EU clearly distinguishes carbon reduction activities... Introduction of carbon removal certification system

Carbon removal refers to the activity of capturing carbon from the atmosphere and storing it semi-permanently outside the atmosphere.

Expected expansion of compensation for climate change response efforts and promotion of private funds and investment in carbon reduction projects

In order to reach the goal of climate neutrality by 2050, the EU has prepared various policy bills such as the European Green Deal, the European Climate Act, and Fit for 55 and has been making efforts to reduce carbon emissions. However, as it is expected that it will be difficult to achieve climate goals by reducing carbon emissions alone, various concepts such as carbon capture storage (CCS) and carbon removal (CDR) have been introduced. The EU plans to recognize negative emissions through the introduction of a carbon removal certification system and unify the certification and compensation system for carbon removal activities.


Introduction of carbon removal certification

The European Commission proposed the "Carbon Removal Certification Framework*" to establish standards for carbon removal certification and classification of removal activities in order to promote efficient carbon removal activities in November 2022, and the European Parliament and Council proposed it on November 2023 and 17, 21, respectively. A position on ‘carbon removal certification’ was adopted.

    Note*: 2022/0394(COD) Union certification framework for carbon removals

As various attempts are made to reduce carbon dioxide and greenhouse gases around the world, the meanings of carbon reduction, carbon offset, and carbon removal are being used interchangeably.

'Carbon reduction' means fundamentally preventing and reducing emissions from direct and indirect carbon sources. 'Carbon offset' is designed to 'compensate' for damage caused by current or future emissions and 'prevent' further damage from occurring. This includes operating carbon offset credits (carbon emissions rights), developing renewable energy, and efforts to improve energy efficiency.

‘Carbon removal’ refers to the activity of semi-permanently sequestering and storing carbon in the atmosphere through technology and the natural environment. Carbon removal is a 'remedial' activity that goes beyond mitigating new emissions and seeks to reverse damage that has already occurred. Compared to reducing or compensating for future emissions, carbon removal can be said to be a more active approach because the effect is immediate. Carbon Removal Certification recognizes that you are providing high quality carbon removal in accordance with the quality standards and certification procedures specified in your proposal. The EU said it would ensure high-quality carbon removal and improve market transparency due to greenwashing by clarifying the concept of these carbon reduction activities.

Carbon removal can be seen as a type of carbon offsetting activity, but most carbon credits traded today come from emissions reduction rather than actual carbon removal. However, in the carbon removal certification proposal, the EU clearly stated that the certified carbon removal amount would not be used to comply with the EU emissions trading system, and explained that the specific use of offsets will be addressed in future EU law.


Carbon Removal Certification Main Contents

First, the EU established 'QU.ALITY', a carbon removal measurement, monitoring, and verification certification system to provide transparency in carbon removal measurement. Each certification standard is as follows.

  – Quantification: Quantifying the scale of carbon removal

  – Additionality: Requires innovation beyond existing practices and laws

  – Long-term storage: Carbon storage period certification

  – Sustainability: Evaluation of contribution to sustainability goals, etc.

In addition, standards for carbon removal activity classification were established and the carbon storage function of building materials was added in addition to existing carbon sinks such as soil and forests. Negative emissions will be recognized only for carbon removal by certified carbon sinks, such as permanent carbon removal, carbon agriculture, and carbon storage through sustainable products.

  ① Permanent carbon removal: Utilization of BECCS (bioenergy carbon capture and storage) or DACCS (direct carbon capture and storage from the air) technology*

  ② Carbon agriculture: Increasing the role of agriculture and forestry to store carbon in soil or forests

  ③ Carbon storage of sustainable products and materials: Recognition of the carbon storage ability of wood-based and energy-efficient building materials

    Note*: The EU Commission views carbon storage (CCS) and utilization (CCU) as a technology to reduce carbon emissions, separate from 'removing' carbon from the atmosphere, and is not included in the Commission's draft.

As carbon removal technology is in its infancy, the EU is paying attention to the role of easier and cheaper carbon agriculture and a natural carbon sink. Soil and forests, which are currently the most common carbon removal methods, are representative natural carbon sinks, and the carbon removed from the atmosphere by plants is stored in topsoil, making the soil fertile. About 27 billion tons of carbon is stored in the soil of the EU-750 countries, which is estimated to be more than the annual greenhouse gas emissions of the EU-27 countries of 44 billion tons.

EU carbon removal certification is not mandatory and is voluntary. An independent certification body will conduct an audit to ensure that carbon removal complies with the QU.ALITY standards and related certification methodologies, and issue a certificate after confirming compliance with the quality standards.

[Source: Energypost]

Additionally, the Commission mentioned in the draft the possibility of supporting innovative carbon removal activities through public funds. We plan to prioritize carbon removal activities that help preserve biodiversity through the Common Agricultural Policy (CAP), national support plan, or Innovation Fund. It is expected that carbon removal certification will reward the efforts of agricultural and forestry workers and companies to respond to climate change, thereby promoting investment attraction for the development of carbon removal technology.

The bill will enter the agreement process between legislative bodies as the European Parliament and Council adopt its position in November 2023. Once the regulations are officially adopted and enter into force, the Commission plans to adopt as delegated legislation the carbon removal certification method and procedures developed with the support of the expert group.

Although both the European Parliament and the Council emphasize transparency in calculation methods and procedures and agree to comply with the IPCC* guidelines, there are differences of opinion on the scope of regulations, standard update cycle, and demands for legal action as a result of monitoring, so attention is paid to future legislative trends.

    Note*: Intergovernmental Panel on Climate Change


Implications and Prospects

The EU estimates that procedural transparency to evaluate the contribution of governments and companies to climate change response will be improved by establishing standards for quantifying and evaluating carbon removal activities. In addition, it is expected that new means of financing the carbon emissions industry will emerge, such as the voluntary carbon (removal) market and impact finance derived from carbon removal certification. It is expected that compensation will be provided to agricultural and forestry workers and companies for their efforts to respond to climate change, and that investment attraction for the development of carbon removal technology will be promoted.

For example, a food company that wants to strengthen ESG management can reward farmers who achieve more carbon removal through carbon farming with carbon removal certification. Construction companies or investments that use sustainable building materials, such as wood, that remove and store carbon can earn additional income by selling carbon removal credits. Participants in carbon removal activities receive additional income based on their contribution, and companies can prove their carbon footprint with reliable, documented data.

Uniform certification regulations allow consumers and investors to more easily compare companies' carbon footprint reduction results. Public institutions or private investors can compare proposals in eco-friendly projects or public procurement through objective data and provide compensation based on certified carbon removal amounts. Local authorities can also use the revenue raised from selling carbon removal certificates to fund climate and biodiversity expansion.

EU carbon removal certification is still awaiting agreement between legislative bodies, and carbon removal technology is still in its early stages. However, the EU's policy framework and regulations are highly likely to be internationally standardized, and if a certification system is introduced, EU companies with institutional mechanisms to prove carbon reduction activities are likely to have an upper hand in trade and bidding competitions, so our companies They will also need to diversify their efforts to respond to climate change while paying attention to future legislative trends.

Source: Compilation of data from the European Commission, European Parliament, Council, European Environment Agency (EEA), local media, and KOTRA Brussels Trade Center

<Copyright: ⓒ KOTRA & KOTRA Overseas Market News>

Source: KOTRA