The EU is considering re-integrating carbon credits into the EU carbon market!

Recently, the European Union is studying whether to include carbon credits in its carbon market, a move that could reopen the use of its carbon credits for offsetting in the EU carbon market in the coming years.

Previously, the European Union banned the use of international carbon credits in its emissions market since 2020 due to concerns about cheap international carbon credits with low environmental standards. Following the suspension of the CDM, the EU took a strict stance on the use of carbon credits and stated that international carbon credits could not be used to meet the EU's 2030 emissions reduction targets.

In November 2023, the European Commission proposed the adoption of a voluntary framework for the certification of high-quality carbon removals from Europe, and after February 20, it received a provisional political agreement from the European Council and the Parliament, and the final bill was finally voted on on April 12, 2024.

Previously, we have analysed that due to various political factors or international constraints, without considering the recognition or cooperation with existing third-party carbon credit issuing and certification bodies (Verra/GS/Puro, etc.), the EU urgently needs to create the missing component of the carbon market, that is, the officially recognized EU-wide carbon removal credit certification mechanism framework. The new framework will generate officially recognized deterministic carbon removals and integrate CDRs into policy instruments. The carbon removal credits recognized by the EU will lay the foundation for subsequent legislation to be directly integrated into the existing EU carbon market system.

So, at a meeting organized by the International Emissions Trading Association in Florence, Italy, on Wednesday, Ruben Vermeeren, deputy head of the European Commission's EU carbon market unit, said: "An assessment is underway to assess whether carbon credits should be included in the scheme in the coming years."

In addition, he made it clear that the European Commission has until 2026 to decide whether to propose rules to add carbon removal credits to the market. Such carbon credits represent the elimination of carbon emissions and can be generated through projects such as planting new forests that absorb carbon dioxide or building technologies to extract carbon dioxide from the atmosphere. The carbon credits that can be offset by the EU ETS include adding removals to the existing ETS, or establishing a separate EU PES market.

Of course, in addition to the EU's own certified carbon credits, the official statement of the third phase of the EU ETS also sets aside a framework for carbon credits generated under Article 6 of the Paris Agreement, and explains that the endorsement of the Article 6 mechanism depends on subsequent developments.

Vermeerren concluded by emphasizing that the potential benefits of increasing removals from the EU ETS include that it will provide a way for industries to address the final emissions that they cannot eliminate. But he cautioned that promoting the use of carbon credits could discourage companies from actually reducing emissions, and that offsets are not a substitute for actual emission reductions.