The document Ref. Ares(2025)3030455 – 14/04/2025 outlines the review of the EU Emissions Trading System (EU ETS). It focuses on maritime, aviation, and stationary installations, alongside the Market Stability Reserve (MSR) assessment. As the EU intensifies its climate goals, the review will assess how carbon dioxide removal (CDR) technologies can be integrated into the EU ETS. It will focus particularly on permanent CDR solutions like biochar to help achieve net-zero emissions by 2050.
Key Objectives and Challenges of the EU ETS Review
The EU ETS is one of the core tools to achieve the EU’ s 2050 net-zero emission target. As the largest carbon market globally, EU ETS sets carbon emission caps and allocates carbon allowances to companies. It encourages the reduction of greenhouse gas emissions. To meet the 55% reduction by 2030 and net-zero by 2050, the EU ETS needs continuous improvements to enhance market stability, efficiency, and fairness.
Review Focus: One of the main goals of this EU ETS review is to assess the effectiveness of existing policies, particularly the MSR and the current carbon allowance system. Additionally, the review will examine how emerging CDR, such as biochar carbon removal(BCR), DACCS, and BECCS, can be effectively integrated into the carbon market. As scientific and technological advancements continue, ensuring that these permanent carbon removal solutions are recognized fairly and transparently within the EU ETS framework is critical for achieving the EU’ s long-term emission reduction goals.
Biochar and Its Contribution to Carbon Removal
Carbon Removal Mechanism
- Carbon Sequestration Properties:
Biochar sequesters carbon in solid form within soil or building materials, providing long-term carbon removal. As a carbon removal technology, it offers significant advantages. Not only is it a mature technology, but it also has strong scalability and cost-effectiveness. Biochar can be rapidly deployed using existing infrastructure and effectively sequester atmospheric carbon, helping to reduce greenhouse gas emissions. - Technology Maturity:
Feedback from the biochar industry shows that the Technology Readiness Level (TRL) of biochar has reached above 8, indicating that it has entered the commercialization phase. In Europe, biochar technology has already been implemented on a large scale, and in 2023, approximately 130,000 tonnes of CO₂ were removed using biochar, proving the feasibility of the technology and market demand.
Biochar in the CDR Market
- Market Data:
Between 2022 and the first half of 2025, a total of 3.04 million tonnes of BCR credits were contracted. The average volume purchased per year has increased from 542 tonnes in 2022 to 762 tonnes in the first half of 2025. Deliveries have grown rapidly, with a total of 658,000 tonnes of BCR delivered since 2022. BCR is by far the most common removal method purchased in contracted credit sales, with 290 unique purchasers. - Price Growth:
According to CDR.fyi Biochar Carbon Removal Market Snapshot, the market grew from $14.6 million in 2022 to $33.9 million in 2023, and to $181.5 million in 2024, representing a Compound Annual Growth Rate (CAGR) of 131.6%. Biochar, as the main technology for durable carbon removal credits, accounts for 86% of all credits delivered and 92% of all credits retired, reflecting its dominant position in the market.
Potential of BCR in the EU ETS
Policy & Market Incentives
Competitive Advantage
Economic Benefits & Potential
Policy & Market Incentives
- Policy to Drive Market Development:
Incorporating biochar carbon removal credits into the EU ETS can provide stable demand for the market. This policy support helps accelerate the large-scale deployment of biochar technology. What’s more, it enables companies to better meet their carbon reduction targets. - Incentivizing Private Investment:
Policy support can encourage private investors to engage in biochar projects, driving innovation and technological development. At the same time, carbon pricing and trading rules can lower compliance costs for companies. They also motivates more businesses to adopt biochar as a carbon removal solution. - Enhancing Market Confidence:
Clearer market rules and well-defined policies will ensure the quality and credibility of biochar carbon removal credits. Thus, it strengthens investor confidence in the biochar market and promoting its long-term, healthy development.
Competitive Advantage
- High Deployment Efficiency:
Compared to BECCS and DACCS, biochar projects can achieve large-scale deployment more quickly. Biochar production equipment does not require expensive infrastructure investments and is not constrained by geographical or climatic factors. It directly utilizes biomass resources such as agricultural waste and forest residues. Through pyrolysis process, it can sequester carbon in solid form. - Low Cost & Risk:
BECCS and DACCS projects require significant capital investment and complex infrastructure, such as underground storage facilities or energy-intensive capture systems. In contrast, biochar projects can be self-sustaining in terms of energy. Moreover, the carbon sequestration mechanism of biochar is relatively stable, with its solid carbon storage resistant to external factors, posing no leakage risk.
Economic Benefits & Potential
- Lower Compliance Costs:
Biochar, as a cost-effective carbon removal technology, helps reduce compliance costs for companies. By incorporating biochar into the EU ETS, companies can achieve carbon reduction targets at a lower cost and reduce dependence on public subsidies. - Improving Market Liquidity:
The inclusion of biochar will help increase liquidity in the carbon market. It will encourages more market participants to engage in carbon trading. Additionally, the widespread use of biochar can foster the healthy development of the carbon market. Moreover, it lays the foundation for future carbon price stability. - Promoting Green Economic Investment:
As biochar technology scales, related industries such as biomass energy, waste management, and agriculture will see further development. This will not only stimulate the growth of the green economy but also attract private capital and green investments.
Policy Recommendations and Implementation Pathways
Technological Neutrality & Market Fairness
Specific Steps for Inclusion
Synergy with Other Policies
Technological Neutrality & Market Fairness
To ensure fair market access, the EU ETS should adopt a technologically neutral framework. This would allow all permanent carbon removal technologies certified under the CRCF (Carbon Removal and Agricultural Certification Framework), including BCR, BECCS, and DACCS, to compete on equal terms in the carbon market. A technology-neutral policy encourages innovation and development across different carbon removal technologies, rather than favoring a single method. For biochar, such a policy would facilitate rapid technology maturation and large-scale deployment. This also strengthens BCR’s role in the carbon removal market.
Specific Steps for Inclusion
- Compliance with CDR Certification Standards: Biochar must meet EU carbon removal certification standards. Thus, it undergoes rigorous verification processes to demonstrate its ability to permanently and reliably sequester carbon. This would not only enhance market confidence but also ensure its legitimacy as an effective carbon removal technology.
- Linking to the MSR: Link biochar carbon removal to the MSR mechanism. This will ensure balance between supply and demand in the carbon market. This mechanism can help stabilize carbon prices, ensuring the long-term effectiveness and reliability of biochar carbon credits.
- Avoiding New Technological or Legal Barriers: In advancing biochar’s inclusion in the EU ETS, we should avoid unnecessary technological or legal barriers. Simplify the certification process and minimize administrative procedures to ensure biochar technology enters the market smoothly and deploys rapidly at scale.
Synergy with Other Policies
- Reducing Redundancies Between Policies: The EU ETS should coordinate with other policy frameworks, such as RED III (Renewable Energy Directive III) and CRCF. It will avoid duplicative administrative checks and reduce compliance costs for businesses.
- Simplifying Compliance Processes: Ensure the EU ETS aligns with other carbon reduction policies to simplify compliance processes for businesses. This would improve policy implementation efficiency and reduce the burden on market participants.
- Policy Coordination: Through policy coordination, different policy measures can mutually support each other. It advances the application of biochar and other carbon removal technologies. Also, policy coordination lays a solid foundation for achieving long-term carbon neutrality goals.
Toward a Future with Biochar Integration into the EU ETS
Integrating biochar carbon removal into the EU ETS is a vital step toward the EU’s climate goals. With its scalability, cost-efficiency, and permanence, biochar can accelerate progress toward carbon neutrality. Coordinated policies and market incentives will unlock its full potential—driving innovation and investment. The review planned for Q3 2026 offers a timely chance to advance this integration and strengthen Europe’s carbon market. Want to stay up-to-date on the latest biochar carbon removal news? Follow us on LinkedIn.
