Min KGG non paper: carbon removal procurement through revenues from the EU ETS
The Netherlands proposes to use EU ETS (Emission Trading System) revenues to finance carbon removals. Three stages are proposed for the development of a market for carbon removals as well the conditions for utilizing ETS revenues for carbon removals.
Carbon removals are necesary to limit the increase of global temperature of 1,5 C. Yet, there is no clear European policy that enables a bussiness case for carbon removals. Therefore, the Netherlands calls for consideration of procurement of carbon removals through revenues of the EU ETS.
It is proposed to have a procurement auction model to ensure the selection of the most cost effective and innovative removal. The development of a market for carbon removals is proposed to be done in three stages: 1) early development: data gathering regarding the interaction of different carbon removals market interaction (uncertainty over price and availability), 2) mid stage: development of instruments that ensure the most cost effective technologies are deployed as it is expected that the price for some technologies are lower in comparision to the price of emissions, and 3) potential end game:overcome specific regulatory issues e.g. ocean capture or biomass.
The use of ETS revenues should be done under these conditions: 1) fix an ammount of allowances for carbon removals, 2) set auctions as a service for carbon removals (as done in the hydrogen bank), and 3) set caps per removal technolgy.