Brussels to Buy 6m Tonnes of CO2 Removals Annually From 2031
The Commission's state-backed offtake pledge arrives as ETS reform proposals have already pushed analysts to cut their EU carbon price forecasts for 2026 and 2027.
Analysts cut their EU carbon price forecasts for 2026 and 2027 after the European Commission proposed reforms to ease the ETS in late July (2026-07-31), Reuters reported, with the forecast revisions arriving weeks after the Commission also committed to buying 6m tonnes of CO2 removals per year from 2031.7,1
The two moves are part of the same carbon market review, and the market has plainly weighted them differently. The cap-softening triggered analyst downgrades. The removals pledge, announced alongside it, did not reverse them.7,1
The removal commitment creates something the voluntary carbon market has not previously had at this scale: a sovereign buyer with a recurring annual bid. Climate commissioner Wopke Hoekstra said the Commission will propose "targeted improvements" to the ETS while maintaining "stable long-term signals," with the formal package due in July (2026-07).1
The cap-side proposals are what moved prices. On 15 July (2026-07-15), the Commission proposed a slower annual decrease in the ETS emissions cap from 2030, aligning it with the EU's economy-wide 2040 climate target, an official said.2 A Forbes analysis of the review put the potential extra allowance volume at roughly 2.4bn tonnes of CO2 and described a decade added to the lifetime of fossil pollution in Europe's core industries.5 That is the bearish arithmetic on ETS supply. Against it, 6m tonnes of annual removals purchasing is a small number.
The sequencing explains the price reaction. A slower cap reduction from 2030 reduces near-term allowance scarcity. A removals purchase programme starting in 2031 adds demand only after the current trading period closes. A utility hedging ICE EUA compliance costs through 2029 gets no direct relief from the removals side of the package.2,1
The free allowance extension is the most contested element of the review. Under the proposal as outlined in an internal Commission document seen by Reuters on 10 June (2026-06-10), industries would receive continued free permits in exchange for investing in the bloc.3 Specifically, allowances would go to those that can prove they followed through on planned investments and achieved previously outlined emissions reductions, Carbon Brief reported on 20 July (2026-07-20).6 Dr Kirsten Scholl, director for EU affairs at thinktank Epico, called the investment condition a "step in the right direction" but said it must not impose excess costs.6
The removals programme operates differently from the allowance mechanics. It functions as a procurement programme, not a cap adjustment, which matters for project developers. An ETS-linked demand channel would be exposed to the same cap changes that just triggered forecast cuts. A direct purchase contract is not.1,2
Volume is still modest in aggregate. Six million tonnes per year against a free allowance proposal covering space for roughly 2.4bn tonnes of CO2 is not a comparable quantity.5 But for removal project developers, sovereign offtake changes the financing conversation. Bankable demand is the primary bottleneck for projects that require capital before they generate revenue, and a Commission procurement commitment carries a different risk profile than a corporate voluntary pledge.1
The review also covers the Carbon Border Adjustment Mechanism, which applies a carbon price to imports of cement, steel, aluminium, electricity and hydrogen.4 CBAM addresses leakage for existing industrial emitters; the removals programme addresses the separate question of creating a market for negative emissions. They do not interact directly in the near-term EUA price picture.4,1
The practical constraint on the removals commitment is funding. No budget line or financing mechanism has been detailed in the source material. Until a specific allocation is confirmed, the 6m tonne figure is a stated intention rather than a contracted bid. The ICE EUA Dec-rolling contract has already responded to the cap proposals, not the removals pledge, which reflects where the binding constraint actually sits.7,1
The July (2026-07) ETS proposal set the direction on cap trajectory from 2030 and the conditions attached to free allowances. Those two elements will define EUA supply through the decade.2 The next concrete signal to track is whether the formal legislative text specifies a funding mechanism for the removals programme — without it, developers cannot take the 2031 start date to a bank.1