Carbon removal is entering the compliance era

"Who pays for carbon removal?"

That's the question that will define whether the world reaches net zero.

Today, Europe proposed a powerful answer: a demand signal for a quarter-billion tonnes of permanent carbon removals, embedded in its strategy to build an industrially competitive economy.

The European Union leads the way with Japan, California and other carbon market makers in recognizing the role of carbon removal for net-zero. This announcement stands apart among that crowd of climate leaders because the EU Emissions Trading System (ETS) is the world's largest carbon compliance market, by far. It covers around 40% of the EU's greenhouse gas emissions across roughly 10,000 power and heavy-industry installations - spanning steel, cement, aluminum, glass, chemicals, refineries, and more - plus airlines and shipping, in 30 countries. Since 2013, it has raised €270 billion and driven emissions in covered sectors down roughly 50% since 2005. It is the most successful carbon pricing instrument ever built.

The European Commission has proposed writing permanent carbon removals into that system. Under this design, the EU will purchase 250 million tonnes of certified direct air capture and BioCCS removals between 2031 and 2040 through a centralized EU procurement facility, ramping up to nearly 50 million tons by year 2040. This is the largest government demand signal for durable removals ever proposed, and the first time DAC is named in the world's biggest carbon market. Purchases would be funded by auctioning an equivalent number of newly created allowances, and a review due by end-2034 would assess letting emitters use removals directly for compliance to turn this ten-year procurement program into the permanent, market-wide demand required to achieve and sustain carbon-neutrality.

We see two vital matters to unpack in the months ahead.

International Credits

The climate math is a global calculus, and multi-gigaton carbon removal will require a global footprint of technology with globally-linked markets. Beyond domestic permanent removals, this package also advances an important conversation about international removals and the cordless nature of carbon removal. The more like-minded governments in California, Canada, Washington, Japan cooperate and collaborate to ensure good projects thrive across borders, the more amplified and durable these market signals become. Importantly, these linkages insulate market mechanisms from political fits and starts through strength-in-numbers.

Pathway-specific Ambition

This move opens the full toolkit that EU industry needs to decarbonise steel, cement, chemicals, aviation, shipping, and a host of other verticals, positioning Europe as the destination of choice for carbon removal infrastructure and capital. We welcome a data-driven, project-informed dialogue with the Commission and member states on how to balance the efficient use of EU revenues with pathway-specific support to bring the full permanent removals portfolio to scale.

What Comes Next

Good carbon removal policy is, at its core, good project policy. It gives developers the certainty they need to invest and unlock capital, turning carbon removal from pilot plants into facilities large enough to matter for the climate. By setting a clear ambition, with a market framework to support, Europe is creating a vital framework that developers, investors, workforces, and the rest of the ecosystem can leverage to deploy DAC at scale.

The proposal now heads to negotiations with the European Parliament and Member States, where the design details will be finalized over the coming year. We welcome the opportunity to work with the Rapporteur and member states to shape the final outcome, with an eye toward informing policy with the needs of project investors that can bring industry-creating capital to the table.

Heirloom's current slate of projects extends across North America. When Europe sends a demand signal for our technology, it creates a powerful magnet for capital.Our focus remains on our projects in California, the Gulf Coast, and Canada - but demand signals grow stronger when markets connect. We see a clear opportunity to amplify Europe's leadership across the jurisdictions where we operate, and to bring our technology to the EU and its Member States as we explore what comes next.

Watch this space.