The European Union (EU)’s carbon market could evolve into a major driver of carbon dioxide removal, according to a new study led by the Potsdam Institute for Climate Impact Research (PIK). This offers policymakers a pathway to scale negative emissions without weakening climate ambition.
Published in the journal Joule March 31, 2026, the study How the EU can utilize its carbon market to scale up Carbon Dioxide Removal finds that the EU Emissions Trading System (ETS) could incentivise large-scale deployment of removal technologies while continuing to push industries to cut emissions.
Using the Long-term Investment Model for the Electricity Sector (LIMES)-EU model, researchers estimate that integrating carbon removal technologies such as direct air capture and bioenergy with carbon capture and storage (BECCS) could deliver around 60 million tonnes of carbon dioxide (CO₂) removals annually by 2050, with higher volumes possible depending on cost trends.
ETS could offer long-term financial certainty for investors at a time when public funding is constrained, said Darius Sultani, lead author and researcher at PIK. He noted that using a market-based instrument “makes sense” given limited fiscal space and growing pressure to meet climate neutrality targets.
Balancing removals with emissions cuts
The study addresses a key concern in climate policy: that reliance on removals could slow down emissions reductions. It finds that within a capped system like the EU ETS, this risk can be limited.
Since total emissions are fixed by the cap, any failure of removals to materialise would push up carbon prices, forcing additional emissions reductions elsewhere in the system. However, the authors caution that risks could emerge if policymakers weaken the cap in response to rising prices.
The research also highlights environmental risks linked to excessive biomass use for BECCS, which could strain land systems and biodiversity if sustainability safeguards are not enforced.
Phased integration to avoid policy risks
To manage these challenges, the study proposes a step-by-step integration of removals into the carbon market.
In the first phase, the focus would be on establishing robust monitoring, reporting and verification systems, along with sustainability standards. The second phase would introduce removal credits gradually, with limits on volumes and scope. Full integration (where removals and residual emissions are governed by a single carbon price) will only occur around 2040.
Michael Pahle, co-author and PIK researcher, said the proposal aims to shift the policy debate from whether removals should be integrated into emissions trading to how this can be done without undermining environmental integrity.
Decision point for EU policymakers
The findings come as the European Commission prepares to decide by 2026 whether carbon removals should be included in the EU ETS.
The study argues that emissions trading could provide a cost-effective alternative to large subsidy programmes, while giving industries clarity on how to deal with residual emissions that are difficult to eliminate.
If implemented carefully, the EU carbon market could eventually transition into a system that not only limits emissions but also actively removes carbon dioxide from the atmosphere, supporting net-zero and, ultimately, net-negative emissions.
