Fit for 2030 series: The ETS takes a step forward towards proper GHG accounting of CO2 use

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CO2 use has been included in the ETS in a way that sets a fair basis for assessing the permanence of the storage in CO2 use. This is in general a positive development as CO2 use has posed a challenge to accounting with the potential for loopholes in emission accounted or non-accounting of CO2 altogether.

The revised proposal of the EU Emissions Trading System mentions ‘permanence’ and potential emissions to the ‘atmosphere’, which sets a good baseline for the assessment of the climate impact of CO2 use. The aspect of permanent storage of CO2 in products will be dealt within the Carbon Dioxide Removal Certification. This is a positive development, since one of the prerequisites for carbon removal is to ensure that the CO2 molecule is permanently stored away from the atmosphere (for more information on carbon removals and their definition, read more here).

CO2 that is used to makes fuels is not recognised as permanently stored, which means that an EU allowance will have to be surrendered for the CO2 used to produce them. In the words of the proposal, a carbon credit will have to be surrendered if the CO2 is released to the atmosphere on normal use. Since fuels are combusted during their ‘normal use’, they could not count as ‘storage’ of CO2 from the EU ETS.

Nevertheless, some products which use CO2 might not emit it during their use, but will cause emissions during their disposal. For instance, plastic products produced from fossil fuels do not cause any emission during their use, but will cause emissions during their disposal (e.g., incineration, burning, landfill or disposal into the environment).

Picture1 Figure 1: Most of our plastics consumption today results in disposal and only a small portion is recycled and downcycled back into the system: 11 million tons are incinerated, 31 million tons are landfilled and 25 million tons leak into the environment (World Economic Forum, Ellen MacArthur Foundation, & McKinsey & Company, 2016; European Commission, 2018)

Therefore, the term ‘disposal’ or ‘end-of-life’ should be added to the wording around CO2 use in the EU ETS to make sure that this loophole is avoided.

In the Renewable Energy Directive, CO2 use is included under the category of renewable fuels of non-biological origin in the form of synthetic hydrocarbon e-fuels, such as e-kerosene, e-methane and others. However, the revised RED doesn’t offer any clarity on how the ‘carbon’ aspect of these fuels will be treated; these details will be dealt with in a delegated act on the GHG accounting methodology for Renewable Fuels of Non-Biological Origin.

For more information on the general principles for the greenhouse gas accounting for CO2 use, see our latest report on the issue.