A new analysis led by Dr Nils Markusson from Lancaster Environment Centre warns that proposals to integrate Carbon Dioxide Removal (CDR) into the EU Emissions Trading Scheme (ETS) could weaken incentives to cut emissions.

CDR encompasses a range of techniques designed to remove carbon dioxide from the atmosphere and store it. These include nature-based approaches such as tree planting, as well as engineered technologies including Direct Air Capture (a technology that uses chemical processes to extract carbon dioxide directly from ambient air) and Bioenergy with Carbon Capture and Storage (capture and permanent underground storage of carbon dioxide). Many climate strategies assume that some greenhouse gas emissions from some hard-to-abate sectors will remain difficult to eliminate entirely, and that carbon removals will therefore be needed to compensate for these residual emissions.

Emissions Trading Schemes (ETSs) are a key climate policy tool that place a cap on total emissions. Companies must obtain allowances to cover their emissions, with these allowances’ tradable between firms and the overall cap gradually reduced over time.

A growing policy debate centres on whether carbon removals should be integrated into these schemes. Supporters argue that doing so could help scale up carbon removal technologies and provide businesses with additional, more flexible ways to meet climate targets. However, the researchers focus on the risk of ‘mitigation deterrence’, or the possibility that a greater reliance on future carbon removals could reduce incentives to cut emissions today.

This risk can arise in several ways. Carbon removals and carbon emissions are often treated as equivalent, but carbon storage may not always be permanent, and so be a poor substitute for emissions reductions. There is also a risk that governments and industries become overly reliant on future carbon removals that may prove difficult to deliver at the scale anticipated.

In their paper ‘Mitigation deterrence in emissions trading schemes: Managing low-quality demand for carbon removal’, the researchers examine recent policy developments in both the UK and the EU, drawing on consultation documents and advisory reports. They found that policymakers in both jurisdictions recognise the risk of mitigation deterrence and are proposing safeguards, including emissions caps and stronger monitoring and reporting systems.

However, the analysis argues that current proposals pay far more attention to the quality of carbon removals being supplied and not enough to the quality of demand - that is, who gets to use carbon removals.

This matters because the potential supply of carbon removals is likely to be limited. If sectors that have relatively straightforward options to reduce emissions are allowed to rely on carbon removals, they could crowd out sectors whose emissions are genuinely harder to eliminate.

The authors also argue that decarbonisation can be slow and path dependent. Reducing incentives to cut emissions today can delay investment and technological change, making it harder to reach net zero targets in the future. While some hard-to-abate sectors may continue to require carbon removals, sectors with more readily available decarbonisation options should not be allowed to slow their progress by relying on future removals.

The paper also highlights the risks associated with delays or failures in carbon removal deployment. The recent pausing, and possible abandonment, of the BECCS project at Drax in Yorkshire illustrates the uncertainty surrounding some large-scale carbon removal plans. Therefore, there is a strong case for requiring easy-to-abate industries (e.g. electricity generation) to pay extra for their permits to balance up the risk of CDR failure.

The paper concludes with three recommendations. First, policymakers should regulate who can use carbon removal credits, not just how those credits are produced. Second, governments should be more explicit about what counts as a ‘hard-to-abate’ sector and how such decisions are made. Finally, climate policy should be more transparent about the assumptions that shape expectations around future carbon removal technologies and their role in achieving net zero.

"We need to keep the pressure to decarbonise up on those industries that are relatively easy to decarbonise. CDR mustn’t be used to ease that pressure.”

https://doi.org/10.1016/j.erss.2026.104962