The agreement of the Carbon Removal Certification Framework Regulation puts an end to the various proposals put forward by both bodies, and by lobbying groups within the carbon dioxide removal (CDR) space. 

The framework specifies rules for three areas of both CDR and carbon reductions: 

• Industrial carbon removals: high permanence CDR technologies, such as direct air capture (DAC) or bioenergy with carbon capture and storage (BECCS). 
• Carbon farming: nature-based carbon removal and the implementation of regenerative agriculture practices, such as reforestation, peatland rewetting or efficient use of fertilisers. 
• Carbon products: storing carbon in long-lasting materials, such as wood-based construction materials or biochar. Storage will have to be guaranteed for at least 35 years. 

CDR will have to be correctly quantified, go beyond existing practices and contribute to broader sustainability goals; this could, for example, be achieved by contributing to positive biodiversity impacts. 

Within the next four years, the EU will also create a central registry, with existing carbon registries being used prior to this going live. In the meantime, the European Commission will prioritise the development of certification methodologies for several types of CDR activities with the help of a Carbon Removals Expert Group.

The new rules will require carbon credit certification schemes to demonstrate compliance with the EU Carbon Removal Certification Framework, which should drive continued improvements in the transparency and credibility of carbon credits through enhanced monitoring, reporting and verification (MRV). This should provide the basis for high potential growth within the nascent European CDR industry. Furthermore, the inclusion of carbon farming in the Framework also increases the viability of regenerative agriculture, which potentially creates opportunities for farmers to diversify their income streams. 

Improved regulation may unlock financial support for CDR technologies from both the public and private sector. The European Commission has stated that they will continue to fund CDR through programmes such as the Innovation Fund, Common Agricultural Policy, Regional Development Fund, LIFE programme and Horizon Europe programme. The framework (and the improved clarity it provides) could also present opportunities to deploy private sector capital. There have already been examples of financing deals for CDR projects (for example Standard Chartered and UNDO and NatWest and Carbon Capture Scotland) in the UK, which can act as precedents for EU-based projects. 

More generally, the agreement is an important step towards the EU’s goal of net zero in 2050. The Carbon Removal Certification Framework Regulation is a principal factor in reaching this long-term goal and the European Green Deal; it will likely also be a key enabler of the 2040 intermediate target for 90% net emissions reductions.

The Framework relates to the EU Directive for Green Claims, which seeks to set common rules for companies making claims like “eco” or “green.” It was previously stated by the European Commission that “climate-related claims that are based on carbon offsets or carbon credits have been shown to be particularly prone to being unclear and ambiguous,” and therefore claims relying on carbon credits must be “transparent about which part of that claim concerns [a company’s] own operations, and what part relies on buying offsets.” The Green Claims Directive will require companies to get prior verification before making claims, and correct accounting and minimum standards of integrity regarding carbon credits. 

The new Framework is important because it provides clarity on what this standard is, and which credits will be eligible when it comes to companies making climate-related claims. There has been some confusion regarding the EU’s stance on offsetting, with a common misconception being that claims based on carbon credits will not be allowed, but this is incorrect. The new framework mandates that companies can base claims on offsets (that meet the minimum standards as described above) once they have also acted to substantially reduce their emissions. In this way, the EU is falling in line with other guidance around carbon offsetting, for example the Science Based Targets initiative and the Oxford Principles.

If you have any questions about this explainer, please do reach out to our authors:

• Christopher Spry, Head of Carbon Markets
• William Robson, Analyst, Carbon Markets