Options for implementing limits for CDR integrated into the EU ETS 1 : final report / by Hugh McDonald, Jonathan Gardiner (Ecologic Institute, Berlin) ; on behalf of the German Environment Agency ; edited by: Section V 3.3 Ökonomische Grundsatzfragen des Emissionshandels, Auktionierung, Auswertungen - Julio Fournier, Jule Neubauer

Abstract

In the context of the ETS review starting in July 2026, the European Commission is expected to propose the integration of permanent carbon dioxide removals (CDR) into the EU Emissions Trading System 1. While beneficial, this integration also raises concerns due to several risks including mitigation deterrence, market uncertainty, and sustainability impacts. This report identifies and briefly assesses nine approaches to limiting CDR use within the EU ETS 1 to address these risks. The findings reveal key trade-offs, showing that limit suitability depends on policy objectives and integration models. Finally, the report outlines possible policy combinations and future research priorities.