In November 2022, the European Commission (EC) published a proposal for the creation of a Carbon Removal Certification Framework (CRCF). Its goal is to establish a unified set of rules under which all carbon removal projects in the European Union (EU) would operate. More than a year has passed since the first proposal, and on 20 February, the European Parliament, the Council, and the Commission reached an agreement on the CRCF regulation, confirming their commitment to ensuring the necessary reliability and transparency for the carbon market.
A unified system for achieving environmental and climate goals
The voluntary carbon market is a system designed for the exchange of carbon credits, namely for the reduction, prevention, or removal of greenhouse gas emissions. It is still in its early stages but is simultaneously growing and changing rapidly.
2023 was by no means easy for the carbon market, as public attention was drawn to many problematic projects. The challenges and lessons learned in the industry confirm that carbon credit buyers need transparency and assurance that projects truly deliver the promised benefits to nature, while project participants, such as farmers and landowners, need assurance that the carbon market will still exist in 10 years and that the benefits of participation will be long-term. The CRCF system provides both.
The main goal of the regulation is to prevent greenwashing and help achieve EU climate and environmental goals. This can be achieved through a unified certification system that ensures a complete and high-quality carbon removal process. The system will certify four types of carbon removal activities: permanent carbon removal (e.g., direct air capture), temporary carbon storage in long-term products (e.g., wood building materials), temporary carbon storage through afforestation, and soil emission reduction in the agricultural sector.
In addition, carbon project developers are actively collaborating with international standard and certification bodies, such as Verra and Gold Standard, thereby creating a high level of reliability assurance for both involved parties.
Carbon removal opportunities are becoming increasingly relevant
90% of the carbon credits currently available on the market are generated by reducing emissions, such as by replacing fossil fuels with renewable energy, while only 3% of credits are generated through the carbon removal process; however, demand for it is high and continues to rise.
The new regulation could change this balance, and the market is already moving from emission reduction projects to carbon removal projects. Market experts have compared this regulation to the adoption of the General Data Protection Regulation (GDPR), as it has a similar potential to become a widely recognised global standard.
Next steps
Following the agreement reached by the institutions, the regulation will now move to the implementation phase and final approval, but forecasts suggest that the system will not be fully operational until 2025 at the earliest. The step taken on 20 February is of great importance, as the greater trust and transparency provided by the regulation will promote more rapid development of the European carbon market and, consequently, broader profit opportunities for Latvian farmers and landowners as well.