The New European Voluntary Certification Framework for Carbon Removal

Authors

 Sergei Makarchuk, LL.M.

 

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By adopting the new Carbon Removals and Carbon Farming Regulation (Regulation (EU) 2024/3012; the "CRCF Regulation") on 27 November 2024, the European Union aims to take another significant step towards achieving climate neutrality. The CRCF Regulation was published in the Official Journal on 6 December 2024 and introduces a voluntary European certification framework for permanent carbon removals, carbon farming and carbon storage in products. This voluntary certification framework supplements the provisions of mandatory certification under the EU Emissions Trading System (the "EU-ETS") and has the aim of complementing the Paris Agreement and Regulation (EU) 2021/1119. The goals pursued by the CRCF Regulation are to encourage the removal of carbon and its long-term storage as well as the creation of a transparent and standardized market with regard to voluntary certification.

Scope of Application

Voluntary certification under the CRCF Regulation is only available for certain certifiable neutralization activities carried out by the relevant operators (e.g. farmers and forest owners): Article 3 of the CRCF Regulation limits the eligibility for certification to "carbon removals" and "soil emission reductions".

However, the CRCF Regulation does not apply to emissions falling within the scope of the EU-ETS, with the exception of the capture and storage of certain CO2 emissions from biofuels, bioliquids and biomass fuels. Since the CRCF Regulation therefore only addresses the general neutralization of emissions (the CRCF Regulation does not target emissions from specific industrial sources), the availability of voluntary certification is not restricted to certain sectors.

By limiting the application to certain neutralization activities, the CRCF Regulation focuses on certification in the following main areas:

  • Permanent Carbon Removals: This includes, for example, technologies that capture carbon and then store it for several centuries and also includes products that capture carbon through chemical compounds and store it permanently.

  • Carbon Farming: This includes activities such as wetland and forest restoration, implemented over a period of at least five years. For this activity, certain practices for afforestation and other activities of land management (e.g. the use of catch crops or cover crops or the conversion of set-aside areas to permanent grassland) may fall within the scope of carbon farming.

  • Carbon Storage in Products: This concerns neutralization activities that capture and store CO2 in long-lasting products for at least 35 years. The Commission intends to promote the use of wood-based and bio-based construction products in particular.

  • Permanent Net Carbon Removal Benefit: Article 4 requires that the permanent carbon removal must provide a quantifiable permanent net carbon removal benefit. In short, more carbon has to be removed than released.

  • Incrementality: Article 5 requires that the neutralization activity must go beyond the already existing legal requirements. Furthermore, it is necessary that the economic viability of the activity is based on the incentives that are triggered by the certification.

  • Storage, Monitoring and Liability: In addition to the two quality criteria already mentioned, Article 6 requires proof that the neutralization activity can lead to permanent storage of CO2 or that long-term storage is intended. The latter subsequently results in a certain degree of monitoring and in liability mechanisms.

  • Sustainability:  Finally, the neutralization activity must not cause significant harm to the environment. Instead, it should generate co-benefits for the sustainability objectives mentioned in Article 7 (e.g. adaption to climate change). For carbon farming activities, the CRCF Regulation requires the co-benefits of protection and restoration of biodiversity and ecosystems (including soil health and prevention of soil degradation).

Quality Criteria

In order to be certified, a neutralization activity by the operator as referred to in Article 3 has to meet the quality criteria set out in Articles 4 to 7 of the CRCF Regulation.

Certification and Publication

In addition to the quality criteria just outlined, Article 3 in conjunction with Article 9 of the CRCF Regulation provides for a further requirement for the certification of a neutralization activity: verification by an independent certification body and a certification scheme (including a respective registry).

If the operator of the neutralization activity wishes to obtain a certification for the respective activity, it has to apply to a so-called "certification scheme" (i.e. an organization that acts as an overall certification monitoring institution) and subsequently submit the documents required under Article 9 to a so-called "certification body" (i.e. an independent auditor of the respective activities).

In reviewing the activities and their compliance with the requirements set out in the CRCF Regulation, the certification body is required to carry out certification audits. Thereafter, the certification body issues its certification audit reports and (based on the outcome of such audit) a certificate of compliance.

However, the actual certified units are not issued by the certification body itself, but by a registry (the Union registry to be implemented by the Commission; until its implementation, certification schemes must establish comparable certification registries). Operators may use such certified units; for instance, to offset emissions or to sell them to other market participants.

As of 27 December 2028, the certification audit reports by the certification bodies have to be entered in such registries. The aim of this registration requirement is to prevent double counting and fraud.

Specific Certification Methodologies

The Commission will adopt delegated acts with regard to the specific certification methodologies that specify the general quality criteria set out under the CRCF Regulation. The Commission has considerable leeway in adopting these methods, as the CRCF Regulation only provides for a few guidelines in this regard. Article 8(3) in conjunction with Annex I of the CRCF Regulation stipulates, for instance, that the certification methodologies should not impose a disproportionate administrative burden on operators (in particular on small-scale agricultural producers).

The Future

The Commission will review the incorporation of emission reductions from two of the largest farm polluters – manure management and cow digestion (enteric fermentation) – by 31 July 2026. If the decision is made to include these categories, a legislative proposal to expand the scope of the activities under the CRCF Regulation to these categories is to be expected thereafter.

Bottom Line

The CRCF Regulation provides additional incentives to adopt carbon-reducing measures that are deemed to benefit the climate and offers rewards for those who implement them. It encourages industry and agriculture to adopt greener practices and aims to give operators and investors the confidence to act in line with climate targets. This setup strives to minimize one of the major ESG problems: greenwashing. With clear standards and third-party oversight, operators can prove that their green claims are not just empty talk.

For ESG enthusiasts, it offers the opportunity to support projects that not only offset emissions, but also restore ecosystems and have the potential to benefit communities. As the EU approaches its 2050 targets, this framework could serve as part of the foundation for a robust carbon-negative future.