On 10 April 2024, the European Parliament adopted the proposed Carbon Removal Certification Framework Regulation based on text agreed with the Council. The proposed regulation will become EU law when, as anticipated, the Council adopts it and it is published in the Official Journal of the European Union.

The regulation creates an EU-wide voluntary framework to certify actions to remove carbon from the atmosphere and to reduce carbon emissions from soil. Its aim is to assist the EU in reaching climate neutrality by 2050.

The regulation sets out three categories of carbon removals: permanent carbon removals; and temporary carbon removals through carbon farming and carbon storage in long-lasting products.

Permanent carbon removals store carbon through industrial technologies for at least 200 years. Examples are direct air carbon capture and storage, and bioenergy with carbon capture and storage.

Carbon farming stores carbon in soil or reduces carbon emissions into the atmosphere for at least five years. Examples of the former are the restoration of forests and soil, wetland management, and seagrass meadows. Examples of the latter are no tillage, rewetting peatlands, and cover crops.

Carbon storage in products stores carbon for at least 35 years. Examples are the production of wood-based construction materials and bio-based insulation materials.

The three categories generate permanent carbon removal units, carbon farming sequestration units, soil emission reduction units, and carbon storage in product units. A unit is one metric tonne CO² equivalent of certified net carbon removal benefit generated by the activities.

The regulation assumes that carbon will be released into the atmosphere after temporary periods end, resulting in expiration of the units. Operators may extend the units by continued monitoring of activities.

Activities must be certified, a process that begins with operators applying to a certification scheme that uses a methodology adopted by the European Commission for verification by independent third-party certifiers.

Certification is based on four over-arching criteria with the acronym QU.A.L.ITY: 1) quantification against a baseline, 2) additionality, 3) long-term storage, and 4) sustainability.

Quantification requires carbon removals and soil emission reductions to deliver a measurable net benefit by outweighing any increase in carbon emissions associated with implementation of the activity such as emissions from machinery used to carry out the activity.

Additionality requires activities not to exceed an operator’s standard practice by both not being required by law or market conditions. If an activity does not need the incentive of certification to be financially viable, the carbon is reflected in the activity’s baseline and does not count towards certification.

Long-term storage links certificates to the time periods indicated above.

Sustainability requires activities to contribute to sustainability goals. For example, carbon farming must deliver at least a biodiversity co-benefit such as soil health or avoidance of land degradation.

Operators must show that their activities store carbon permanently or aim for long-term storage by:

1. monitoring and mitigating any risks of ‘reversal’ of carbon captured and stored by an activity during the monitoring period, and
2. addressing any reversals during that period by a liability mechanism. Reversal includes felling forests or their destruction by fires or pests.

If applications for certification are accepted, operators submit an activity plan and a monitoring plan to the certification body, which audits the activity to verify its compliance with quality criteria and the relevant certification methodology. If the audit is successful, the certification body issues a compliance certificate that shows the amount of carbon removed or reduced by an activity. The certificate is subject to a re-certification audit at least every five years, with the period depending on the activity’s characteristics.

The regulation directs the European Commission, in consultation with an expert group, to develop certification methodologies for the different categories of activities, including rules on monitoring, liability mechanisms such as insurance and collective buffers to address cases of reversal, and the risk of failure of liability mechanisms.

The Commission will publish an electronic EU-wide certification registry four years after the regulation enters into force. The registry, which will be funded by annual fixed proportionate user fees, will include compliance certificates, summaries of audits, and the status of certified units. Until the registry is published, certification schemes will publish the requisite information.

The regulation will spur development of the voluntary carbon market through which companies can offset their carbon emissions.  In turn this will lead to the development of further carbon credit insurance policies to provide cover for the risk of reversal leading to cancellation of credits and related exposures.