The European Commission has proposed a major overhaul of the EU Emissions Trading System (ETS) that would, for the first time, allow compliance revenue to buy permanent carbon removals and international carbon credits. Starting in 2031, the Commission would use auction revenue from 250 million allowances to purchase BioCCS and DACCS units certified under the EU's Carbon Removals and Carbon Farming (CRCF) framework. From 2036, a separate facility funded by up to 260 million allowances would buy high-quality international credits, likely including Article 6 units, to reduce the EU's domestic abatement requirement by up to five percentage points. The proposal also creates a new Industrial Decarbonisation Bank with a target of mobilising 100 billion euros for industrial decarbonisation and removals. This funding arrives as public investment in carbon removal projects has fallen from 89% of total funding in 2024 to 61% in 2026. The reforms are not final yet, as the European Parliament and Council must negotiate their positions. But the proposal gives the removals and Article 6 markets a defined compliance buyer with a specific volume attached, a significant shift from the EU's long-standing preference for pure domestic abatement.
