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The European Commission is expected to publish its report and possible proposal on integrating carbon dioxide removal into the EU Emissions Trading System by July 2026. If it happens, this is the single most consequential policy decision for European CDR markets in the next decade.
ETS Basics. The EU ETS puts a shrinking cap on greenhouse gas emissions from covered sectors (power generation, heavy industry, aviation, maritime transport). Companies must hold enough EU Allowances (EUAs) to cover every tonne they emit. If they emit less, they can sell their surplus. If they emit more, they have to buy.
Integrating CDR into the ETS would bring carbon removal credits into this system as a form of compliance. A BECCS plant that captures and permanently stores a tonne of CO2 would receive a credit. Under full fungibility, that credit would be interchangeable with an EUA. A cement producer could then buy and use it to cover a tonne of its own emissions.
The expected market impact is that instead of governments primarily funding CDR through grants and reverse auctions, the carbon market itself would generate much more significant demand. Responsibility to pay for removals would shift toward emitters. That turns CDR from a policy-dependent sector into a market-driven one.
But the details matter, and several possible configurations are on the table.
Full fungibility is the cleanest version: one CDR credit equals one EUA, no restrictions.
Partial integration is more cautious. Credits might be accepted for compliance but with volume caps (e.g., a facility can only cover 10% of its obligation with removal credits). Or removals might trade in a linked but separate pool, with a conversion factor rather than 1:1 fungibility.
The Commission's choice here will determine the scale of the market that gets built.
This is the central tension in the debate. If companies can buy removal credits instead of cutting their own emissions, some of them will.
Say it costs a steel manufacturer €200/tonne to retrofit its furnaces. If BECCS credits are available at €150/tonne, the manufacturer buys the credits. The atmospheric math works out: one tonne removed offsets one tonne emitted. But the furnace never gets replaced. The steel sector keeps emitting. The dependency on removals calcifies.
How big this risk gets depends on how the cap is designed:
If the long-term EUA price stabilizes around €300/tonne because more expensive CDR pathways provide a cost ceiling, anything above that price effectively defines the boundary of "hard to abate." That's a useful market signal: it tells the market which sectors genuinely need removals and which ones should be decarbonizing directly.
A possible policy compromise is a phased approach: strict volume limits while CDR costs remain high, gradually loosening as removal CCS technologies mature and costs decline. Full fungibility wouldn't arrive until around 2040, by which point most of the cheaper abatement options should have already been adopted and thus the risk of abatement deterrence is contained.
If removal credits are going to be treated as equivalent to emission allowances, the monitoring, reporting, and verification behind those credits has to meet compliance-grade standards. Here's what the ETS and CRCF framework will demand, and where the industry stands today.
Continuous, automated data capture across the full value chain. ETS-covered installations already face strict monitoring requirements. CDR projects entering the system will need to meet the same bar. For BECCS, that means real-time tracking of CO2 flows from biomass intake through combustion, capture, transport, injection, and storage. Manual, spreadsheet-heavy, or retrospective data assembly will become increasingly difficult to defend for complex BECCS value chains
At Mangrove, our platform already handles this through direct integrations with SCADA systems, data historians, and PLCs at the facility level. Data is ingested continuously from production equipment, transport networks, and subsurface monitoring tools. The result is a single, auditable record of every tonne captured and stored, updated in real time rather than assembled retroactively for reporting periods
Biomass sustainability verification. This will be one of the most scrutinized areas of BECCS integration. The CRCF BioCCS methodology requires demonstration that biomass feedstock meets sustainability criteria, and the Renewable Energy Directive (RED III) adds further requirements. Projects will need to trace feedstock provenance, verify that sourcing doesn't drive adverse land-use change, and document compliance with applicable sustainability certification schemes.
Mangrove tracks biomass sourcing data as part of the same integrated system that handles CO2 flows. Feedstock provenance, volumes, and sustainability documentation are captured alongside operational data rather than managed in a separate process.
Automated reporting across multiple compliance frameworks. One of the practical challenges for BECCS projects is that they rarely operate under a single reporting obligation. A project might need to report against CRCF for EU compliance, Puro or Isometric for voluntary credit issuance, and state energy agency requirements for country-level incentive programs, all from the same underlying operational data.
Mangrove's quantification engine routes a single dataset to multiple reporting destinations. Reports are auto-generated in the format each registry or program requires, with version control and audit trails built in. Layering on new value streams doesn’t require projects on our platform to rebuild their data infrastructure. The monitoring parameters are already being captured.
Third-party verification readiness. Compliance markets require third-party verification at a standard comparable to financial auditing. Verification bodies need access to complete, tamper-evident datasets with clear provenance. Mangrove’s platform is built around this requirement: every data point is time-stamped, source-tagged, and stored in an immutable audit trail. Verification bodies and registry reviewers can access the data they need directly, which compresses verification timelines and reduces the back-and-forth that slows credit issuance in less automated systems.
How integration might impact the need for MRV. The bar for BECCS MRV won't change overnight. But the stakes will. Today, most CDR MRV activity serves offtake diligence, grant applications and CDR certification. If ETS integration proceeds, MRV becomes compliance infrastructure. Project developers seeking financing will need to demonstrate that their monitoring systems can produce credits that survive regulatory scrutiny. Investors and lenders doing due diligence will treat MRV capability as a prerequisite, not an afterthought.
Under a phased approach, MRV standardization comes first, credit issuance later. The standards and systems need to be in place before the market opens, not after. That's how Mangrove approached our work with BECCS developers: building the data infrastructure now so that when the compliance framework arrives, the projects are ready.
The Commission's July proposal won't immediately change who is buying CDR credits or at what price. The legislative process alone will take at least 12-18 months after the proposal, with implementing legislation to follow. But the direction holds considerable weight for the industry.
If the Commission signals inclusion, it will give state regulators the framework they need to align national programs with a European market structure. It gives private companies a reason to believe that CDR investments will have a compliance pathway, not just a voluntary one. And it gives project developers enough certainty to move projects through development stages that require long-term revenue assumptions.
If the Commission punts or signals non-inclusion, the sector likely remains dependent on grant cycles, national subsidy programs, and voluntary buyers. That would make it harder to attract the capital needed to move BECCS projects from pilot to commercial operation, leaving the EU’s 2040 and 2050 removal targets in danger without significantly expanded public-sector support.
The bottom line: Many European BECCS projects have stalled in recent months. National subsidy programs are under fiscal pressure. Voluntary buyers are cautious and slow-moving. The private demand signal that would pull capital into the sector hasn't materialized at scale.
ETS integration is the mechanism that could change that equation by providing the long-term certainty that financing decisions require. The July proposal won't create a functioning CDR market by itself, but it could determine whether the architecture for that market gets built.
