next Annex (Annex 7). |
| | ·Monitor and report the emissions and removals of the project. Robust monitoring and reporting of carbon removals activities is necessary to ensure the quality of carbon removals. Assessing and managing the uncertainty in data and methods, including on-site measurement, modelling, and default emission or removal factors, is an important challenge that the certification should address. However, the costs of the monitoring, reporting, and verification of carbon removals, need to be kept manageable, in particular to enable smaller projects. The use of state-of-the-art digital solutions should allow for a cost-efficient implementation, in particular for carbon farming. 71 |
| | 3Existing certification approaches |
| | 3.1Setting project boundaries |
| | The GHG Protocol distinguishes two types of GHG effects: |
| | ·A primary effect is the intended change caused by a project activity in GHG emissions, removals, or storage associated with a GHG source or sink. Primary effects considered by the GHG Project protocol focus on reduction on energy and process emissions, fugitive and waste emissions as well as CO2 removal by biological processes. In the specific context of LULUCF projects all carbon pools (including living biomass, dead organic matter, and soils) should be included unless the project developer can demonstrate that a pool will not become a source as a result of the project activity. |
| | ·A secondary effect is an unintended change caused by a project activity in GHG emissions, removals, or storage associated with a GHG source or sink. Secondary effects are typically small relative to a project activity’s primary effect. In some cases, however, they may undermine or negate the primary effect. Secondary effects often correspond to leakage effects and are classified into two categories: |
| | oOne-time effects, i.e. changes in GHG emissions associated with the construction, installation, and establishment or the decommissioning and termination of the project activity. |
| | oUpstream and downstream effects, i.e. recurring changes in GHG emissions associated with inputs to the project activity (upstream) or products from the project activity (downstream), relative to baseline emissions. |
| | For LULUCF projects, secondary effects are primarily from fertiliser application, fuel combustion in machineries but also potential indirect land use change effects from market responses. |
| | For the GHG protocol the project system boundary encompasses all primary effects and significant secondary effects associated with the GHG project. A project activity’s total GHG effects are quantified as the sum of its associated primary and secondary effects, across the project’s scope of activities. |
| | The ISO 14064-2 standard does not use the term project boundaries but refers to relevant Sources, Sink and Reservoirs (SSR). While the terminology is different, the approach is similar to the GHG protocol with an identification of the SSRs controlled by the project, those related to energy and material flows and those affected by the project. |
| | 3.2Defining baseline emissions and removals |
| | The GHG Protocol describes two methods, also known as procedures, to estimate baseline emissions and removals: the performance standard method and the project-specific method. |
| | The performance standard method produces an estimate of baseline emissions and removals from a numerical analysis of the GHG flux rates of “baseline candidates”. A performance standard is sometimes referred to as a multi-project baseline or benchmark because it can be used to estimate baseline emissions for multiple project activities of the same type. It serves the same function as a baseline scenario but avoids the need to identify an explicit baseline scenario for each project activity. |
| | By contrast, the project-specific method produces an estimate of baseline emissions and removals through the identification of a baseline scenario specific to the proposed project activity. The baseline scenario is identified through a structured analysis of the project activity and its alternatives. Baseline emissions are derived from the baseline scenario and are valid only for the project activity being examined. |
| | The guidance of the GHG Protocol indicates that a performance standard method may be preferable when a number of similar project activities are being implemented, when obtaining verifiable data on project activity alternatives is difficult, or when confidentiality concerns arise with respect to the project activity. Project-specific procedure may be preferred when the type of project is very specific with a number of baseline candidates limited or GHG emission rate data for baseline candidates are difficult to obtain. Strengths and weaknesses of these two approaches are discussed further in the annex on Baselines and Additionality [Annex 7]. |
| | The ISO 14064-2 guidance to define baseline emissions and removals are rather general. They state the need to consider all feasible baseline scenarios and select the most plausible one through a process respecting the principles of conservativeness, completeness, consistency, accuracy transparency and relevance. The ISO 14604-2 refers to customized (i.e. project specific) and standardized baselines and differentiates static and dynamic baselines. It mentions the relevance of historical conditions, market conditions and best available technologies for the development of baseline methodologies. |
| | 3.3Monitoring and Reporting |
| | Both the GHG protocol and the ISO standard underline the importance of establishing a comprehensive monitoring plan describing in detail the procedures used for the measurement or the estimates of all GHG data and other information relevant to the project and the baseline. The ISO 14062-2 guidance indicates which elements should be included (e.g. parameters, data, assumptions, methodologies, modelling, roles and responsibilities, frequency of the monitoring, etc..) and insist on the importance of documenting and recording these elements. |
| | The GHG protocol follows the same line and brings more details on the different steps for the implementation of a robust monitoring system. For this standard, a monitoring plan should contain provisions for: |
| | ·Monitoring project activity emissions and removals: For each GHG source or sink related to a primary or significant secondary effect, the monitoring plan shall describe all data to be monitored, how it will be monitored, the level of uncertainty, potential assumptions used for the measurement, further relevant technical information, the frequency of the monitoring and all sources of data and information |
| | ·Monitor baseline parameters: All baseline parameters shall be described in the monitoring plan in a similar way, when applicable, as for project activities. |
| | ·Describe quality assurance and control (QA/QC) measures. How the GHG project data will be maintained and how QA/QC measures will be implemented shall be described in the monitoring plan and include information on role and responsibilities, data management, QA/QC procedures. |
| | In terms of reporting, the GHG protocol guidance for project accounting presents a list of the information that must be compiled and reported to ensure transparency and enable third-party reviewers to evaluate the quantification of GHG reductions for a GHG project. Project developers should retain all data, assumptions, criteria, assessments, and explanations used to support reported information and should follow the principles of transparency and completeness in reporting GHG reductions. |
| | Neither of the two standards provides specific guidance on the management of uncertainty and the verification of the reported data because they are considered as elements dependant of GHG programmes or certification schemes. However, the ISO 14064-2 requires adherence to ISO 14064-3 on guidance for the verification and validation of GHG statements, if the project proponent requests verification and/or validation of the GHG project. |
| | Experience from existing certification schemes show that they typically identify the sources of uncertainty and estimate its size based on sampling techniques, expert opinion, data distribution, simulations, or literature sources. They then propose various approaches to managing this uncertainty, sometimes in combination, such as: |
| | ·Discounting the estimated removals when these are uncertain, possibly proportional to the level of uncertainty |
| | ·Storing a percentage of the total estimated removals in a buffer account, which can be drawn down at later date; the credits in the buffer account are sometimes released to the participant at the end of the project duration, or are retired (equivalent to discounting) 72 ; |
| | ·Using conservative assumptions when quantifying removals. |
| | In addition, a promising avenue for simplification of monitoring is the use of remote sensing data (especially in the case of carbon farming) that can provide information on soil types, above-ground biomass, and geographic location of the project in an accurate, automated and non-expensive way. |
| | 4Quantification criteria for an EU framework |
| | 4.1General criteria |
| | The existing standards provide the general criteria that all carbon removal projects to be certified under an EU framework should follow: |
| | ·The quantification, monitoring and reporting of carbon removals should apply the six principles underpinning international standards and best practices for the quantification, and reporting of project based GHG emission reductions and removal enhancement: Relevance, Completeness, Consistency, Transparency, Accuracy and Conservativeness. The quantification, monitoring and reporting of carbon removals should also take in consideration the specificities of the EU climate policies. |
| | ·The project boundaries should be set in a way that it accounts for all removals and emissions attributable to the carbon removal activity. This would include primary emissions and removals directly associated to the carbon removal activity and any secondary emissions, also called leakages, that would impact negatively the overall climate benefit of the carbon removal activity. |
| | ·The climate benefit assessment of a carbon removal project should be conducted by comparing the net removals expected from the project activities to a representative baseline. The baseline setting should be relevant, transparent, conservative and credible. It should encourage ambition over time – in line with the Paris agreement – and a broad participation. It should be adapted to the type of carbon removal activities and the context in which the carbon removal project is developed (see Annex 7). |
| | ·The carbon removal project should provide a comprehensive monitoring plan describing in detail the procedures used for the measurement or the estimates of all GHG data and other information relevant to the project and the baseline, including a detailed breakdown of the emissions and removals attributable to the project. |
| | When assessing the different carbon removal solutions, very different quantification approaches emerge. For some industrial solutions such as BECCS and DACCS, carbon removals and emissions can be directly measured with a high level of accuracy; instead, for some carbon farming solutions, these can only be modelled or inferred (which entails more uncertainty), and there is a trade-off between quantification accuracy and costs. |
| | 4.2Quantification of permanent storage solutions |
| | The storage of CO2 in geological formations is covered by several jurisdictions: the CCS directive at the EU level but also other frameworks from UK government oil & gas authorities, the US Environmental Protection Agency, the California Air Resources Board, the Alberta Emission Offset Programme or the Australian Government Offshore Petroleum and GHG act. The primary objective of these frameworks has been the capture and stockage of fossil CO2 emissions, they do not address specifically the quantification of carbon removals resulting from the storage of non-fossil CO2. |
| | In an EU context, DACCS and BECCS methodologies can build on methodologies developed for projects under the Innovation Fund 73 , i.e. a life-cycle assessment accounting for the direct emissions of the carbon removal activities but also upstream and downstream emissions attributable to the carbon removal project. The Innovation Fund methodology for carbon capture and storage assesses projects characterised by the capture of CO2 in industrial processes or power generation, or directly from ambient air, with a separation and compression of the CO2, which will then be transported by road tankers, ships, rail and/or pipelines to a suitable storage site where it will be injected and permanently stored. Storage sites are permitted under the CCS Directive 2009/31/EC and can be different geological formations: saline aquifers, depleted oil and gas reservoirs, un-mineable coal beds, mafic rocks (e.g. basalts). |
| | Some methodologies for the permanent storage of CO2 are also emerging on the voluntary market. Puro.earth marketplace proposes methodologies for the certification of geologically stored carbon 74 . Puro.earth is also considering biochar, also refered as Pyrogenic Carbon Capture and Storage (PyCCS), as a permanent form of carbon storage when the carbon is stored in appropriate soils, depth and climatic conditions. |
| | Boundaries |
| | The quantification of the net climate benefit for industrial solutions to capture and store permanently carbon in geological sites should include the emissions from capture, transportation and injection as well as emissions from chemicals, membranes and purpose-built equipment including the construction and materials for the equipment. Energy consumption can be substantial in carbon capture activities, in particular for DACCS projects, and therefore all the emissions from energy use, including displacement effects, should be accounted for when quantifying the net climate benefit of CO2 removals. Increasing demand for bioenergy has the potential to drive land use change (LUC) effects, which should be considered for BECCS projects. Existing EU policy frameworks exist for controlling the risk of LUC from bioenergy, primarily the biomass sustainability criteria and certification standards developed under the Renewable Energy Directive framework. These same standards should be used as a precondition for BECCS projects. See also Annex 9 on Sustainability. |
| | Baseline |
| | See Annex 7 on Baselines and Additionality. |
| | Monitoring and reporting |
| | The certification of carbon removals with permanent storage will focus firstly on BECCS and DACCS activities. Even though DACCS and BECCS installations are not covered by the EU ETS, these solutions can draw from the current framework applied to fossil CCS, including the Monitoring Reporting Regulation 75 (MRR) and the Directive on Geological Storage of Carbon Dioxide (CCS Directive) 76 . The monitoring and reporting requirements would build on the EU ETS since the capture, transport and geological storage of fossil CO2 is already covered by the EU ETS. The detailed requirements from the MRR are aligned with principles and requirements from ISO 14064, therefore by building on these existing EU legislations the certification framework can also be consistent with international standards. The reporting of carbon removals should moreover provide useful information for the compilation of national inventories. |
| | Other types of carbon removal projects such as for instance enhanced rock weathering or ocean alkalinisation have the potential to play a very important role in the future to remove carbon from the atmosphere, but their characteristics and potential impacts still need to be better understood before being addressed in a certification context. Specific methodologies could be developed in the future once enough certainty on the climate benefit and environmental sustainability of these activities is established. |
| | 4.3Quantification of carbon farming practices |
| | The complexity of the quantification process for carbon farming varies from practice to practice. Table 5 presents an overview of the main challenges related to quantification for different types of carbon farming practices. |
| | Table 5 - Quantification across carbon farming solutions |
| | Quantification challenges |
| | Afforestation / Reforestation | Well-established and tested methodologies suggest robust monitoring can be achieved at affordable costs for the biomass part. Some uncertainties remain around impacts on soil carbon. |
| | Improved Forest Management | Many forest management methodologies that have low monitoring and reporting costs rely on forest growth and yield modelling to estimate change in carbon storage. More recent methodologies (e.g. VCS methodology for Improved Forest Management) apply field measurements of biomass carbon stocks and dead wood, as well as monitoring of other factors (such as fertiliser application). |
| | Agroforestry | High diversity of agroforestry practices means that quantification must be adapted to the local context. Existing examples of quantification approaches are limited. While above-ground biomass can be relatively easily monitored, soil carbon is sometime considered more challenging but innovative solutions making use of Earth Observation data with artificial intelligence are very promising 77 . |
| | Soil carbon sequestration in cropland and grassland | Monitoring of the soil organic carbon can be either predicted via soil sampling and empirical or process models. High variability of soil carbon stocks across locations make quantification very challenging using current technologies, implying that solutions need to be developed to address statistical uncertainty at field level. |
| | Peatland and wetland restoration | Quantification relies on established correlations with easily measurable parameters, such as the height of the water table, to develop emissions factors for local context, and to classify land categories, potentially limiting short-term upscaling. Real time onsite measurement is not cost-effective. There are well-developed examples of quantification methods (e.g. MoorFutures), but they are dependent on local scientific evidence (to calibrate methodology to local conditions), which can nonetheless be collected using for example remote sensing. |
| | Biochar | It is relatively straightforward to quantify emissions and removals related to biochar feedstocks and to the production of biochar. The European Biochar Certificate 78 guidance has identified a positive list of biomass feed-stock sources. The quantification of biochar application is more uncertain, but European climate is favourable to the stability of biochar. There are still some remaining knowledge gaps regarding impacts on soil carbon, methane and nitrous oxide emissions. |
| | Boundaries |
| | Following IPCC guidelines and common recommendations from international standards, the quantification of carbon farming project should cover the emissions and removals from the LULUCF sector 79 and carbon pools primarily impacted by carbon farming practices, e.g. aboveground and belowground biomass as well as soil organic carbon, should be reported and accounted for the baseline and the project where relevant. Dead wood and litter are rarely subject to significant changes due to carbon farming practices but are significant with respect to verifying that environmental conditions are respected. |
| | Secondary emissions attributable to the project activities (e.g. fertiliser emissions or fuel combustion for machinery) need to be considered to properly assess the overall climate benefit. |
| | Baseline |
| | See Annex 7 on Baselines and Additionality |
| | Monitoring and reporting |
| | The monitoring and reporting of the direct emissions and removals from carbon farming solutions can build on the IPCC guidelines for compiling the national GHG inventories for the Agriculture, Forestry and Other Land Use sector, and on the methodologies required under the LULUCF Regulation, which would allow consistency and better integration with national inventories. Where applicable, tier 3 approaches of IPCC 80 guidelines should be favoured to enhance alignment. |
| | IPCC puts forward a clear argument to rely on a combination of sampling surveys, remote sensing, and machine learning to minimise monitoring and reporting costs. Accuracy and comparability are optimised by attributing to each parcel of land an estimate of emissions and removals based on remote sensing data (provided for instance by airborne LIDAR, or alternatively sensors and products through the Copernicus programme). This reduces the need to perform frequent on-site sampling for every certified project, especially when it comes to establishing the baseline level of emissions and removal of a project (see also Annex 7). |
| | The Communication on Sustainable Carbon Cycles proposes the aspirational goal that, by 2028, every land manager should have access to verified emission and removal data, an objective that can be enabled by widespread certification activities. The European Commission and the Member States should, in the next years and based on existing and evolving technologies, create a database of high-resolution information on the emissions and removals of all managed land parcels in the EU. Ideally, this could leverage existing datasets held by Member States for agricultural and environmental policy implementation. Such a system would obviously enable a dramatic improvement in the quality of land-based GHG inventories and policymaking, in coherence with the objectives of the Commission’s proposal to upgrade the LULUCF Regulation. It would, moreover, encourage a wider uptake of carbon farming approaches by significantly reducing quantification costs for economic operators and certification schemes alike. |
| | 4.4Quantification of carbon storage products |
| | Carbon removal projects storing carbon in long-lasting products can provide climate benefit. By removing carbon from the atmosphere for several decades or centuries, they can contribute in limiting the peak of global warming and therefore the worst climate impacts. Two sub-categories of product storage can be distinguished: storage in bio-based material and storage in long-lasting Carbon Capture and Utilisation (CCU) products. |
| | There are only few examples of certification schemes covering the sequestration of carbon in products, and quantification protocols for product storage are still at an early stage of development. IPCC only recognises three broad categories, with complex computational methods to determine how, when sawn-wood, panels or paper are created from harvested timber, emissions associated with the harvesting are deferred to the future. These methods apply very broadly at national (macro) level and entail a series of assumptions that impact project level implementation. Nevertheless, the Commission’s proposal in 2021 for the LULUCF sector introduces “a more explicit pathway towards new products (construction materials, fibres/polymers)” 81 . |
| | Reviews of existing schemes for the certification of carbon removals such as McDonald et al. (2021) 82 and Arcusa et al (2021) 83 report that the voluntary market Puro.earth has developed a limited number of carbon removal methodologies for the sequestration of carbon in wooden products, carbonated material and biobased insulation material, while Verra has established a methodology for the long-lasting plastics. There is an overall understanding that the quantification should follow an LCA approach, but inherent difficulties exist in accounting for the end of life of the product, as well as in recognising the temporary storage of carbon in the product. |
| | Bio-based products |
| | There is currently no consensus on quantification rules for embodied carbon emissions and biogenic carbon storage in wood products, aside from, at national level, the IPCC guidelines on Harvested Wood Products included in the LULUCF Regulation. Large statistical uncertainties persist in existing Life-Cycle Assessments with regard to biogenic carbon emissions, sequestration in the production and end-of-life stages of wood building products. |
| | A study contracted by the European Commission on the evaluation of the climate benefits of the use of harvested wood products in the construction sector 84 concluded that current LCA standards fall short in considering the temporary carbon storage effect of wood products. |
| | This study recommends using innovative methods and in particular a simplified dynamic LCA approach that explicitly takes into account the timing of GHG fluxes. This recommendation is in line with those of other authors such as Hoxha et al. (2020) 85 who found the same limitations for LCA standards. They also identified the simplified dynamic LCA approach as the most pertinent and transparent approach to be applied in the assessment of the climate change impact of construction bio-based products and materials. |
| | In this context, 2022 annual EU work programme for European standardisation propose to develop a new “Dynamic life-cycle assessment for estimating carbon removals in construction products” 86 . The main objective is to reflect the progress made in dynamic life-cycle assessment better to acknowledge carbon storage in standards for construction products, mainly when using time-dependent characterization factors applied to a dynamic life cycle inventory. |
| | The IPCC approach for Harvested Wood Products (HWP) is based upon a deferred progressive release of carbon following the conversion to a product but progressively over years or decades. GHG inventories report that carbon stock in the HWP declines over time according to a first-order decay (FOD) model, and therein explicitly acknowledges the impermanence of carbon storage in HWP. However, it may seriously underestimate the re-use or recycling of timber products, especially if these undergo rapid innovation under an impulse of the bioeconomy. Under the current LULUCF Regulation, Member States may use country-specific methodologies and half-life values to account for HWP in their national GHG inventory, provided that such methodologies and values are determined on the basis of transparent and verifiable data. Under the Fit-for-55 package, proposed revisions to the LULUCF Regulation envisage the introduction of new categories of carbon storage products not just timber based – allowing for improved granularity over pathways for wood use and the application of more specific assumptions regarding the durability of carbon storage in HWP. Applying similar methodologies in the context of project certification could be considered. |
| | Long-lived CCU products |
| | The quantification of CCU products is complex due to the wide range of products operating in different markets and the risk of double counting or leakage. Like bio-based products, the quantification of CCU products should consider how long the carbon is stored in the product and the end of life of the product. Most of the standard life-cycle assessment methods are not designed to distinguish between various temporary carbon retention times. Several methodologies have been proposed, nevertheless, to solve this issue: |
| | ·The Innovation Fund has developed a methodology for the quantification of climate benefits from CCU projects for products whose conventional production is covered by the EU ETS Directive. However, the end-of-life considerations are based on very simple assumptions and an adjustment and improvement of this methodology would be required to apply it for the certification of carbon removals. |
| | ·The Global CO2 Initiative 87 has developed guidelines for the life-cycle analysis and technico-economic assessment for CCU products providing recommendations for the selection of the specific elements needed and the boundaries, as well as considerations on uncertainties. |
| | ·A simplified dynamic life-cycle assessment, relying on the use of a dynamic life-cycle inventory and time-dependent characterization factors, already tested for wooden construction products, could in theory be applied to all type of products, assuming that the information required for the assessment is available. |
| | From a monitoring and reporting perspective, the CO2 inputs and product outputs from CCU activities e.g. in the production of plastics or building materials can in general be measured with high level of accuracy. Activities covered by the ETS should follow the requirements of the Monitoring and Reporting Regulation. |
| | Annex 7: Quality Criteria – Baselines and Additionality |
| | 1.Introduction |
| | Baselines and additionality are two important concepts that are related in the sense that they both aim to establish that an activity has a positive climate benefit. The baseline, as mentioned in the previous Annex, is an essential element in the quantification of the climate effect of a carbon removal activity compared to the standard practice: it determines a minimum level beyond which carbon removals are additional. To ensure that also the activity generating the removals is additional in given regulatory and market circumstances, two further tests are proposed: |
| | 1.Regulatory additionality requires that the activity goes beyond what is already required by legislation. This type of additionality therefore depends on the regulatory context applicable to the jurisdiction where the activity takes place. |
| | 2.Financial additionality requires that the financial support linked to certification should have an incentive effect: this is present when the beneficiary would not engage in the additional activity without such financial support. This type of additionality therefore depends on the profitability and the funding possibilities inherent to the project. A similar approach is used under State Aid rules: in this context, the presence of the incentive effect is assumed when work on the relevant project or activity has not started before the application, but simpler approaches exist for aid schemes where the financial incentive effect is assumed to be fulfilled through the application itself. |
| | 2.Certification challenges |
| | Different challenges have to be balanced when setting the baseline and demonstrating additionality. |
| | First, it is important to consider how the choice of the baseline and additionality requirements will affect the total number of economic operators that want to undertake carbon removal projects. Setting a very ambitious baseline, which is e.g. oriented towards best-in-class levels, may discourage uptake and lead to a very low uptake and small amounts of delivered carbon removals. Setting a baseline based on individual past performance has two drawbacks: (i) it can lead to unambitious results, as such a baseline will favour those economic operators that start from a very low business-as-usual performance; (ii) it will discriminate against early movers that piloted innovative projects in the past; as project developers fear that their past efforts may not be rewarded in the future, there is a risk that these rules may lead to inaction of economic operators while they wait for the certification framework to be in place 88 . The baseline should be defined to balance those opposing incentives. |
| | Second, it is paramount to minimise the administrative burden on economic operators. Establishing the baseline requires to quantify the baseline emissions and removals, and establishing regulatory and financial additionality can require a lot of information, such as an overview of the existing regulatory requirements, information on the business-as-usual land management, data about the profitability of a project, and/or an overview of the existing public subsidies available to carry out the same project with a justification that these incentives are not enough to trigger action. Baseline determination and additionality demonstration can represent up to 50% of costs associated to drafting projects documents when an “individualized” demonstration is required 89 . Most economic operators, especially in the carbon farming field, are small- or medium-sized enterprises (SMEs) that could be reluctant to take up carbon removal activities if certification is too complex. |
| | Finally, the certification methodology should minimise the risk that baselines or additionality tests are manipulated with a view to arbitrarily increase the volume of “additional” carbon removals. Experience with voluntary carbon markets have demonstrated significant risks of over-issuance of certificates. For instance, the climate performance in a historic or projected baseline may be arbitrarily underestimated to increase the volume of certificates generated (so called “hot air” certificates), or activities already planned for non-climate reasons may be presented as additional activities to receive more money from the sale of certificates (‘wind-fall profits’). Another challenge is represented by the risk of adverse selection: in the presence of a baseline computed as the average across a large sample with very heterogeneous circumstances, only the sites with a potential for producing more carbon removals than in the baseline may opt-in the programme, with no guarantee that the removals were not going to happen anyway because of the biophysical characteristics of these sites. |
| | 3.Existing approaches |
| | These challenges, which are common to the design of any incentive contract or scheme, have been discussed extensively in the voluntary carbon markets – from the Clean Development Mechanism under the Kyoto Protocol to the voluntary cooperation under Article 6 of the Paris Agreement. |
| | The implementation rules for Article 6.4 of the Paris Agreement, which were agreed at the Glasgow COP in 2021, provide the latest guidance on baseline setting and additionality. 90 Particularly important features are that baselines should encourage ambition over time and broad participation; be real, transparent, conservative, credible and below [i.e. more ambitious than] ‘business as usual’; and align with the long-term temperature goal of the Paris Agreement and the relevant Nationally Determined Contribution. |
| | The implementation rules for Article 6.4 promote a performance-based approach to setting baseline, taking into account: |
| | a.Best available technologies that represent an economically feasible and environmentally sound course of action, where appropriate; |
| | b.An ambitious benchmark approach where the baseline is set at least at the average emission level of the best performing comparable activities providing similar outputs and services in a defined scope in similar social, economic, environmental and technological circumstances; |
| | c.An approach based on existing actual or historical emissions, adjusted downwards to ensure alignment with the principles outlined in the previous paragraph. |
| | These standardised baselines shall be established at the highest possible level of aggregation in the relevant sector. |
| | As regards regulatory and financial additionality, the Glasgow Climate Pact says that “Additionality shall be demonstrated using a robust assessment that shows the activity would not have occurred in the absence of the incentives from the mechanism, taking into account all relevant national policies, including legislation, and representing mitigation that exceeds any mitigation that is required by law or regulation, and taking a conservative approach that avoids locking in levels of emissions, technologies or carbon-intensive practices”. |
| | As explained in annex 6, other important reference documents for the quantification of climate activities (the GHG Protocol and the ISO 14064-2 standard) describe two methods to establish the baseline: performance standards methods (the average performance of a group of projects) or project-specific methods (the past or projected performance of an individual project). Compared to the Glasgow guidance, the GHG Protocol and ISO standards still include the more generous method of a baseline based on the business-as-usual historic performance of an individual project, without reference to any external benchmark. Still, most certification schemes in the EU rely on project-specific baselines, based on an assumption that standardised baselines based on national averages may not be representative of the individual project’s circumstances: |
| | The French Label Bas Carbone allows the project developer to choose between an individual and standardised baseline. In case of a standardised baseline based on a national average, a discount is applied (i.e. a more ambitious baseline below the national average is demanded). |
| | In particular for carbon farming, the representativeness of standardised baselines will be significantly improved by recent advances in monitoring technologies, which can also largely simplify MRV procedures and lower costs. The representativeness of standardised baselines in carbon farming will be ensured by aggregating large amounts of observations from parcels in the same specific soil/crop/forest type and climatic context. Information on these parameters can gathered via remote sensing technologies (e.g. Copernicus programme) or existing databases (e.g. the Land Parcel Identification System of the Common Agricultural Policy, LUCAS). Thanks to machine learning and artificial intelligence applications, it is possible to classify each parcel according to these parameters and to assign to it a baseline which reflects the average emissions and removals in a very large number of comparable parcels. |
| | In addition, the Commission is working on the inclusion of environmental data surveyed in the context of the Farm Accountancy Data Network. This database is already used to define benchmark for economic performance of farmers in several Member States, grouped and clustered by using different criteria. The inclusion of environmental variables, including climate-related ones, will also give the possibility to build references related to carbon removals. Data inserted by farmers in on-farm carbon calculators, once largely deployed, will also represent an important source of data. Several commercial tools are already available; the Commission as well worked on the integration in the Farm Sustainability Tool for Nutrient (FaST) of a module for the calculation of GHG emissions, including carbon stock and changes, with a first version available to be tested and improved by operators 91 . |
| | Therefore, in the context of this Impact Assessment, we will consider three types of baselines based on a mix of the two categorisations proposed: |
| | ·a highly representative standardised benchmark, as just described, which would correspond to the best available technologies or best performing activities (first or second approaches described in the Glasgow rules) defined as the “economically feasible and environmentally sound course of action”, and present a high level of aggregation (i.e. based on a large number of observations) and of representativeness (activities in similar social, economic, environmental and technological circumstances); |
| | ·a generic standardised baseline based on historic national or regional averages, which would correspond to the third approach described in the Glasgow rules, and be less representative as based on a broader range of circumstances; |
| | ·a project-specific baseline based on the historical emissions of an individual project, which would correspond to the project-specific methods contemplated in the GHG protocol and the ISO standard and be based on information provided by the individual economic operator on its business-as-usual climate performance under current regulatory and financial constraints. |
| | Highly representative standardised baseline | Generic standardised baseline | Project-specific baseline |
| | Robustness | | Baseline can be validated through large datasets, remote sensing and modelling, and based on standard practices (e.g. Good Agricultural and Environmental Conditions (GAECs) from the CAP) to accurately reflect the circumstances of the carbon removal activities and standard practices. | | Baseline is more difficult to establish because of potentially different circumstances in regional or national averages. | May be difficult to avoid adverse selection, e.g. if an economic operator is above the baseline by virtue of their specific circumstances (e.g. soil type which is more carbon rich than the average soil in a country) and not because of any particular effort to go beyond standard practice. | Needs to be adjusted downward to reflect standard practices and data uncertainties. | | Baseline can be validated through direct observations or modelling, and accurately reflects the current circumstances of the individual project. | However, it relies on counter-factual arguments provided by the economic operator, which may be difficult to substantiate, and prone to arbitrary manipulation, especially in the case of forecasted baselines (high risk of ‘hot air’). | Needs to be adjusted downward to avoid rewarding small improvements compared to Business-as-Usual, which would not be aligned with the goals of the Paris Agreement. |
| | Incentives to uptake | | Incentivizes action beyond current practices and avoids continuation of inefficient business-as-usual practices. | Rewards ‘first-movers’ by acknowledging their additional effort compared to the standard practice under similar circumstances 92 ; may discourage uptake among “late-comers” (with very low climate performance) if too ambitious. | | A non-representative baseline could favour first-movers or late-comers depending on the composition of the sample. | | Rewards ‘late-comers’ (economic operators whose initial business-as-usual climate performance is very low) and discourages first movers |
| | Administrative burden | | Low administrative burden because baseline is established independently from economic operator. | | Low administrative burden because baseline is established independently from economic operator. | | Requires a large number of inputs from economic operator. |
| | A highly representative baseline, which already reflects well the market and regulatory conditions, will reduce the need for complex tests on financial and regulatory additionality. |
| | 4.Baselines and Additionality criteria for an EU framework |
| | 4.1.General criteria |
| | Based on the assessment in the previous section, the certification methodology should ensure that: |
| | ·the baseline incentivizes the broad uptake of carbon removal activities that go beyond standard practices; |
| | ·the carbon removal activity is additional from a regulatory and financial perspective; |
| | ·the administrative costs for establishing baselines and for testing additionality are minimised. |
| | Depending on the type of carbon removal, the setting of the baseline and the establishment of additionality will be straightforward (permanent storage) or more complex (carbon farming, carbon storage projects). |
| | 4.2.Additionality and baselines for permanent storage solutions |
| | Most industrial solutions that permanently store carbon in geological reservoirs are fairly nascent technologies that are often being started with the main purpose of sequestering carbon. In these cases, no emissions or removals would usually take place in the absence of a project to permanently store carbon, and a pragmatic approach to reduce certification costs could be to assume a standard baseline equal to zero removals (i.e. all carbon removals stemming from industrial solutions would not occur in the baseline). These technologies are also extremely costly and would not be profitable without a mix of public support and private financing through certification. If these assumptions can be justified (depending on the type of activity), then all removals can also then be considered additional, without the need to run any complicated test. |
| | 4.3.Additionality and baselines for Carbon Farming |
| | Based on the analysis carried out in the previous section, a highly-representative standardised baseline is considered the most pragmatic approach to ensure the recognition of the net climate benefits of activities compared to current practices on comparable parcels, while decreasing the burden on economic operators, where economic operators are usually SMEs with little time or skills to provide the extensive documentation and calculations needed to establish a project-specific baseline. A standardised baseline for carbon farming has also the advantage of recognising the effort of carbon farming practices that started before the establishment of the certification framework, thus rewarding first-movers. |
| | While such highly-representative performance standards would be the preferred approach, their effectiveness rests on the assumption that sufficient data and adequate technologies are available to construct such a baseline. Otherwise, other approaches could be available to certification schemes and economic operators, provided that the carbon removals resulting from the application of such baselines are discounted or adjusted to account for uncertainty and possible biases: |
| | ·A performance standard based on less representative national or regional statistics; |
| | ·A project-specific baseline based on historic data (only for a limited period to allow late-comers to ramp up their climate effort and catch up with the more progressive land managers who already put carbon farming solutions into practice); |
| | Irrespective of which baseline is eventually applied, economic operators should be free to choose a more ambitious benchmark level. |
| | Carbon farming activities in the EU take place in a regulatory context that already includes statutory requirements; these can be used to establish regulatory additionality for carbon farming activities. Examples of relevant regulatory standards stem from the Nitrate Directive 93 , the Water Framework Directive 94 and the National Emissions Ceilings (NEC) Directive. Within the CAP framework as well, certain conditions linked to the receipt of area-based CAP payments such as the standards of Good Agricultural and Environmental Condition (GAEC) described in the national CAP strategic plans, or any other relevant mandatory requirements established by national or regional legislation, whichever is the more ambitious and can be extrapolated to apply also to areas not subject to claims under the CAP. |
| | These standard practices can be used to validate the highly representative baselines for the different carbon farming activities, possibly grouped at the level of the appropriate jurisdiction (regional or national) through a standard baseline based upon these. |
| | When establishing financial additionality, it will be important to clarify upfront which combination of public and private support will or will not lead to double financing. In particular for carbon farming, the rules for support by the Common Agricultural Policy (CAP) and State aid need to be taken into account. |
| | Carbon farming projects often require financial support in their initial phase, for instance through financing of upfront investment costs via the CAP. While carbon farming practices may show reduced input costs (e.g. use of less fertilisers, less machinery etc.) or increased soil quality and thus soil fertility, which results in more resilient production in the long-term, they may result in an initial and temporary decrease of profitability, either because of an initial decrease of yields (extensification, reduced tillage), or due to necessary investments related to a change of management strategy (e.g. new sowing machine for sowing on residues). |
| | Box 2 - Combining private financing of carbon removals with public support by the Common Agricultural Policy (CAP) and State aid | It is essential to avoid double funding, i.e. help ensuring that beneficiaries do not receive a double payment for the same action. This is particularly relevant in the EU as most European land managers receive payments for voluntary schemes under the Common Agricultural Policy (CAP), such as eco-schemes and rural development (RD) interventions. | Eco-schemes and RD interventions for environmental, climate and other management commitments are generally schemes that design payments for land managers to undertake certain practices, i.e. the actual carbon sequestration inherent to those practices does not constitute the basis for the payment. Those practices, even if they are beneficial for carbon removals, are part of the whole farming management of the holding and the production of food and other ecosystem services so the relevant payments are intended to finance such practices and not directly aimed at rewarding carbon removals so that double funding is excluded. The same reasoning would apply to other CAP financing for voluntary measures covering costs which support the adoption of carbon removing practices: investments, advisory services, training, research possibilities, collective approaches etc. do not finance the achievement of carbon removals so that a combination of CAP funding and revenues from private markets would not constitute double funding. | Similar considerations apply mutatis mutandis to support through State aid: the risk of double funding could occur only where State aid is granted in favour of a carbon sequestration scheme that would pay the beneficiary based on the actual carbon removals generated, whereas national financing of other aid measures could be combined with financial revenues from the selling of certified carbon removals on the markets, without creating such a risk. |
| | 4.4.Additionality for carbon storage products |
| | As the experience with certification schemes for product storage is still limited, no best practice can be yet identified. As one of the few examples, the CarboMark methodology for wooden products proposes e.g. that carbon credits could be generated if the ratio of wood in construction was higher than the national average. |
| | Annex 8: Quality Criteria – Long-term storage |
| | 1Introduction |
| | A peculiar characteristics of carbon removals, which distinguishes them from emission reductions, is the risk that the stored CO2 is re-emitted to the atmosphere (i.e. risk of reversal). It is important that any certification methodology includes elements to address this risk and to guarantee the long-term sequestration of carbon, providing carbon removal projects with the appropriate incentives to store carbon over the long term and policymakers, financers and stakeholders with more clarity on the exact duration of the sequestration. |
| | 2Certification challenges |
| | The average duration of carbon sequestration varies enormously across the spectrum of carbon removal activities. Activities sequestering carbon in soil and vegetation can store carbon for decades to centuries while those sequestering carbon in geological formation can store carbon for ten thousand years or more 95 . |
| | Early release of carbon can occur due to intentional or unintentional reversal. These risks varies significantly between different types of mitigation activities and the likelihood, scale, and timing of an early carbon reversal is difficult to predict ex ante. It is important to establish appropriate regimes to allocate liability for redressing carbon reversals, intentional or unintentional, over the lifespan of a removal activity. |
| | A framework ensuring the long-term storage of carbon needs to consider the expected duration of carbon sequestration of carbon removal activity under normal circumstances, as well as the risk of an early release of carbon into the atmosphere, the measures put in place to mitigate this risk and account for potential release and the arrangements to share the related economic risks. |
| | 3Existing approaches |
| | 3.1Accounting for the diversity of expected storage durations |
| | The GHG effect of a ton of CO2 emitted in the atmosphere last for centuries. Neutralising emissions with carbon removals requires addressing this long term GHG effect by ensuring that enough carbon has been removed from the atmosphere for long enough. Three strategies can achieve a compensation of CO2 emissions with carbon removals: |
| | ·The first option is to compensate one tonne of CO2 emitted with one tonne of permanent carbon removal, i.e. one tonne of CO2 stored for several centuries out of the atmosphere. |
| | ·The second option is to compensate one tonne of CO2 emitted with over time a succession of one tonne of temporary carbon removal to ensure that when the first tonne of carbon removal is released back to the atmosphere, another tonne of carbon is removed from the atmosphere. |
| | ·The third option is to compensate one tonne of CO2 emitted with up front multiple tonnes of temporary carbon removal. For a given time horizon, an equivalence could be defined between a long term carbon removal and multiple short term carbon removals. |
| | 3.1.1Very long term carbon sequestration |
| | The simplest way to address the issue of long-term storage is to focus on “permanent” carbon removals or carbon removal solutions that, under normal circumstances, and appropriate management practices, store carbon for a predefined number of years, for instance 100, 500, 1000 years or more. However, this approach can exclude most of carbon farming approaches, CO2-derived products, and other temporary storage solutions that can provide value to avoid the worst short-term impacts of climate change while potentially providing co-benefits on other environmental aspects. |
| | An example of voluntary scheme focusing on the certification of very long term carbon removals is Puro.earth 96 . It includes methodologies with assumed long-term storage periods such as biochar, carbonated building elements or geological stored carbon. However this marketplace defines long-term storage as more than 50 years, does not require any specific procedures to monitor and account for potential CO2 reversal and does not establish liability regimes. 97 Moreover, the “proof of permanent sequestration” required in the methodology are very relative: Biochar is considered permanent by proving it is not used for energy purposes; carbonated building elements are considered a priori permanent regardless of the use of the carbonated building elements and the end of life emissions are not considered; for geological stored carbon the legislation of the jurisdiction of the storage site applies. |
| | More stringent requirements are set by regulatory frameworks. The EU requires that any geological site in the EU storing more than 100 kt CO2 of total storage from any source (fossil, biomass, and atmosphere) must be permitted in accordance with the CCS Directive. The primary aim of the Directive is to ensure safe and environmentally sound practice, including effective site selection and management to reduce the risk of site leaks. The CCS Directive also establishes a structured liability framework governing the stewardship of the stored CO2 over the long-term. CO2 pipelines and geological storage sites falling within the scope of the CCS Directive are also subject to an environmental impact assessment (under the EIA Directive). In the event of leaks from the geological storage site (carbon reversal), the conditions of the GHG permit under the ETS require the site operator to monitor, report and surrender EU Allowances equivalent to the mass of CO2 estimated to have leaked. Following liability transfer, the host Member State is obliged to monitor and report emissions in accordance with the 2006 IPCC Guidelines. |
| | 3.1.2Temporary carbon removals |
| | The vast majority of carbon removal projects deployed today are sequestering carbon through nature-based solutions that cannot guarantee a very long term storage of carbon. An analysis conducted in Arcusa et al. (2021) 98 across twenty carbon removal standards developing organisations has shown that most of the proposed carbon removal standards stipulate duration of sequestration management between 10 and 100 years, often without specific consideration for the physical characteristics of the storage and without consistency across standards (different standards can require different durations for the same type of removals). In fact, the standard stipulations on duration refer often to the active monitoring period of the project under which the project developer is liable but without any constraint on liability or on the validity of the certificate once the monitoring period ends. This means that in most cases there is no guarantee of carbon sequestration beyond the monitoring period when an afforestation offset programme certifies 1 tonne of carbon removal to compensate for 1 tonne of GHG emitted. |
| | Only very few certification schemes have introduced expiry date on certificates to account for the temporary nature of carbon farming removals. A time-limited certification has been introduced in the Clean Development Mechanism through temporary and long-term certified emission reductions (tCERs and lCERs). These certificates for afforestation and reforestation activities were designed to periodically expire and re-issuance could be done only upon verification. The tCERs were based on sequestration levels at a given verification date and expired after 5 years. The lCERs expired after either 30 or 60 years. A major barrier explaining the poor uptake of these certificates was the reluctance of potential investors to engage due to the higher administrative burden of reapplications and the fact that tCERs and lCERs were not allowed to be traded under EU ETS due to the risk that a replacement with permanent credits would not be feasible. Given the large oversupply of carbon credits under the CDM, the temporary credits were not successful on the voluntary market because buyers could already buy permanent credits at extremely low prices. |
| | More recently, the US marketplace Nori 99 , specialised in soil carbon sequestration, has chosen to issue temporary carbon removal certificates valid for 10 years, with robust monitoring obligations. After this period, the farmer can re-enrol and re-register projects. Nori believes that long-term permanence for nature-based solutions is more likely to be achieved through recurring carbon retention payments, as opposed to large up-front payments and land-use restrictions imposed by covenants. 100 |
| | 3.1.3Carbon removal equivalence |
| | One of the main barriers with temporary removal is the process to renew the certificate once it expires, which requires to set up a mechanism where the buyer commit to replace the expired certificate with a permanent certificate or another temporary certificate. Some certification mechanisms get around this issue by setting equivalence factors to compare short term temporary removal to longer term removals. The central idea is that the climate impacts of CO₂ can be characterized by the quantity of CO₂ involved and the time it resides in the atmosphere. A larger quantity of CO₂ stored for a shorter period of time and a smaller quantity of CO₂ stored for a longer period of time can claim equivalent climate outcomes. |
| | Following this approach, the constraint of acquiring several temporary carbon removal certificates over time is replaced by the acquisition of multiple temporary carbon certificates upfront. The tonne-year approach referred in the 2000 IPCC special report on Land Use, Land-Use Change and Forestry 101 is building on this principle. An equivalence could be for instance that a temporary carbon removal of 50 year provides 25% of the climate benefit from a 1000 year storage and therefore 1 tCO2 could be neutralised by investing upfront in 4 temporary certificates instead of single permanent one. 102 |
| | The tonne-year methods simplify the management of temporary carbon removal from an investor perspective by quantifying the benefit of carbon sequestration on an annual basis; this is the main reason why programmes such the Natural Capital Exchange (NCX) 103 and more recently the Canadian national carbon offset system 104 propose such methods for certifying carbon removals. 105 Tonne-year methods can be applied to any type of temporary carbon storage, to carbon farming activities but also to solutions storing carbon in products. |
| | However, they also come with challenges, the main one being the fact that the resulting equivalence depends very much on the time horizon selected and the specific methods used. An analysis conducted by Carbon Plan 106 reports equivalence ratio from offsetting programmes can vary greatly with some requiring 100 year of 1 tCO2 stored to compensate for 1 tCO2 emitted while others requiring only 17 year. The choice of the equivalence ratio is a difficult exercise and partly arbitrary, with potential impacts in terms of environmental integrity when it is set too low or on cost for investors when it is set too high.Other drawbacks of these methods include: 1) There is no assurance that the carbon removal project has the right incentives to carry out its activities for the long term. 2) The diversity of carbon storage products from their production to their end of life is not well captured with such simple methodologies and more complex dynamic life-cycle assessments have been proposed for a consistent consideration of non-fossil carbon storage and timing of GHG emissions in a products. A dynamic LCA approach uses a dynamic inventory, which details each emission through time (i.e., the amount of GHG released at every given time-step), and dynamic characterization factors to determine the impact of emissions for every time-step. 107 |
| | 3.2Managing the risk of early release of carbon |
| | To cover the risk of an early release of carbon, robust certification schemes should put in place measures to decrease this risk and allocate liabilities adequately. Reducing the risk of reversal goes thorough assessment of carbon removal projects accounting for local conditions and technological factors. Three broad approaches offer means to address the risk of early reversal and allocates liabilities; these approaches can be combined to a certain extent. |
| | 3.2.1Liability set on the economic operator: Monitoring and compensating for reversals |
| | The economic operator (i.e. carbon removal supplier) maintains liability for the issued certificates in the event of carbon reversal. If a reversal is recorded as activity emissions during the monitoring period, these can generally be deducted from the overall level of removal certificates to be issued. However, if the level of emissions exceed the level of removals achieved in the monitoring period, conditions for certification can include a mandate for economic operators to acquire and retire certificates from other suppliers or other sources. Concerns about the costs in such events may inhibit uptake of certification for some type of carbon removal solutions. However, private insurance products may be available to limit the risks for economic operators. This approach does not directly address the risk of CO2 reversals beyond the monitoring period. The duration of the monitoring is therefore an essential element to assess the robustness of certification under this approach, and monitoring periods vary considerably among certification schemes, between 1 and 100 years from the start of the crediting period. 108 |
| | 3.2.2Liability at the level of a financial intermediary: Pooling the risk |
| | In some cases, a financial intermediary puts in place measures to manage liability for carbon reversals on behalf of economic operators. This usually involves applying discount factors to the quantity of net carbon removals certified, possibly proportional to the risk of early reversal of a given carbon removal activity. The part of carbon removal that is discounted can be withheld and allocated to a buffer account in a registry that is operated by the certification scheme. This common buffer reserve can be drawn upon to cover reversals from any economic operator participating in the buffer. |
| | This approach absolves the economic operator of direct liability, thus reducing the disincentive to participate. It is widely adopted 109 among certification schemes and offsetting programmes. A key element is setting the discount rate and dimensioning the size of the buffer reserves to cover reversal risks over time during the active period of the project and also, preferably, after the end of the monitoring period of carbon removal activities. It is therefore important to establish which fraction of carbon credits is put into the reserve and how the reserve is replenished in case a reversal needs to be compensated for. |
| | 3.2.3Liability at the level of the user |
| | The liability for carbon reversal risk is attached to the certificate and therefore passed on to its buyer. In case of a reversal, the certificate loses its validity and the buyer needs to acquire a new certificate to preserve the benefit of the associated carbon removals. This approach is rarely used by certification schemes and its pertinence would depend on the context in which the certificate is used. It can inhibit the uptake of certification for some types of use, for instance in an offsetting context. |
| | 4Long-term storage criteria for an EU framework |
| | 4.1General criteria |
| | The following best practices can be identified to better distinguish the different capacities of carbon removal solutions to sequester carbon over the long term: |
| | ·For technology-based removal solutions that offer the possibility for very long-term storage (e.g. BECCS and DACCS), the liability rules of the CCS Directive provide the most robust standard for permanent storage, i.e. the carbon removal project remains responsible for monitoring and reporting and liable to compensate for any re-emission with a transfer of liability foreseen at the cessation of the activities. |
| | ·Carbon removal projects that cannot offer permanent storage (e.g. carbon farming, carbon storage products) should be able to commit for shorter time periods: |
| | oDuring the commitment period, the carbon removal project takes the full liability for any re-emission. |
| | oThe carbon removal project needs to commit to at least a minimum duration that is appropriate in view of the technological, regulatory and business conditions. |
| | oIt should be possible to renew those short-term commitments or to commit upfront for a longer time period. |
| | With a view to transparency, clear rules should be established that the certificate becomes void after the expiration of the commitment period, e.g. no claim can be made that the carbon which was removed from the atmosphere during the project is still sequestered after the expiry date of the certificate. |
| | These principles allow to design methods tailored to the different types of carbon removals. The strengths and weaknesses of the approaches just described are compared in Table 6 . |
| | Table 6: Comparison approaches for long-term storage criteria |
| | Policy baseline | Temporary storage | Permanent storage |
| | Short description | The risk of reversal is addressed through a combination of two approaches: a buffer setting aside a % of certificates and/or a liability for the economic operator during the monitoring period of the project. | The release of sequestered carbon after the end of the project, including the monitoring period, is not directly addressed. | The certification is valid until an expiry date set in accordance with the expected duration of the carbon removal under normal circumstances. | Monitoring obligations and liability are set only until the expiry date of the certificate. | The economic operator must monitor potential reversal and is liable during the operational phase of the project and after closure up until transfer of responsibility to a private or public entity. |
| | Transparency on the duration of the storage | | The risk of reversal after the end of the activity/monitoring period is rarely addressed. | Even though the amount of certificates set aside in a buffer could be adjusted to the likelihood of reversal of various types of carbon removals, a common percentage of certificates is usually set aside often irrespectively of the expected risk. There is not clear distinction between carbon removals with very different durations. . | | Temporary sequestration and expected duration is acknowledged by the expiry date of the certificate. | Monitoring obligations and liability regimes are set during the validity period of the certification. | The certificate can be renewed if the activity or monitoring is continued. If not, the carbon is assumed to be released after the expiration of the certification. | | The very long-term storage of the carbon is recognised with a permanent validity of the certification. | Clear rules establish liability and monitoring obligations during the project and after the end of the project (as set out in the Carbon Capture and Storage (CCS) Directive for geological storage). |
| | Incentivising long-term storage | | Incentive is given to mitigate the risk of reversal before the end of the project, which can take place over several decades. | No specific incentives to maintain the sequestration of carbon beyond the duration of the project. | | Incentive is given to mitigate the risk of reversal before the end of the project, which can take place over several decades. | A renewal of the temporary certificate will maintain the sequestration for a longer period than the initial validity period. | | Only permanent carbon removal solutions can be certified under this approach. |
| | Administrative burden | | Simple to implement with limited costs and low economic uncertainty for projects. Adapted to small scale projects. | | Simple to implement with limited costs and low economic uncertainty for projects. Adapted to small scale projects. | The obligation for the renewal of the certificates after the expiration can be seen as an administrative constraint, in particular for use such as offsetting. | Well adapted to financial contributions without offsetting claims. | Fair and transparent sharing of reversal risk between economic operator and financer. | | Stringent long-term liability can be source of economic uncertainty or entry barrier for small-scale projects. Financial insurance mechanisms or risk pooling arrangements can be set. | Transfer of liability after the closure of the project requires the commitment of a new private entity or public authorities. |
| | Application | This approach would apply to carbon farming and carbon storage products | This approach would apply to all permanent storage solutions (geological storage and others), |
| | 4.2Long-term storage for Permanent Storage solutions |
| | Geological storage is often considered as a virtually permanent solution for the sequestration of carbon. Appropriately selected and managed geological reservoirs are very likely to retain over 99% of the sequester CO2 for longer than 100 years and likely to retain 99% of the sequestered CO2 for longer than 1000 years. 110 The injection of gases with high CO2 concentration in subsurface formations for rapid carbon mineralization is a trapping technique that can permanently store CO2 in reactive rocks such as basalt and mafic or ultramafic rocks in general. |
| | Carbon removal relying on geological storage present a high level of confidence regarding their long-term storage with already an existing framework covering the risk of reversal and attribute liabilities. From a certification perspective, these solutions can be considered as permanent without the necessity to put new measure to complement the existing regulatory framework in the CCS Directive. Any geological site in the EU storing more than 100 kt CO2 of total storage from any source (fossil, biomass, and atmosphere) must be permitted in accordance with the CCS Directive. |
| | Other permanent solutions to remove carbon such as enhanced rock weathering or ocean alkalinisation have also the potential to store carbon for more than 10.000 years 111 with limited risk of reversal but further research is required for these solutions. |
| | 4.3Long-term storage for Carbon Farming |
| | Overall, biological processes can sequester carbon for decades to centuries and face a higher risk of reversal due to the necessity to maintain practices that prevent the release of CO2 to the atmosphere, including the potential impact of climate change on natural ecosystems. |
| | All biological carbon sinks are prone to depletion through natural or anthropogenic events. Changes in ownership of the land and tenure arrangements can also lead to land use change impacting carbon stocks. Based on the carbon removal solutions identified in the IPCC AR6 WGI report 112 , Table summarises the risk of reversal for selected carbon farming solutions. |
| | Table 7: Risk for reversal with carbon farming projects |
| | Risk of reversal in an EU context |
| | Afforestation, Reforestation, | Improved Forest management, | Agroforestry | Natural disturbances (e.g. fires, pests, droughts), extreme weather. Climate change can increase the risk in the future. | Change in management practices. |
| | Soil carbon sequestration in cropland and grassland | Soil and crop management. The soil carbon stocks are sensitive to management practices. Not maintaining carbon farming practices could quickly lead to the release of carbon back to the atmosphere. The progression of climate change is increasing reversal risks. |
| | Peatland and wetland restoration | Peatland drainage, fire, drought, land use change. | |
| | Biochar | Biochar remaining in the soil are at lower risk of reversal. Fire could potentially release carbon from it. Lower residence times occur under tropical and sub-tropical regions and not in Europe, higher residence times in dry soils. |
| | Establishing a long-term liability at the level of the economic operator – comparable to the rules of the CCS Directive – would imply economic risks difficult to take on for a land manager. Nevertheless, it is important that land managers engage to climate-friendly practices on a long-term basis, and contractual agreements can prevent the voluntary early withdrawal of carbon-farming projects. A pre-defined period of commitment where the land manager is liable for adopting carbon farming practices could be set and continuously renewed (building on existing practices with private buyer contracts or subsidy schemes under the Common Agricultural Policy). Such arrangements can secure a continuous income stream for the land managers and limit their risk exposure, which is particularly important for the promotion of carbon farming with land managers who have smaller holdings. |
| | The issuance of temporary certificates with an expiry date would provide a very transparent information on the temporary nature of carbon removal solutions while preventing the use of the certificates beyond their validity. A minimum duration of validity would be set according to existing regulatory or business practices (e.g. programming period of the Common Agricultural Policy for soil management). However, carbon removal projects should be able to go beyond and be able to commit up to the expected duration of the specific carbon farming solution or to renew their commitment period. |
| | To manage the risk of early release of carbon, additional risk measures – such as buffers, risk pooling, or tonne-year accounting – can be applied. |
| | 4.4Long-term storage for Carbon Storage Products |
| | The potential for carbon sequestration in products depends very much on the type of product and its end-use. Bio-based and CCU products encompass a very large range of storage duration and risk of reversal, the assessment should be carried out on a case by case basis, for instance construction products are often considered as low risk of reversal over the first 50 to 100 years. |
| | Certification of removals through bio-based products should align with models used for Harvested Wood Products (HWP) in the national GHG inventory compilation. In this context,the criterion of long-term storage should be implemented either through: |
| | ·Issuance of temporary certificates that expire at rates aligned with the HWP half-life under the first-order decay (FOD) calculation approach according to 2006 IPCC Guidelines, or |
| | ·Use of a variant of tonne-year methods to calculate the amount of certificates to be issued based on the time equivalency of the mitigation aligned to the assumed HWP half-life. |
| | There is no fundamental reason to treat CCU products differently than bio-based products. A FOD approach coupled with temporary certificates or tonne-year accounting would also fit CCU products with different life expectancy and risk of reversal. A FOD set to zero would represent a permanent storage but imposing requirements similar to the CCS Directive on the monitoring of carbon reversal from CCU products could turn out to be hardly implementable given the likely more complex value chains of CCU products over their lifetime and changing ownership. |
| | Annex 9: Quality Criteria – Sustainability |
| | 1Introduction |
| | Carbon removal actions have the potential to affect sustainability objectives beyond climate targets, as highlighted by the most recent reports by the IPCC 113 and can therefore contribute positively to sustainable development goals, including adaptation to climate change, food and water security, and biodiversity. |
| | As highlighted in the EU Biodiversity Strategy 114 , nature is a vital ally in the fight against climate change and nature-based solutions 115 , such as protecting, restoring and managing sustainably ecosystems, are essential for climate action. Carbon removals activities should minimize trade-offs and instead encourage synergies with other environmental impact categories. |
| | There is growing scientific evidence 116 that the healthier and more biodiverse an ecosystem, the higher its productivity and multi-functionality, the more carbon it stores and the more resilient it is to the impacts of climate change. It is therefore important that ecosystems on all types of land, including forests, grasslands, croplands and wetlands, are in good condition to be able to capture and store carbon efficiently. |
| | Dimensions of sustainability other than biodiversity, such as land tenure and food security, also need to be addressed. It is necessary to ensure that carbon removals do not exclude sustainable models of agriculture or land management, for instance through increased uncontrolled competition for land. If monocultures were to replace natural forests and subsistence farmlands, some carbon removals activities, such as afforestation and bioenergy with carbon capture and sequestration (BECCS), would raise various issues with adverse side-effects for adaptation, biodiversity, and other sustainability objectives. As such activities involve land use change that can affect food and water security as well as local livelihoods, they can cause conflict around land tenure and access. Several cases of increased land competition due to the implementation of voluntary climate scheme have been documented, including large-scale land acquisition for afforestation and peatland restoration in the United Kingdom 117 or the conversion of farmland to forestry induced by carbon offsetting in New Zealand 118 . To prevent these adverse impacts, appropriate sustainability requirements are necessary to ensure the right choice of species and management practices, the implementation of these measures at appropriate scales and on relevant locations, and the suitable integration into territories. |
| | However, carbon farming practices can improve the soil fertility and land resilience to climate change, and thus contribute to better food security and sustainability. These win-win synergies should be encouraged in order for carbon farming to remain truly a new business model for farmers, foresters and land managers, as set out in the Farm to Fork Strategy 119 . Practices increasing carbon sequestration in trees and soils can help to conserve and restore biodiversity and to maintain and enhance multiple ecosystem services 120 . |
| | Sustainability issues are not specific to carbon farming but apply to all types of carbon removals. For example, industrial carbon removals can be resource, land or energy intensive and affect localised pollution. Conversely, carbon storage products often have advantages in terms of energy efficiency, user comfort and circular economy. The successful implementation of carbon removal activities depends on consideration of local environmental and socio-economic conditions. Certification methodologies that capture negative and positive impacts, as well as the engagement of civil society organisations, can help in deploying carbon removal projects with high acceptability, equitability and sustainability. |
| | 2Certification challenges |
| | The assessment of sustainability impacts can cover a wide range of climate (e.g. adaptation), environmental (e.g., air, water and soil quality, protection of natural resources, biodiversity conservation), social (e.g. public health, energy access, food and water security) and economic goals (e.g. energy independence, income stability, green job creation, technology transfer). |
| | ·Safeguards can be defined as a set of principles, rules and procedures put in place to prevent adverse side-effect 121 and to reduce trade-offs 122 : activities carried out for a purpose of climate change mitigation should not have trade-offs that would lead to significant negative impacts on other environmental and socio-economic objectives. In this sense, the concept is similar to the environmental impact assessment required for many projects in national and European regulations. At the international level, forest carbon standards were equipped early-on with particularly elaborate systems of safeguards, with social, environmental and procedural criteria 123 . |
| | ·While safeguard clauses are aimed to prevent negative impacts on other sustainability dimensions, the notion of co-benefits 124 aims to demonstrate the positive impacts that mitigation activities can have on other environmental and socio-economic objectives. Although various definitions of co-benefits can be considered 125 , they imply effectively a ‘win–win’ strategy to address two or more goals with a single activity. |
| | A robust monitoring of sustainability impacts requires a solid framework of indicators and statistical data to monitor progress, inform policy and ensure accountability of all stakeholders. At UN level, a global indicator framework was adopted to measure and monitor progresses the along the 17 SDGs of the 2030 Agenda for Sustainable Development 126 . Eurostat used a similar structure in its monitoring report on sustainable development 127 . Sustainable development objectives have been at the heart of European policymaking for a long time, firmly anchored in the European Treaties 128 and mainstreamed in key projects, sectoral policies and initiatives, including under the European Green Deal 129 . As many of the SDG concerns are already being integrated in regulatory obligations, the challenge to include sustainability criteria in carbon removal certification could be simplified in the Union. |
| | If SDGs are highly relevant to frame sustainability impact assessment, associated indicators are however only partially applicable at the project level and can overburden project developers. Besides, the ambiguity of the notion of sustainable development has led to different definitions and interpretations, resulting in a large number of indicators and ratios. Based on an analysis of 217 project-level indicators from different existing schemes, Day et al. (2020) 130 identified five potential issues when using indicators to assess sustainable development impacts: |
| | 1.Indicators may be vague and may not refer to specific results, making it difficult to understand the impact and magnitude of the impact; |
| | 2.Even in the case of a specific result or impact, the link with the project level may be only indirect, making it difficult to understand cause and effect relationships; |
| | 3.Some indicators do not lend themselves to the use of quantitative measures, reducing accuracy and transparency; |
| | 4.Some indicators are very complex and require large data collection and processing efforts; |
| | 5.Indicators may also raise politically sensitive issues, hindering their implementation. |
| | Pragmatic solutions can improve sustainable development impact assessment without increasing complexity: indicator definitions should be specific enough to ensure that there cannot be multiple interpretations; one-dimensional indicators should be used when possible, to ensure comparability and reduce costs; indicators should be expressed in absolute terms to increase the comparability and ease the verification. |
| | Another certification challenge for assessing the sustainability impacts of carbon removals relies in the site-specific dependency of side-effects and co-benefits, which vary according to topography, bioclimatic conditions and other conditions of the place where removals activities are taking place, the past and current practices, and more generally the socio-economic conditions of the populations present on or near the site. |
| | The following table summarises some co-benefits and trade-offs identified by the IPCC AR6 WG3 report 131 for selected carbon removal solutions. |
| | Table 8 – Co-benefits and trade-offs of carbon removal solutions |
| | Co-benefits | Trade-offs |
| | Afforestation and reforestation | Focusing on e.g. degraded lands or biodiversity friendly afforestation has significant co-benefits, including for biodiversity and adaptation. | Afforestation that results in monodominance could reduce biodiversity. | Inappropriate deployment at large scale can lead to competition for land with biodiversity conservation and food production. | Reduced catchment water yield and lower groundwater level if species and biome are inappropriate. | Potential leakage due to afforestation of productive land, with commercial activities shifting. | Afforestation can alter albedo changes and other local biophysical variables. |
| | Improved Forest Management | Sustainable forest management can lead to enhanced biodiversity and productivity, water quantity and quality. | High co-benefits, including ecosystem and biodiversity preservation, as well as water quality and water quantity benefits. | If it involves increased fertiliser use and introduced species it could reduce biodiversity and increase eutrophication and upstream GHG emissions. | In some cases, improved forest management for mitigation can lead to mal-adaptation, e.g. increasing biomass in fire-prone forests. | Leakage effects are low, as forest management occurs on existing forest land and has only small impacts on timber production. | If it involves short rotations, clear-cutting and even-aged management to benefit from high storage rates in young forests, it can have negative effects on biodiversity and soil health/storage capacity |
| | Agroforestry | Enhanced biodiversity (e.g., on pollinators, insects, and provision of habitats), improved soil quality, more resilient ecosystems. Protection against flooding, nitrate leaching, and soil erosion | Significant positive impact on biodiversity (including habitat provision, pollinators and insects), reduced soil erosion and improved soil health, flooding protection and reduced nitrate leaching. | Modest trade-off with agricultural crop production. | Low risk of leakage since agroforestry does not fully replace existing arable/animal production (although small impact on output). |
| | Soil carbon sequestration in cropland and grassland | High co-benefits. Improves soil structure and soil fertility, increases water retention capacity of soils and increases resilience to climate change, reduces soil erosion and reduces soil compaction risk. | Potential negative impacts on production in the transition period. | There are concerns about possible unintended impacts on soil health (due to pollutants) if the SOC levels are increased by applying off-farm organic inputs. There may be trade-offs with N2O emissions. Clear estimates for risk of leakage are not available in literature. |
| | Peatland and wetland restoration | Improved biodiversity, soil carbon and nutrient cycling, water and soil quality, protection from floods and coastal storms. | Many co-benefits, such as biodiversity conservation, flood protection, improved soil and water quality, protection from coastal storms, as well as cultural ecosystem services. | Competition for land on some peatlands used for food production. | Small-medium leak-age risk due to activity displacement (though relatively small peatland area, so limited risk). | Peatland restoration in-creases methane emissions (though in most contexts in medium and long term net GHG effect is negative) |
| | Biochar | Increased crop yields and increased resilience to drought. Stabilization of toxins and heavy metals, the decrease of soil nutrient losses, improved soil structures and water holding capacities. | Expected co-benefits are uncertain but expected to be relatively small; improved soil structure, water holding capacity, reduction in nutrient losses from soils, stabilisation of heavy metals and other toxins. | Environmental impacts associated with particulate matter (soil black carbon emissions); competition for biomass resource, potential GHG leakage due to biomass production, decrease in albedo, potentially negative effects on biodiversity | Unclear impacts on worms and soil fauna, or broader impacts on biodiversity. Precautionary approach should be applied until better scientific understanding of side-effects and long-term impacts. Leakage can occur if biochar biomass production competes with other land uses. Biochar application poses no leakage risks as biochar can be applied to existing crop/grasslands. |
| | BECCS | Fuel security, use of residues, generation of energy, energy independence, bioenergy pathways | Relatively large land requirements compared to other carbon removal options. Competition for water to grow biomass feedstock. Biodiversity and carbon stock loss if from unsustainable biomass harvest. Increased competition for land, potential land use change and deforestation. | Competition for biomass & land, forests managed with weak MRV, and pressure on bio-diversity and water resources. |
| | DACCS | DAC installation have a low land area footprint. | Energy requirement and emissions associated when fossil sources of energy are used. | Land area footprint for the production of energy when wind or solar energy is used. | Water requirement |
| | Bio-based products | Substitution of fossil carbon products. | Production with long-term circularity potential. | For some products, end-of-life use as an agricultural amendment. | Competition for water and land to grow biomass feedstock. Biodiversity and carbon stock loss if from unsustainable biomass harvest. Increased competition for biomass & & land use. |
| | Carbon capture and utilisation | Substitution of GHG intensive products. | Foster circular use of carbon. | End of life of the product conditions the real environmental benefit, large energy requirements | High energy demand |
| | 3Existing approaches |
| | 3.1Sustainability assessment and requirements in EU policies |
| | 3.1.1Existing legislative frameworks |
| | The European ambition for sustainability is long-standing and many assessment frameworks have been built over the years to verify the sustainability of activities and projects, especially on environmental aspects. Two important general frameworks are: |
| | ·The Environmental Liability Directive 132 establishes a framework based on the polluter pays principle to prevent and remedy environmental damage. The Directive defines "environmental damage" as damage to protected species and natural habitats, damage to water and damage to land. Guidelines 133 were adopted that clarify the scope of the term 'environmental damage' in the Directive. These guidelines help Member States to better assess whether damage to water, land and protected species and natural habitats must be prevented or restored by explaining the scope of each of these categories in detail. |
| | ·The Environmental Impact Assessment Directive 134 , whose first version was adopted in 1985, is one of the oldest pieces of EU environmental legislation. It ensures that environmental considerations are properly considered when project decisions are made, with a view to reducing their environmental impact and making the projects more sustainable, thus contributing to sustainable development. |
| | ·The Environmental Footprint method 135 defines the recommended modelling requirements, data quality requirements 136 , and life cycle impact assessment 137 to be followed when assessing the environmental performance of products and organization. Such methods allows to identify co-benefits and trade-off between climate change and the other 15 impact categories. |
| | 3.1.2Sustainable finance taxonomy |
| | More advanced frameworks for assessing environmental sustainability at activity level have emerged under the EU sustainable finance policies, relying on long-established policies related to environmental liability and environmental impact assessment. In the EU's policy context, sustainable finance is understood as finance to support economic growth while reducing pressures on the environment and taking into account social and governance aspects. The financial sector has a key role to play in delivering on climate objectives. Following the sustainable finance action plan 138 and the strategy for financing the transition to a sustainable economy 139 , the Commission has implemented a sustainable finance toolbox. One of these tools is the EU taxonomy, a classification system, establishing a list of environmentally sustainable economic activities, and providing companies, investors and policymakers with appropriate definitions of which economic activities can be considered environmentally sustainable. The Taxonomy Regulation 140 establishes six environmental objectives: |
| | ·Climate change mitigation, |
| | ·Climate change adaptation, |
| | ·The sustainable use and protection of water and marine resources, |
| | ·The transition to a circular economy, |
| | ·Pollution prevention and control, |
| | ·The protection and restoration of biodiversity and ecosystems. |
| | The regulation establishes the basis for the EU taxonomy by setting out 4 overarching conditions that an economic activity has to meet in order to qualify as environmentally sustainable: |
| | I.it contributes substantially to one or more of the six environmental objectives; |
| | II.it does not significantly harm any of the other environmental objectives; |
| | III.it is carried out in compliance with minimum safeguards that target human rights; and |
| | IV.it complies with the “technical screening criteria” that are established by the European Commission through delegated acts. The technical screening criteria specify the conditions under which an economic activity meets criteria (i) and (ii). |
| | Minimal safeguards in the area of human rights refer to procedures carried out to ensure the alignment with the OECD Guidelines for Multinational Enterprises 141 and the UN Guiding Principles on Business and Human Rights 142 . |
| | In order to receive input from experts from across the economy and civil society, the Platform on sustainable finance 143 is tasked with advising the European Commission. Advice can deal with the further developing the EU taxonomy, improving its usability and exploring its expansion to social objectives 144 . It is also working on the environmental transition taxonomy 145 , with extension options including activities that significantly harm the environment or activities that are neutral towards the environment. |
| | A first delegated act 146 has been published on sustainable activities for climate change adaptation and mitigation objectives. A second delegated act for the remaining objectives will be published in 2022, analysing the platform’s recommendations on technical screening criteria for the four remaining environmental objectives 147 . |
| | The Climate Delegated Act of the Taxonomy includes technical screening criteria for the following activities, particularly relevant for carbon removals: |
| | ·Forestry: afforestation; rehabilitation and restoration of forests, including reforestation and natural forest regeneration after an extreme event; enhance sustainable forest management; Conservation forestry; |
| | ·Environmental protection and restoration activities: restoration of wetlands; |
| | ·Water supply, sewage, waste management and remediation: material recovery from non-hazardous waste; underground permanent geological storage of CO2. |
| | What does not qualify as a green economic activity under the EU Taxonomy is not necessarily unsustainable given the need to make a ‘substantial contribution’. The taxonomy is a living document, with the possibility to add screening criteria for new activities that make a substantial contribution to one of the six environmental objectives in the taxonomy and don’t harm any of them; the existing criteria will also be regularly reviewed. In particular, there is not yet technical screening criteria for agriculture. The technical screening criteria for substantial contribution to climate change mitigation of the activity “Manufacture of other low carbon technologies” relies on life-cycle GHG emission savings calculated using PEF or static life-cycle analysis, which does not allow a proper acknowledgement of carbon removals. |
| | 3.2Sustainability requirements in existing climate certification schemes |
| | Several studies 148 have attempted to compare how existing climate certification schemes cover sustainability issues, while scoring tools are beginning to emerge to provide investors and project developers with more transparency on existing standards 149 . The majority requires methodology developers or project managers to identify and to clarify how likely sustainability impacts are managed, and include more or less stringent prescriptions and tools. |
| | At UN level, the Clean Development Mechanism provides a voluntary tool for sustainable development impact assessment, based on a 3-pillars classification along environmental (natural resources, soil quality and/or soil pollution, water quality, air quality), social (education, job creation, welfare, health and safety) and economic aspects (energy transfer, technology transfer, economic growth, balance of payment). If any negative impacts are identified, the projects are required to provide a socioeconomic and environmental impact assessment of the proposed activity as well as a mitigation action plan. However, only a very small share of CDM activities has actually used this tool 150 . |
| | The Glasgow decisions for sustainable development under article 6 Paris Agreement represent a step forward compared to the CDM, including in terms of international harmonization and reporting 151 . While the main focus is on reducing greenhouse gas emissions, addressing other sustainability aspects has been enshrined as a principle which applies when Parties intend to use cooperation mechanisms under article 6 Paris Agreement. Under Article 6.2, comprehensive reporting and accounting requirements have been introduced, which also aims to ensure sustainable development benefits and to avoid negative impacts. Under Article 6.4, the successor of the CDM, the rules also include requirements for reporting on the sustainable development impacts of the host country. As regards non-market approaches under article 6.8, one of the initial priority areas of the work programme includes "mitigation actions to address climate change and contribute to sustainable development". Sustainable development issues are well identified in the first agreements under Article 6.2, signed notably between Switzerland and several developing countries 152 . However, there is hardly any concrete implementation experience yet available. |
| | While existing climate certification schemes carry out in most cases only qualitative assessments, some of them include quantification tools on multiple sustainable development goals. Some schemes condition certification on the disclosure of additional co-benefits, as long as they can be monitored and verified. Co-benefits can be attached to certificates, giving them additional value. |
| | Beyond the disclosure aspects, some schemes condition the eligibility of methodologies and projects on applicability or exclusion criteria with regard to impacts on sustainable development. These criteria can limit eligibility to methodologies or projects that generate significant co-benefits on multiple sustainable development goals beyond climate change mitigation, or alternatively can exclude projects that, despite their climate benefits, are likely to generate adverse side-effects. |
| | Regarding stakeholder consultation, many schemes require that methodology and project developers involve stakeholders and that new methods/projects are subject to public consultation. |
| | At the international level, based on the 17 Sustainable Development Goals (SDGs) of the UN 2030 Agenda for Sustainable Development 153 , the majority of certification schemes propose to measure the contribution to the SDGs in a general way, without proposing any specific tool or method. The approaches deployed by the schemes vary greatly. While some schemes do not include any specification, others include the facultative but recommended reporting of impacts or an assessment framed along several SDGs. In some rare cases, the assessment follows the entire framework of the 17 SDGs with a suitable tool made available. In most cases, the main sustainability issues addressed are the conservation of biodiversity and other environmental objectives, socio-economic benefits, and the protection of human rights. |
| | Regarding biodiversity, while some schemes do not provide any specification, the majority of standards propose at least an optional or method-specific consideration, particularly for methods involving land management. Some schemes include general principles or specific criteria that must be respected by all methodologies. A few schemes rely on a mandatory assessment of the negative and positive impacts of projects on biodiversity. |
| | For other environmental criteria, the degree of consideration covers a wide range of possibilities, including the absence of specification; an assessment of environmental impacts complementary to biodiversity, without a precise purpose, method or indicators to be used; and an assessment of an established list of co-benefits on the quality on soils, water and air, and other environmental topics. |
| | Regarding socio-economic benefits, best practice is to require an assessment of the socio-economic co-benefits generated by the project. While some schemes define their own requirements, others refer to requirements under national law which may lead to uneven outcomes in different countries. Schemes can be more or less stringent, with a large range of possibilities, including the absence of specification, optional socio-economic impact analysis, a mandatory analysis of negative and positive socio-economic impacts, either without specific methodology or by listing several specific criteria to be respected. |
| | Regarding respect for human rights and rights of local populations, international best practice is to require projects to demonstrate that they are not in breach of a list of fundamental human rights or rules, through regular auditing. More specifically, the degree of consideration ranges from the absence of any specification, to mandatory consideration of the views of local people and communities or the presence of safeguards or mandatory conditions. For several schemes whose projects are carried out only in industrialised countries, respect for human rights is not considered a concern and schemes do not contain any specific provision. |
| | For several climate schemes, it should be noted that complementary schemes can be added for more in-depth consideration of environmental objectives, socio-economic benefits, human rights and consultation with local populations and communities. For example, Gold Standard include social safeguards principles, which can be complemented by Fairtrade Climate International standard, particularly on the issue of working conditions. Similarly, the Climate, Community and Biodiversity (CCB) Standards is a complementary standard to Verra which proposes, in addition to the no net harm criterion and the criteria specific to land sector methodologies, to apply more specific criteria to the species and ecosystems concerned by the project. |
| | 4Sustainability criteria for an EU framework |
| | 4.1General criteria |
| | Three approaches can be envisaged to implement the sustainability criteria: |
| | 1.Policy baseline: rely on existing legislation which puts direct obligations on carbon removal providers regarding a range of sustainability aspects. |
| | 2.Disclosure of sustainability co-benefits: certification methodologies can include specific indicators that show the most important co-benefits and allow comparing the sustainability performance of the carbon removal projects. Projects with co-benefits would be more attractive than projects without co-benefits. |
| | 3.Minimum sustainability requirements: the activity should meet some minimum requirements that ensure that only activities that do not generate adverse side-effects and on the contrary that generate co-benefits for sustainability objectives are certified. |
| | The following table Error! Reference source not found. summarises the strengths and weaknesses of these approaches in terms of incentivising sustainability and in terms of the administrative burden that they impose on economic operators: |
| | Table 9 - Comparison of approaches for sustainability criteria |
| | Policy baseline | Disclosure of co-benefits | Minimum requirements |
| | Incentives for sustainability co-benefits | | Legislative framework already applicable to specific carbon removal activity does not incentivise additional co-benefits. | | Safeguards against negative impacts depend on type of solution and of legal approach. | | Carbon removal activities can demonstrate their co-benefits and attract more finance | | No safeguard against projects with negative sustainability impacts | | Goes beyond mandatory legal standards | | Additional incentives because only carbon removal activities that provide a minimum level of co-benefits are eligible. |
| | Administrative burden | | No additional burden | | To keep administrative costs low, the indicators for disclosure should build on indicators used in other existing legislation but not yet mandatory for the economic operator (such as Taxonomy or Nature Restoration Law) or best practices from private certification. | The development and testing of new indicators could lead to high administrative burden. | | Should build on existing legislation, but adjustments may be needed to operationalise criteria, and flexibility should be ensured to update with evolving policy developments. |
| | 4.2Sustainability criteria for permanent storage |
| | Permanent storage solutions such as BECCS and DACCS have very strong potentials to deliver carbon removals but are not likely to provide co-benefits to sustainability objectives, except, for BECCS, for some inherent socio-economic benefits related to energy security ( Table 8 ). On the other hand, these solutions may cause harm to environmental objectives. Therefore, the most pragmatic approach for this type of solution is to focus on criteria that prevent any adverse effect on sustainability, while not including minimum requirements for sustainability co-benefits. |
| | The policy baseline already includes EU legislation that is directly applicable to the economic operators of BECCS and DACCS carbon removal activities and that can provide appropriate safeguards against any negative sustainability impacts: |
| | ·The CCS Directive 154 , which lays down extensive requirements for selecting sites for CO2 storage and contains several provisions related to the management of health, safety and environmental risks, thereby providing appropriate safeguards for avoiding environmental harm from geological storage (i.e. the CCS part of BECCS and DACCS). The Directive states that the geological storage of CO2 has to be done in such a way to prevent, and where this is not possible, eliminate as far as possible negative effects and any risk to the environment and human health (e.g. gas-phase CO2 concentrations in the atmosphere in the surroundings of the complex, water contamination and pollution and other environmental risks, displacement and leakage of other formation fluids, including oil or gas, ground displacement and induced seismicity). Yearly inspections examine the full range of relevant effects from the storage complex on the environment and on human health. Liability for local damage to the environment is dealt with by using the Directive on Environmental Liability. |
| | ·The Renewable Energy Directive 155 puts sustainability criteria on the biomass used to produce bioenergy, and therefore these criteria are relevant to establish the sustainability of the bioenergy component in BECCS plants. To count towards the renewables targets, or to be eligible for subsidies by EU countries, renewable energy sourced from biomass needs to fulfil criteria that cover agricultural and forest biomass and include threshold for GHG emission savings and efficiency; in addition, evidence is required to ensure that agricultural biomass does not come from primary or highly biodiverse forests, protected areas, highly biodiversity grasslands, or land with high carbon stocks such as wetland, peatland and continuously forested areas. For forest biomass, evidence is needed to verify the legality of the biomass, to avoid the risk of unsustainable harvesting and to ensure that emissions from forest harvesting are properly accounted for. The proposal a revision of the Renewable Energy Directive 156 includes the extension of no-go areas for forest biomass to protect in particular primary and old-grown forests, as well as wetland and peatland. It also requires to avoid the use of roots and stumps and to minimise large clear-cuts. The proposed rules introduce an obligation on EU countries to design their national support schemes in accordance with the biomass cascading principle whereby woody biomass is used according to its highest economic and environmental added value. These provisions can be seen as minimal requirements to ensure that there is no significant harm on several sustainability objectives, including on biodiversity protection and the transition to circular economy. |
| | ·The Taxonomy Climate Delegated Act includes technical screening criteria for underground permanent geological storage of CO2. In this context, the Do No Significant Harm criteria for water pollution and biodiversity build on existing legislation (the Water Framework Directive 157 and the Environmental Impact Assessment Directive), and in addition require that on the basis of the Environmental Impact Assessment the identified risks are addressed and that the necessary mitigation or compensation measures are implemented. |
| | 4.3Sustainability criteria for Carbon Farming |
| | The proposed Nature Restoration Law 158 highlights that ecosystems restoration can make an important contribution to maintaining, managing and enhancing natural sinks, thus generating sustainable carbon removals, and to increasing biodiversity while fighting climate change. It is also in this perspective that the proposed revision of the LULUCF Regulation 159 emphasises the need to protect and enhance nature-based carbon removals, to foster the resilience of ecosystems to climate change, to restore degraded land and ecosystems, and to rewet peatlands. As announced in the Farm to Fork Strategy, carbon farming has been designed from the outset to provide strong evidence of no significant negative impacts on environmental objectives, and even to show a positive contribution to these objectives, including biodiversity. The technical handbook 160 on how to set up and implement carbon farming in the EU highlights that assessing the potential to deliver climate impacts has also to cover the co-benefits. The handbook insists that response to climate change needs to be fully integrated with the other pressing environmental and social issues, including biodiversity. |
| | Therefore, in the case of carbon farming, going beyond already applicable legislation safeguards in the policy baseline or the disclosure of sustainability impacts should be encouraged to fully exploit the potential synergies between carbon farming and sustainability objectives, and minimum requirements for sustainability should also be included in the certification methodologies. The best practice is therefore to aggregate all the relevant elements from the three general approaches: |
| | ·Policy baseline |
| | Elements of the Common Agricultural Policy (Statutory Management Requirements, standards for good agricultural and environmental condition (GAECs)) can constitute relevant environmental safeguards that are directly applicable to farmers. |
| | The proposed transformation of the Sustainable Use of Pesticides Directive 161 into a new Regulation on the Sustainable Use of Plant Protection Products 162 introduces new provisions for a drastic reduction of chemical pesticides and fertilizers in all types of farms and the development of sustainable agriculture, including the respect for nature and the workers. The proposal includes strict rules on environmentally friendly pest control and a ban on all pesticides in sensitive areas, including Natura 2000 areas. |
| | The CAP directly contributes to socio-economic objectives such as food security and support to rural communities through the provision of direct income support and includes social safeguards such as provisions to simplify access to CAP support for small farmers or to improve the position of farmers in the value chain. |
| | ·Disclosure of co-benefits |
| | The Nature Restoration Law proposal includes biodiversity indicators for various ecosystems to track progress in restoration efforts at national level. These indicators include monitoring indexes for various categories of animals (e.g. butterfly and birds), carbon stocks in various carbon pools (e.g. soil organic carbon, deadwood) and other spatial indicators (e.g. the share of agricultural land with high-diversity landscape features, forest connectivity). When designing the individual methodologies, it should be considered to which extent these indicators can be used at the farm level, in order to maximize synergies between carbon removals and ecosystem restoration efforts. It should be avoided to develop indicators just for the purpose of the carbon removal certification in view of the risks of high administrative burden and inconsistencies with other EU legislation. It will therefore be important to follow closely the development in the relevant EU policy areas and take over the indicators developed there. |
| | In addition, the EU Forest Strategy 163 announced that the Commission, together with the Member States and in close cooperation with different forest stakeholders, will identify additional indicators as well as thresholds or ranges for sustainable forest management concerning forest ecosystem conditions, such as health, biodiversity and climate objectives, in order to enhance the sustainable forest management framework. The Commission has also published a handbook for practitioners for evaluating the impact of nature-based solutions 164 . The Commission will also develop a “close-to-nature” voluntary certification scheme, so that the most biodiversity friendly management practices could benefit from an EU quality label. Guidance and indicators used for Natura 2000, green infrastructure and areas under restoration can be entry points for assessing the sustainability impacts of land-based carbon removals activities. Once ready, these indicators, new certification criteria, and guidance documents could be taken up for measuring co-benefits under the relevant certification methodologies for carbon removals. |
| | The new CAP promotes the use of new instruments which provide EU farmers and land managers with tools and datasets, including remote sensing, on agriculture, environment and sustainability, such as the Farm Sustainability Tool (FAST) 165 . As this tool is intended to gather a lot of information related to the sustainability of agriculture, it can be a useful tool to assess the sustainability impacts of carbon farming options, starting with fertiliser management. |
| | The long-term vision for the EU’s rural areas 166 has identified areas of action to improve rural livelihoods in the EU: i) deploying innovative solutions for the provisions of services; ii) maintaining and improving public transport services and connections; iii) promoting sustainable bioeconomy and circular economy, as well as resilience to climate change, natural hazards and economic crises; and iv) diversifying economic activities and improving the value added of rural activities. These areas of action could be a source of inspiration for developing indicators to inform the socio-economic co-benefits of carbon farming-based removal activities. |
| | Box 3 – Experience drawn from LIFE projects on carbon farming | As part of its work to identify and accelerate the development and adoption of carbon farming in Europe, the LIFE Carbon Farming Scheme project has assessed the environmental impacts of carbon farming 167 . This work confirms that focusing solely on carbon sequestration can result in poor environmental outcomes. Land-use changes related to carbon farming can result in increased biodiversity, increase water quality and better nitrogen balance. On the other hand, loss of remnant vegetation can lead to degraded ecosystem services. Diversity is the key to generating co-benefits, as biodiversity and carbon farming have many mutually beneficial relationships, which increase the resilience of agroecosystems. Carbon farming can also alter the leaching of nitrogen and phosphorus nutrients, with results that can be highly variable both in terms of greenhouse gas emissions balance and in terms of impacts on water and soil quality, which need to be closely monitored. | The LIFE Carbon Farming Scheme project has also elaborated a tool to assess the socio-economic impact of carbon farming 168 , based on a four-phase impact assessment process, including a contextual analysis, a mapping of potentially affected people, an engagement with these affected people and an analysis and action planning. Among the potential positive impacts, there is the access to market-led carbon schemes that can contribute to the economic diversification of famers. Among the potential negative risks, the project looks at potential issues around increasing land prices and land grabbing. To deal with these impacts, it is recommended to build collaboration arrangements and platforms at various levels (local, national, EU) not only for identifying synergies and reducing the burden for a single actor, but also to ensure that there is sufficient understanding of the complexity around some of the salient issues as well as capacity and leverage to address them. |
| | ·Minimum requirements |
| | The minimum requirements for sustainability should go beyond existing mandatory requirements. Besides the EU legislation referred to under the previous section on co-benefits, minimum requirements can build further on the already existing Taxonomy screening criteria for forestry (see Box 4) and restoration of wetlands. |
| | Box 4 – How minimum requirements for biodiversity in forest activities are operationalised in the Climate Delegated Act of the Taxonomy Regulation | The Do No Significant Harm criteria for biodiversity from the Taxonomy Regulation Climate Delegated Act on forestry activities provide an example of how minimum requirements that are relevant for biodiversity can be operationalised. Those criteria are: | ·In areas designated by the national competent authority for conservation or in habitats that are protected, the activity is in accordance with the conservation objectives for those areas. | ·There is no conversion of habitats specifically sensitive to biodiversity loss or with high conservation value, or of areas set aside for the restoration of such habitats in accordance with national law. | ·An afforestation / forest management plan must include detailed information on provisions for maintaining and possibly enhancing biodiversity in accordance with national and local provisions, including the following: | oensuring the good conservation status of habitat and species, maintenance of typical habitat species; | oexcluding the use or release of invasive alien species; | oexcluding the use of non-native species unless it can be demonstrated that: | (i) the use of the forest reproductive material leads to favourable and appropriate ecosystem condition (such as climate, soil criteria, and vegetation zone, forest fire resilience); | (ii) the native species currently present on the site are not anymore adapted to projected climatic and pedo-hydrological conditions; | oensuring the maintenance and improvement of physical, chemical and biological quality of the soil; | opromoting biodiversity-friendly practices that enhance forests’ natural processes; | oexcluding the conversion of high-biodiverse ecosystems into less biodiverse ones; | oensuring the diversity of associated habitats and species linked to the forest; | oensuring the diversity of stand structures and maintenance or enhancing of mature stage stands and dead wood. | Based on these criteria, the planting of tree monocultures, and any other forestry activity without a positive impact on biodiversity, will be excluded. |
| | In the case of carbon removals based on agricultural activities taking place in ecologically sensitive areas (e.g. protected areas, areas under restoration commitment, Natura 2000), among others, a ban on all pesticides could be considered. For activities taking place in less ecologically sensitive areas, minimum requirements could be less stringent with a greater number of considerations referred to co-benefits. |
| | The minimum requirements for forest activities can also build further on private certification schemes on sustainable forest management and associated certification schemes. In Europe, the concept of sustainable forest management has been introduced in 1993 at the pan-European reporting under the Ministerial Conference on the Protection of Forests in Europe (MCPFE) process, which later become Forest Europe 169 . The work of Forest Europe has led to the adoption of a definition of sustainable forest management 170 and a system of 6 criteria and 34 indicators 171 . The criteria cover environmental dimensions (forest resources and global carbon cycles, forest ecosystem health and vitality, forest biological diversity) as well as socio-economic dimensions (productive functions of forests, protection functions (soil and water), and socioeconomic functions). This framework is used by EU countries to monitor and report progress on the management of their forests at national level. At local level, forest certification, and associated labelling, inform consumers about the sustainability of the forests from which wood and other forest products were produced. |
| | Box 5 – Third-party certification bodies on sustainable forest management | At the level of forest owners and managers, several voluntary schemes are available to certify the compliance with sustainable forest management principles and criteria. Certification can improve forest management, allowing both consumers and companies to have an important role in forest conservation through their choice of certified products. | They are two types of forest certification: | -the certification of forest management assesses whether forests are being managed according to a specified standard of sustainable forest management; | -the certification of the chain of custody verifies that certified material is identified or kept separate from non-certified or non-controlled material through the production process, from the forest to the final consumer. | To label an end-product as certified, both forest management certification and chain-of-custody certification are required. | The two most known schemes are the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC). Both schemes promote environmentally sustainable, socially responsible and economically viable forest management and have been widely adopted in developed countries, particularly in Europe. In 2018, around 19% of EU forest was certified under FSC scheme, while about 40% was under PEFC scheme, with large differences among Member States 172 . Stakeholders are actively involved in the forest certification process and in the standards definition through participatory approaches. | The FSC forest management certification relies on a global general framework of 10 principles and 56 associated criteria 173 . Thereafter, national Standards Development Groups adapt the global requirements at the regional and/or national level, in order to reflect the diverse legal, social and geographical conditions of forests in different parts of the world, creating a local standard based on global principles. 15 national FSC standards are present in the EU. | The PEFC is an umbrella organization that endorses national forest certification systems. National forest certification systems use an international benchmark standard 174 , including 6 criteria close to Forest Europe framework, to develop their national standards. PEFC is not a standards agency but a mutual recognition scheme. National systems are assessed by third-party assessor. Many national systems exceed the international requirements, going even further to include additional, nationally relevant requirements. |
| | 4.4Sustainability criteria for carbon storage products |
| | Sustainability of products is one of the most active areas of European regulation, including with the recent package of measures, published on 30 March 2022, to make sustainable products the norm in the EU. As these provisions specifically target the sustainability of products, they are a particularly relevant basis for developing appropriate safeguard clauses for carbon storage products, and for framing the disclosure of co-benefits. |
| | EU policies also include relevant sectoral initiatives such as the Construction Products Regulation (CPR) 175 , which the Commission proposes to revise 176 . Safeguards and co-benefits disclosure for carbon removals associated to construction products could largely rely on CPR provisions. In addition, the proposal for an Ecodesign for Sustainable Products Regulation 177 aims to set product-level requirements that promote energy efficiency, circularity and the overall reduction of environmental and climate impacts, and to improve product sustainability information for consumers and supply chain actors. |
| | For other products, an increasing number of sectoral product sustainability initiatives will be developed and improved over time. Sustainability targets set in the various regulations, notably in terms of energy and resource saving and climate change adaptation, should be reflected in safeguard clauses, while any contribution to these targets beyond the commitments could be subject to co-benefit disclosure or minimum requirements. In the meantime, and until all relevant sectorial initiatives are published, the framework could be equipped with additional ad-hoc criteria potentially tailored out for each removal activity and/or objective not yet covered. |
| | Annex 10: Transparency criteria |
| | 1Introduction |
| | Transparency of the certification process is crucial for creating a robust and effective system to incentivise uptake of carbon removal activities. |
| | Drawing from existing experiences 178 from regulated and voluntary carbon markets, the sustainability criteria of the Renewable Energy Directive, and the certification rules of Organic Agriculture, three best practices have been identified: |
| | ·Functioning of certification schemes through sound internal governance, |
| | ·Verification of carbon removals through independent third party-auditing, and |
| | ·Tracking and tracing the certified carbon removals through a robust registry system. |
| | This horizontal criterion is independent of the type of carbon removal activity, and unlike the other criteria it applies to the certification schemes that certify the carbon removals and not to the economic operators that produce them. |
| | 2Functioning of certification schemes |
| | 2.1Challenges |
| | Certification schemes have the key role of ensuring that the certified projects fulfil the QUALITY criteria. Their capacity to do so depends on having in place sound internal rules that regulate how the certification scheme is governed to effectively support its mission and that stakeholders have a transparent and accessible view into their decision-making. The review 179 of the certification schemes operating under the 2018 Renewable Energy Directive points to a number of good practice rules that are generally applicable to certification schemes operating in other fields: |
| | 2.2Existing approaches |
| | ·Management structure: All schemes should establish a management structure to ensure that the scheme has the necessary legal and technical capacity, including: |
| | oBoard of Directors. The Board is ultimately responsible for all actions and activities of the scheme, although for practical purposes it may delegate day-to-day responsibility of managing the scheme to a Secretariat. A legal document, such as an Articles of Association, should set out the specific roles of the board members, the process for (re-)electing members, terms of engagement, a description of how decisions are taken and how conflict of interest is prevented. The Board should have broad and appropriate representation that fits the specific operational context. |
| | oSecretariat (Management team): The Secretariat is responsible for the day-to-day management of the organisation. This includes both technical functions (e.g. scheme development, quality assurance and certification), as well as activities such as marketing or communications. It is good practice that the role of such a team, and importantly its relationship with the Board, is clearly defined. |
| | oTechnical Committees or Working Groups: A Technical Committee is often included in the governance structure of certification schemes. The use of such an expert committee helps to ensure that the Board has the necessary technical capacity. It is important to avoid potential conflict of interest by ensuring that an individual’s role within a Technical Committee is not compromised in any way by their external activities. |
| | ·Stakeholder consultation. Schemes should have an open consultation system with a clearly defined process to promote the involvement of stakeholders in the development of the certification rules and in the decision making (e.g. decision to grant or withdraw certification). The system can include either round-table discussions with stakeholders or targeted consultations, depending on the specific context. The process should set out a timeline for stakeholder consultation, to be defined by the certification scheme, depending on the specific context. The ISEAL Code of Good Practice on Setting Social and Environmental Standards 180 provides best practice guidance on standard development and revision. |
| | ·Complaints management. Establishing a robust complaints process is an important component of the governance of a scheme. Such procedures improve the reliability of schemes, support their continuous improvement and provide transparency to scheme users and external stakeholders. Schemes should have a clear process for dealing with complaints made by third parties against economic operators and certification bodies. As a minimum, the process should include: how complaints are filed and the evidence that is to be provided; guidance on which complaints are in scope, and which are not; step-by-step overview of how complaints are handled, from the receipt of the initial complaint through to resolution, and the associated timeframe for each step; and decision making process for complaints and the process for appealing decisions. The complaints process should be transparently available on the voluntary scheme’s website. |
| | ·Internal monitoring and transparency. Schemes should have in place a system of internal monitoring to verify compliance of economic operators with the provisions of the scheme. Such internal audits should be undertaken when relevant information on potential non-conformities has been brought to the attention of the scheme by external parties, and also to cross-check the work conducted by external auditors. Typically, internal monitoring should be undertaken on an annual basis. In addition, it is also good practice for the schemes to put in place a website which provides information in a readily accessible and transparent format. |
| | ·Non conformity. In addition, certification schemes should have harmonized and clear rules on the implications of any non-conformities by the economic operator identified during the validation and verification audits (see below), assessing: under which circumstances verification reports are withdrawn or suspended; what procedures are in place to ensure that any non-conformities that do not lead to immediate withdrawal or suspension of the certificate are corrected. ISO 17021 provides further clarifications on the application of suspensions. |
| | 3Verification of carbon removals |
| | 3.1Challenges |
| | Verification of the economic operator’s activities by an independent verification body, conducting third-party auditing is a critical component of the overall credibility of the carbon removals. Typically, certification is based on a two-step process: 1) a first validation where the carbon removal project’s conformity to its referred methodology is assessed; 2) a regular verification of the achieved carbon removals. |
| | A strong validation and verification system ensures that verification bodies are thoroughly scrutinised and that auditing activities provide reliable reassurance that carbon removals certificates are only issued to projects that comply with the QUALITY criteria, including the related certification methodologies. There are 3 main issues to be addressed: the obligation and regularity of third-party auditing, the competence of the auditors; and the accreditation of verification bodies. |
| | 3.2Existing approaches |
| | Third-party auditing of economic operator |
| | Typically, most validations are based on an internal documentary review by certification schemes themselves (e.g. Label Bas Carbon, partly by MoorFutures, Registro Huella de Carbono, Eco region Kaindorf). The Peatland Code and Woodland Carbon Code use a third-party to validate projects. Best practices in verification consist of having projects validated and verified through the intervention of third party auditing. The most virtuous schemes provide a list of independent organizations able to carry out these audits and are transparent about the criteria for choosing these organizations. For instance, the Label Bas Carbone requires that the validation of projects and the verification of their results are carried out by an independent auditing body, chosen from the list made available by the board of auditors eligible to verify projects. |
| | Regular checks make it possible to verify that the project is functioning and evolving as planned during certification. The majority of existing certification schemes require periodic documentary checks, often on the basis of annual reports, but do not require systematic field visits for all projects. These visits are set up randomly or are only required for certain projects (example: large-scale projects for the Clean Development Mechanism). For instance, the Gold Standard imposes an annual report on all projects and a systematic field check every 5 years during their certification. |
| | Auditors’ competence |
| | It is critical that the verification body (or bodies) remains independent from the certification scheme to ensure it can verify an economic operator’s compliance with the scheme’s standards without external interference. Schemes generally require that verification bodies operating on behalf of the scheme are accredited to ISO 17065 181 . This standard requires a clear separation between the certification scheme owner and the verification body. Furthermore, it attributes the responsibility to award or withdraw a certificate to the verification body. This serves to limit the emergence of conflict of interest between the certification scheme owner and the verification body. Furthermore, auditors should have the general skills for performing audits; and the auditor should have the appropriate specific skills necessary for conducting the audit related to the scheme's criteria 182 . ISO 19011:2018 183 outlines guidelines for the competence and evaluation of auditors. The Label Bas Carbone provides project developers with the criteria for the independence of auditors, so as to allow the choice of an external auditor from this list. In this case, the project developer must prove the competence of the chosen auditor. |
| | Accreditation of verification bodies |
| | Accreditation is the third-party attestation of a verification body’s demonstrated competence to carry out specific conformity assessment tasks. A decision on accreditation is taken based on the demonstrated competence of a verification body to evaluate compliance with a standard. Accreditation is a key aspect in establishing the quality of the certification and verification process and should follow the rules set out in Regulation (EC) No 765/2008 184 . This is achieved through continued assessment of the verification body and in particular ensuring that the verification body and its auditors are operating according to relevant ISO. |
| | There are two approaches that are commonly used in the context of certification: |
| | ·National: Accreditation bodies are appointed in each country that the standard operates and endorsed, or recognised, at a government level. Many of the larger national accreditation bodies are members of the International Accreditation Forum (IAF). This organisation ensures that its members accredit in compliance with the appropriate international standards. The IAF has worldwide coverage in almost one hundred countries, with members located in Europe, the Middle East, Asia and the Americas. The majority of the IAF members are signatories to the IAF Multilateral Recognition Arrangement (MLA). The agreement accepts the equivalence of the accreditation systems operated by the signing members. |
| | ·The European co-operation for Accreditation (EA) has been formally appointed by the European Commission in Regulation (EC) No 765/2008 to develop and maintain a multilateral agreement of mutual recognition between European and third country national accreditation bodies. There are around fifty EA members, these are classified as either ‘Full’ or ‘Associate’ Members. The EA Multilateral Agreement (EA MLA) is an agreement between the EA Full Members whereby the signatories recognise and accept the equivalence of the accreditation systems operated by the signing members. A Bilateral Agreement (BLA) between an EA Associate Member and EA has the same purpose and bilateral signatories to the EA MLA are required to meet the same requirements as EA Full Members. The EA is also an IAF MLA signatory. |
| | Fixed costs of third-party validation and verification can be important. The more stringent the certification requirements (high monitoring, precision, individual additionality demonstration, quantification…), the higher the costs. Options to reduce verification costs include: |
| | ·Diversification of third parties involved in validation and verification processes. For example, some standards (Woodland Carbon Code, Peatland Code, MoorFutures) allow the same third party to carry out both the validation and verification of a project, whereas the CDM required to use a different entity. One other way to reduce costs is to have a wider pool of potential auditors and to allow wider types of profiles. For verification purposes, the Registro Huella de Carbono have not appointed or selected specific verifiers, so any forest engineer who present the adequate qualification could carry out the verification procedure. The French Label Bas Carbone also allows for an extended choice of verifiers in a perspective of lowering costs. |
| | ·Remote-sensing solutions could be a way to reduce MRV costs and especially verification costs. For instance, for carbon farming activities, existing monitoring and reporting under the LULUCF, the land parcel information system under the Common Agriculture Policy, national forest inventories, as well as data from the Copernicus space observations could help building a reliable monitoring system, which will become more granular over time. |
| | 4Traceability of certificates through registries |
| | 4.1Challenges |
| | Once a project is validated and verified, there is a need to trace the carbon removals in order to avoid the risk of fraud, e.g. double funding of the same project or the double use of the same certificate. Experience with the Renewable Energy Directive but also with the EU ETS points to the need to have robust registries in place to track and trace certificates in order to avoid the risk of fraud 185 . In particular, under the 2018 Renewable Energy Directive, the Commission has been tasked to put in place an EU database linking relevant national databases in order to ensure transparency and traceability of renewable fuels. |
| | Fraud can occur through e.g. double issuance and double use: Double issuance is a situation in which more than one certificate is issued for the same removal activity. For instance, this can occur when the same project is registered under two different certification schemes or twice under the same scheme. Double use is a situation in which the same certificate is used several times to make the same claim. Such risks are particularly relevant for the voluntary carbon market where a certificate could be sold on from one buyer to another. If these subsequent trades are not comprehensively tracked, the risk exists that several buyers will make the same claim (e.g. to offset emissions) based on a single certificate. |
| | 4.2Existing approaches |
| | Avoiding double issuance |
| | The existence of a register ensures the full traceability of carbon removal certificates and minimizes the risk of double issuance. Best practice is to keep a public record of all certificates issued, as well as the volume cancelled, and volume withdrawn. The majority of the reviewed certification schemes both for the Renewable energy Directive and the voluntary carbon removal market 186 keep a database or registry that specifies the volume of certificates issued and withdrawn. |
| | In particular, the majority of carbon removal schemes keep a register that links each certificate to a project and identifies them via a serial number. For instance, the Verified GHG standard (VCS) presents on its website the volume of certificates registered, in the process of being registered, withdrawn, as well as the volume of certificate kept aside (“buffer pool”). This scheme also links each removal certificate to a removal project on its website. Each project is identified by a serial number and must detail its location. It gives rise to a certain number of removal certificates to which a serial number is also assigned. |
| | Avoiding double use |
| | In the voluntary carbon market, traceability between sale of a certificate and purchase by an organization makes it possible to avoid double counting of removals from a double use or a transfer. Existing schemes have a varying performance in the area: only less than a quarter follow the transfers of certificates (sale of certificates not withdrawn, in particular for the purpose of speculation). The best practices consist in identifying the acquirer of the certificates during each sale, as well as to report the transfers of certificates (sale from one acquirer to another without withdrawing the certificate). |
| | Certification schemes could ensure in two ways that such double use is avoided. First, their registry and project database systems can provide for functionalities that allow the carbon certificate holders to specify the purpose for which a carbon certificate is cancelled. Alternatively, certification schemes could require all users to specify the purpose. The level of detail provided in documenting cancellations and requirements also plays a role for facilitating that double use is avoided. For instance, the VCS standard links each certificate withdrawn to a purchaser on its site. Transfers are only possible between VCS accounts, which allows them to be tracked. |
| | Registries should be ready for the different uses of certificates – public financing, private financing through commercial contracts, or carbon markets – that demand different functionalities of the registry. For certificates – which are non-tradeable (e.g. Label Bas Carbone in France) – it will not be necessary to trace further transfers. For time-limited certificates, it will be important to ensure that any claims are annulled at the end of the time period. |
| | Link to national registries and Nationally Determined Contributions under the Paris Agreement |
| | In the context of international and voluntary carbon markets, it has been discussed for years how to account in a transparent way for the climate benefits from traded carbon credits – irrespective of whether a credit is based on emissions reductions or carbon removals: |
| | ·Double claiming does not result in double counting of GHG emission reductions under the Paris Agreement, as long as only one country counts a relevant emission reduction or removal as having taken place within its territory at any given time, including after any international transfer. In the context of international transfer of emissions reductions or removals, such as those envisaged under Article 6 of the Paris Agreement, the host country would make a “corresponding adjustment” to its own accounts to ensure that it no longer counted the abatement, which was now being used by the acquiring country. |
| | ·In the context of voluntary markets, the host country would count the GHG emissions reduction or removal. When it comes to the overall merits of corresponding adjustments for voluntary markets, there is a debate over whether they would increase overall mitigation efforts and result in a net climate benefit. Those in favour of applying corresponding adjustments in voluntary carbon removal markets argue they increase the credibility of voluntary transactions, for example by managing real or perceived risk of double claiming. These views are countered by concerns that demands for corresponding adjustments under voluntary markets, and the associated institutional capacity requirements and understanding regarding implications for NDCs, would limit carbon removal purchases and private finance flows. |
| | There is an ongoing debate as to whether a compensation claim by a company requires an accounting adjustment by the host country. It is important to underline that different potential types of support have different implications for the applicable standards of accounting and quantification. Much depend on the nature and coverage of targets/claims towards which it is proposed to count a particular certified outcome. For example where a certificate is proposed for use to compensate for emissions under one target, in circumstances that the underlying removals may also be counted towards another target, and hence the risk of potential double counting arises, an accounting adjustment on the part of the host country may be needed to avoid double claiming. |
| | In contrast where a carbon removal is used to demonstrate a direct contribution to a single, e.g. corporate, target (and not as an offset between emissions or removals under two distinct targets) generally no adjustment is needed. Where there is an adjustment proposed between buyers and sellers with different targets, quantification will need to be consistent with the sellers target to avoid overselling. While it is not proposed to address accounting or quantification requirements directly in this proposal, such requirements will however need to be specified when particular uses are mandated. |
| | 5Transparency criteria for an EU framework |
| | Certification scheme management |
| | Management structure | All schemes should establish a management structure to ensure that the scheme has the necessary legal and technical capacity. In addition schemes should have minimum rules to ensure stakeholder consultation, complaints process; and internal monitoring and information transparency. |
| | Public consultation and information | All schemes should have minimum rules to ensure stakeholder consultation, complaints process; and internal monitoring and information transparency. |
| | Verification of removals |
| | Third-party verification | Schemes should have carbon removal projects validated and verified through the intervention of an independent third-party auditing organization. Scheme should require regular verification audits mandatory for all projects, and even field visits at regular intervals. |
| | Auditors’ competence | Auditors should remain independent from the certification scheme. In addition auditors should have the general skills for performing audits; and the auditor should have the appropriate specific skills necessary for conducting the audit related to the scheme's criteria. |
| | Accreditation of verifiers | Verifiers should be accredited either by: a) national accreditation authorities referred to in the Commission. Regulation No 765/2008 187 , setting out the requirements for accreditation and market surveillance; b) by a national accreditation body affiliated to the IAF; c) by being a ‘full’ member or ‘associate’ member of ISEAL. |
| | Traceability of removal certificates |
| | Public Registry | The standard should publish a register listing all the associated projects and certificates. The use of innovative digital technologies such as blockchains can also be considered. |
| | Link between issuance of certificates and projects | The register should make it possible to link each project to a number of the certificate issued, and each certificate issued to a specific project. The identification of each certificate via a serial number is needed. |
| | Publication of use, withdrawals, and transfers of certificates | The use and cancellation of certificates should be reported publicly, within the register. |
| | Risk of double claiming | The scheme should propose a procedure for avoiding the double counting of the project. |
| | Annex 11: SME TEST |
| | 1Identification of affected businesses |
| | The initiative establishing an EU regulatory framework for the certification of carbon removals will not impose direct mandatory requirements on economic operators in the EU. Rather, certification will be an optional, voluntary, activity that could be implemented by SMEs and/or large companies wishing to quantify levels of CO2 removed by project activities and realise any associated benefits. As such, any cost impacts of establishing certifiable activities would be voluntarily bestowed upon participating entities irrespective of their size. The costs of implementation will be determined by the type of removal solution to be implemented, and the applied measurement, reporting and verification (MRV) methods and procedures, rather than the specific size or type of entity undertaking the activity. The initiative will therefore not disproportionately affect SMEs relative to large companies. |
| | This initiative is considered highly relevant for SMEs, as many current and emergent economic operators in the carbon removals and certification fields are SMEs. These firms can be expected to provide a very significant contribution to the implementation of the initiative, which can also include implementation on behalf of larger firms (e.g. project developers). Thus, a certification initiative that attaches direct economic value to SME services and technologies potentially offers significant financial opportunities for economic operators in these sectors. In this sense, an EU framework for the certification of carbon removals is considered highly relevant, in particular for SMEs such as: |
| | ·Certification schemes, registry system developers and operators (even the largest global operators are classified as SMEs) |
| | ·Project developers and carbon removal consultants |
| | ·Landowners hosting certifiable activities (e.g. foresters, farmers, or other land managers) |
| | ·Technology developers in emergent removals areas (e.g. biochar producers, direct air capture design, construction and operation, novel CO2 utilisation pathways) |
| | Larger firms also operate in these businesses, including: |
| | ·Large agriculture and forestry companies hosting certifiable activities (e.g. vertically integrated forest product companies; large agri-business) |
| | ·Large energy companies engaging in the geological CO2 storage business |
| | ·The larger validation and verification companies |
| | ·Large consultancies |
| | |
| | 2Consultation of SME Stakeholders |
| | A total number of 64 SMEs participated to the public consultation conducted in the context of the initiative, representing 43% of the 150 companies and business organisations that provided their input to the consultation. The SMEs replying to the public consultation were mainly service activities (27%), scientific and technical activities (22%) and agriculture and forestry activities (16%). The SMEs respondents expressed a large support to the initiative since 55 (89%) agreed that establishing a robust and credible certification system for carbon removals is the first essential stepping stone towards achieving a net contribution from carbon removals in line with the EU climate-neutrality objective. This is slightly more than the 86% support of all stakeholders in general and only 5 (8%) SMEs disagreed. The SMEs have identified the issue of ensuring precise, accurate and timely measurement of carbon removals as the main challenge of the certification (for 50% of the SMEs). |
| | The opinions expressed by the SMEs on the design of an EU framework for the certification of carbon removals are in line with the views expressed by other stakeholders. For examples, 53% (vs 52% of all stakeholders) expressed their preference for a certification framework allowing the differentiation between different types or sub-categories of carbon removals and 56% (vs 59% of all stakeholders) share the view that carbon removal methodologies should be developed by a public administration rather than private entities. |
| | During the preparation of the initiative, SMEs also had the opportunities to express their views as speaker or participants to a stakeholder conference held on 31 January 2022 with more than 600 participants registered from companies and business organisations. |
| | 3Assessment of the impact on SMEs |
| | For economic operator conducting carbon removal activities, the certification of carbon removals will be a voluntary, and optional, activity. As explained in Annex 3, an economic operator opting to apply the EU regulatory framework will see overall benefits associated with increased visibility and trust that an EU framework for the certification of carbon removal would provide. The recognised quality of their carbon removals would create more demand and allow them to get a better price for their removals. |
| | The EU intervention could create new market opportunities for specialist service providers with a deep understanding of carbon removals solutions. Conformity to an EU standard can also help raise capital for project activities. |
| | Regarding the SMEs involved in the business of the carbon removal certification, the long-standing, global certification schemes 188 could see an opportunity to develop a bigger market in Europe. On the other hand, the smaller specialist new entrants and national and regional schemes could continue to organically develop across Europe to become main market actors. Although the large certification schemes offer perceived market power, in terms of actual activity on the ground in Europe, the small local schemes are more prevalent than the larger ones. For example, the Verified Carbon Standard (VCS) reports 1884 registered projects worldwide at the time of writing, only 8 of these are in Europe, while, similarly, the Gold Standard has only 4 certified projects located in Europe among the 1708 projects worldwide. When focusing only at carbon removal projects the numbers are even smaller: only one project in Europe (out of 146 worldwide carbon removal projects) for VCS and none of the 42 Gold Standard carbon removal projects are located in Europe. |
| | The increase demand in carbon removal certification will also be beneficial to accredited validation and verification bodies since they will service would be increasingly required to assess the validity of projects candidate to the certification and the veracity of the carbon removals generated. |
| | Also, many European certificate buyers are willing to pay a premium for locally-originated certificates, suggesting that an EU-based accredited small or micro-size scheme operator could attract higher revenues compared to others types of scheme operators. |
| | 4Minimising negative impacts on SMEs |
| | In the public consultation held for this initiative, around half of SME representatives in the land sector (agriculture and forestry) highlighted the affordability of MRV aspects as one of the main criteria for the types of carbon removals the EU should incentivize, while acknowledging the importance of robustness of MRV. Three respondents explicitly pointed to the need for easiness to implement rules for small landowners. |
| | Notably, most existing certification programmes in the voluntary carbon markets, as well as existing EU MRV standards such as the EU ETS Monitoring and Reporting Regulation (MRR), apply different MRV requirements according to the scale of the activity (or installation) undergoing MRV. Future work to define methodological standards for carbon removals in the EU will seek to develop more streamlined small-scale methods with simplified procedures that can offer benefits for SMEs wishing to engage in voluntary carbon removals certification. Establishment of streamlined approaches to small-scale activities should address the needs of SMEs potentially wishing to engage in certification activities. |
| | Some carbon removal programmes aggregate multiple projects of the same carbon farming activity in a single collective project to reduce the MRV costs for small individual projects without scarifying on the quality of the MRV. Such programmes often provide in parallel advice to the farmer on how to manage the land to increase carbon sequestration and therefore potential climate benefits but also economic benefits for the land manager. Part of the economic risk is carried by the programme developer and the project operators face less uncertainties. Most of carbon farming projects targeting soil carbon sequestration build on these programmes. |
| | In other areas, primarily positive benefits can be expected for SMEs relative to other potential economic actors in the marketplace. The development of small-scale streamlined certification methods should help to enlarge the pool of smallholders/SMEs willing to participate in removals certification. By developing common criteria and methodologies for the certification of carbon removal, the initiative will establish a level playing field making easier for small economic operator to develop carbon removal activities that can be recognised for their climate benefits. |
| | (1) |
| | “To incentivise the uptake of carbon removal and increased circularity of carbon, in full respect of the biodiversity objectives, the Commission will explore the development of a regulatory framework for certification of carbon removals based on robust and transparent carbon accounting to monitor and verify the authenticity of carbon removals.” |
| | (2) |
| | DGs that attended: AGRI, JRC, ENV, COMP, SG, RTD, INTPA, NEAR, GROW, ENER, REGIO, JUST, MARE, EEAS, SJ, CLIMA. |
| | (3) |
| | DGs that attended: REFORM, GROW, NEAR, AGRI, JRC, RTD, ENV, ENER, MARE, HR, SG, INTPA, EMPL, COMP, CLIMA, EEAS, SJ. |
| | (4) |
| | For the options of industrial solutions, the share of EU citizen responses that express an opinion but select later than as soon as possible is (in increasing order): Bio-based products with long lifetime (including for construction) (27%); Utilisation of non-fossil CO2 in long lifetime products (45%); Biochar (47%), Bioenergy with carbon capture and long-term or permanent storage (BECCS) (51%); DAC with long-term or permanent carbon storage (62%); Geological storage of non-fossil CO2 (70%); Enhanced rock weathering (78%). |
| | (5) |
| | Climate Change – Restoring sustainable carbon cycles ( link ) |
| | (6) |
| | Assuming 3.5 Mt of BECCS and 1.5 Mt of DACCS |
| | (7) |
| | Assuming 3.75 Mt2 of afforestation, 0.75 Mt of agroforestry and 0.5 Mt of soil carbon enhancement |
| | (8) |
| | Assuming 15 Mt2 of afforestation, 3 Mt of agroforestry and 2 Mt of soil carbon enhancement |
| | (9) |
| | The revenue was estimated for a carbon price of 100 euro for industrial removals and 50 euro for carbon farming removals. |
| | (10) |
| | Sources: Project sizes from McDonald et al. 2021 ( link ). |
| | (11) |
| | MRV costs derived from ETS MRV report ( link ). |
| | (12) |
| | MRV cost for carbon farming from Farming Ahead ( link ). |
| | (13) |
| | Smith et al. (2020) How to measure, report and verify soil carbon change to realize the potential of soil carbon sequestration for atmospheric greenhouse gas removal ( link ). |
| | (14) |
| | The price for a typical farm is £980 excluding VAT for the baseline assessment and £980 excluding VAT for each annual diagnosis, so a total of £5,880 excluding VAT for the complete a 5 year programme. The costs of any soil analyses (one at the beginning of the programme and another at the end of the programme) are not included in the programme. All other costs related to certification, possible audits and the sale of certificates are included in the price and no additional costs are charged during the programme. |
| | (15) |
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| | (93) |
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| | This annex is largely based on the information and analysis contained in the following three reports: 1. Guidehouse (2021) Report on the harmonisation and strengthening of sustainability certification for biofuels, bioliquids and biomass fuels under REDII; 2. Umwelt Bundesamt (2021), Certification of Carbon Removals – Part 2; 3. ICARE (2022), Étude comparée des standards de compensation existants. |
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| | Notably, neither the larger nor smaller certification schemes can be considered SMEs under the EU classification scheme. For example, Verra (the largest actor in the market) had a turnover in 2019 of around USD 21 million ( link ) and it presently has a staff headcount of <100. |
