Potsdam Institute Outlines Step-By-Step Integration Of Carbon Removal Technologies Into European Union Emissions Trading System By 2040

A new Potsdam Institute study shows how integrating carbon removals into the EU trading system can remove 86 million tonnes of CO₂ annually by 2050.

By: AXL Media

Published: Mar 31, 2026, 11:19 AM EDT

Source: Information for this report was sourced from Potsdam Institute for Climate Impact Research (PIK)

A Market Based Strategy for Climate Neutrality

The Potsdam Institute for Climate Impact Research (PIK) has introduced a scientifically grounded model for expanding the European Union's carbon market to include large-scale atmospheric removals. Currently, the EU Emissions Trading System (ETS) focuses on capping and reducing the output of CO₂ from the energy and industrial sectors. However, as the annual allowance for emissions approaches zero by 2039, industries are facing significant uncertainty regarding residual emissions. The PIK study suggests that integrating "negative emissions" into the existing trading framework could provide a vital safety valve for the economy while upholding strict climate targets.

Quantifying the Potential of Carbon Capture

Using the LIMES-EU calculation model to optimize investment decisions across the EU, United Kingdom, and Norway, the research team quantified the impact of two primary removal methods. The analysis indicates that if market-based incentives are properly aligned, companies could remove between 68 and 86 million tonnes of CO₂ per year by 2050. The study specifically evaluates "direct air capture" via filtration systems and "bioenergy with carbon capture," where biomass is burned and the resulting CO₂ is sequestered underground. The success of this technology mix will depend heavily on the rate at which technical advancements can drive down filtration costs.

Stabilizing Carbon Prices Through Market Equilibrium

The inclusion of removal technologies is projected to have a profound impact on the long-term price of carbon within the EU. According to the study’s lead author, Darius Sultani, the carbon price is expected to rise steadily to approximately 400 euros per tonne by 2050. However, once removals are fully integrated into the market, the price is likely to stabilize at a slightly lower level during the second half of the century. This stabilization offers industry players a degree of planning security, as removal certificates could be resold to firms that have not yet managed to eliminate their entire carbon footprint.