A lot has been happening in Europe lately.To break it all down for us, we’re joined by Sebastian Manhart, senior policy advisor at Carbonfuture and Initiator and Chair of the DVNE, Germany's CDR association.The episode discusses three major topics: 1) The good, the bad, and the surprising news from the concluded trilog negotiations on the Carbon Removal Certification Framework - how did reductions make it in there?2) The EU’s proposed 2040 emissions targets which quantifies the cost of inaction at 2.4 trillion euros.
3) The Green Claims Directive, which aims to address a critical issue: 53 percent of all environmental claims in Europe are misleading, and 40 percent are unfounded.Enjoy this power session on EU policy!
On This Episode
Radhika MoolgavkarSebastian Manhart
Resources
The Carbon Removal Certification Framework: Europe's Blueprint for Net-Zero
From Greenwashing to Green Trust: The State of European Environmental Claims Regulation
Understanding Carbon Removal Policy Across Europe: An Exclusive Analysis
Tech openness letter signed by 350 companies
Subscribe to Climate Workers Anonymous
My other show, Reversing Climate Change
Books referenced in the podcasts, at Bookshop
Full Transcript
Announcer: You’re listening to Carbon Removal Newsroom, a weekly show about current events in the world of carbon removal, from technology and innovation to policymaking and job growth. Brought to you by Nori, the carbon removal marketplace.
Radhika Moolgavkar: Welcome to this week’s episode of Carbon Removal Newsroom. I’m Radhika Moolgavkar, VP of Supply and Methodology at Nori, a carbon removal marketplace based in the United States. Periodically, we like to check in on the developments across the Atlantic, and lately there has been a lot going on for our European friends and partners. So here with me to discuss the EU’s proposed 2040 emission targets, the Green Claims Directive, and the conclusion of the trilog negotiations between the European Council and Parliament and Commission on the Carbon Removal Certification Framework is one of our favorite guests, Sebastian Manhart, Senior Policy Advisor at Carbon Future and Initiator and Chair of the DVNE, Germany’s CDR Association.
Welcome, Sebastian. Thanks for joining us.
Sebastian Manhart: Always a pleasure to be here.
Radhika Moolgavkar: Okay, so we have a ton to cover, so let’s just jump right in and start with the Carbon Removal Certification Framework. It was really probably the biggest news of the week. So can you just start with reminding our audience what the CRCF is and why it’s so important?
Sebastian Manhart: Yeah, sure. So the carbon removal certification framework, or CRCF for short, is probably one of the most ambitious pieces of CVR legislation anywhere in the world. And it tries to answer the basic question, what does carbon removal and especially high quality carbon removal look like and how can we certify it as a government? And in Europe, it’s kind of that missing building block that we need to achieve net zero. Because in Europe, we have a lot of big frameworks that are missing carbon removal right now. And the CFCF paves the way to bring it in.
And the CFCF, briefly to just explain what’s in it, it has four categories of three of carbon removal. So it has, you know, carbon farming, which includes also nature-based solutions. It has carbon storage and products. You know, if you’re thinking about construction materials or concrete, And it also has a permanent removal, which are what you probably deal with a lot in this podcast as well, as far as I know, durable removals like dark specs, biochar and so on. And now it’s also included, and we might want to talk about this later, which is controversial emission reductions in carbon farming as a fourth category in a carbon removal framework, which is really not what should be happening.
And all of these are subject to certain quality criteria. And then the CSEF essentially lays out a certification framework of how exactly these different four buckets can turn into units that then could be used in all sorts of different ways. And why is it important? First, at EU level, as I said, this is what we need to integrate, for example, removals into compliance markets or other very important legislation against greenwashing and so on. At national level, if you are a European member state and you’re thinking about removals, you’re not going to reinvent the wheel.
You’re going to leverage what’s already in the CSEF. And I expect even beyond Europe, countries or even regional blocks might just copy and paste it just like people have done for the GDPR and privacy regulation, right? And the final and probably most immediate is in the voluntary carbon market. If you are a buyer and you know this is coming down the pipe, or just if you want to trust the judgment of having an EU stamp on something, you’re probably going to align your purchasing behavior with what is already in the CSCF.
So overall, I think hugely impactful.
Radhika Moolgavkar: Yeah, obviously when I introduced it, it was a tri-party agreement. And so I’m assuming that may be why Emission reductions through carbon farming snuck in, but can you maybe expound on that a little bit because it is interesting that it’s part of a carbon removal framework.
Sebastian Manhart: Interesting to say the least, highly problematic. I mean, if you read any of the press releases of civil society, they are going after this pretty hard. I mean, read the carbon market watch, for example, and I recommend it, right? Like it’s true. It shouldn’t have been in there. They already started with, they kind of, it snuck in through peatland restoration, which is emission reduction and then turns into carbon removal. But frankly, if you look at it now, it’s just its own thing. Why has that happened? 36% of the EU’s budget is agriculture.
So the agricultural lobby in the EU is very strong. If you think about how this works, both in parliament and in the council, which represents the member states, there are some member states that had this very high on the agenda, given the farmers that are already literally with their trucks on the street right now in Europe. So yeah, it’s an unfortunate result. We can talk about some of the many good things, but this is unfortunately something that probably is not so welcoming.
Radhika Moolgavkar: Yeah. So let’s start with what exactly was decided on February 20th, because that is the date. And then tell us some of the positive things you think will come out of it and the positive, maybe even the positives that developed during the process of doing this, because this hasn’t been a short discussion.
Sebastian Manhart: No, the way that it works, essentially the commission started a proposal that was November 2022. And then it’s one and a half years in this case of negotiation. It was supposed to be February 19th, but as they often like to do, it got done at like 3 a. m. on February 20th. That’s why that date. But essentially the trial of marks the end of this kind of negotiation between the three key EU bodies that you mentioned. And we don’t have the final text yet. That will take a bit longer, probably next week or the week after.
But we do already have the press releases by the commission and the official one. And also I’ve seen the text just before the final meeting and not a lot will have changed. So we have good reasons to believe that this is kind of what’s happened. And on the positive side for me, also this was not the case originally, we now have different units. I mentioned the four buckets. In the original framework, they were all treated the same. So a carbon farming unit was the same as a permanent removal unit, which creates a whole ton of challenges when you’re trying to apply this.
Now at least we have four different units, one for each. A second one that I’ve been very involved in from an advocacy perspective is tech openness and the definitions. Making sure that you actually have an inclusive framework that doesn’t a priority pick winners and exclude technologies, which is what was happening. And now we’ve got definitions aligned with the IPCC. Nobody knows why it wasn’t aligned from the get go. And we’ve got tech open definitions of permanent removal. So this is really good stuff that at least leaves the room open. And the final thing is use cases.
That’s been a huge point of critique that We have a certification, but for what? And kind of the commission in particular had been refusing to say how this is going to be used. Now in the final version, at least we’ve got references to things like the Corporate Source Sustainability Reporting Directive or the Green Claims Directive that shows kind of these linkages are starting to form. Challenges, I mean, the biggest one we already spoke about, right? Emission reduction should simply never have found a way into the CSEF. And that is a huge blow to the credibility of the CSEF as a whole.
And another one that was not really a topic of discussion, but I think should be, is certifying non-European removals. It is very much focused only on Europe. It has a provision for geological storage in Norway, Iceland, and the UK, because frankly, that’s where Europe will have to store most of its CO2. But it doesn’t currently allow for the certification of non-European removals. And this is a problem because climate change is a global challenge. Conditions are much more favorable in the global south or in tropical regions in many cases. And so this is something that I hope we’re going to see in other legislation.
But overall, at least as far as I’m concerned, it’s a huge step in the right direction.
Radhika Moolgavkar: Yeah, the other interesting thing about that is some of these solutions are not geographically bound, like ocean solutions, right? How do you say it’s a European solution in the broad sense? So it’ll be interesting to see how that all develops. So that leads me to my final question for the CRCF, which is what’s next? How does this move forward? And, you know, what do you expect to see in the next 12 to 18 months?
Sebastian Manhart: So let’s start kind of with the regulation itself, with the legal text. So that’s been agreed on. It will be adopted in April before the election in June, the European election, and it should be implemented by the end of 2024. What’s happening in parallel is that the European Commission is tasked with developing the actual methodologies. And this is crucial. This is the meat on the bones. Because the legal text does not go into detail about how exactly a DACC credit will be certified or a DACC unit will be certified. So this is really, really important.
And the Commission will work throughout the year and will have 12 months after implementation, so end of 25 roughly, beginning of 26, to bring out the first methodologies. The regulation gives some indication. They say that they should prioritize approaches. They call it methodologies. I call it approaches that have significant potential, first, and second, that have clear co-benefits. What I’m hearing is that the commission is going to start with duck specs and carbon farming. Which is welcoming, but I also find it a bit problematic because to me, it doesn’t really align with the criteria I just mentioned, if I think about it.
And also, it excludes 95% of current deliveries, right? Endurable carbon removal coming mainly from biochar carbon removal, mineralization, enhanced rock weathering. And so what’s currently happening and what I’m also going to be working on over the next few months is trying to help the commission do more in the same time. Because obviously, if they have 12 months, they’re going to just try to get whatever they can done. And one approach is to focus higher level. So instead of trying to do what the VCM has been doing for years, which is develop standards with hundreds of scientists, it’s focused one level higher on kind of principles based guidance that sets the right boundaries, but then allow the VCM to deliver on the standards.
That way the commission could actually do four or five or even more methodologies in the same time. But yeah, it’s to be seen that the big meeting in April, mid April, that people can also watch online and where a lot of this will be decided.
Radhika Moolgavkar: Well, good luck, Sebastian. I agree with your kind of perspective on creating a broader framework because we also just don’t know what’s going to work. So you don’t want to get too locked into, and the VCMs can be more maybe reactionary to the technology as it develops versus large government institutions. Good luck on that. And I hope that you’re successful in making them change their approach to how they develop these methodologies. Let’s move on to another big topic of conversation, which are the 2040 emission targets. So obviously this goes hand in hand with carbon removal because everybody knows emission reduction first, then carbon removal.
So the EU proposed 90% reduction targets for 2040 is significantly more ambitious than previous goals. So what are the key factors driving this increased ambition and what’s your sense that it’s realistic to achieve these targets considering the breadth of the EU economic situation and regulatory situation?
Sebastian Manhart: Yes, I mean, it is a very ambitious target. To be clear, it recommended three options. The least ambitious is 75%. Then it’s 85%. And then there’s a 90 plus percent, which is what the commission is recommending. It is a communication. So it’s before a proposal. The proposal is going to come next year in early 2025. But just to be clear, there is urgency behind it because the EU is expected to deliver its next NDC next year, its next nationally determined contribution, which will have to have a final decision on this topic.
So by next year, we will have these locked in stone. And now it is an 800-page impact assessment coming with the communication, which goes into a lot of depth. And a lot has gone behind it. And one thing or two things to pull out is the cost. They tried to quantify the cost of inaction. So they justified the 90% by essentially looking at what would it cost us between 2030 and 2050 if we didn’t achieve this level of emission reduction. And they estimated it at 2. 4 trillion euros, which is an exorbitant amount of money.
So this is kind of one of the drivers, the cost of inaction. And the second one is the EU wants to clearly disincentivize investments into carbon intensive technologies and literally fuel the green transition. So these are kind of the overarching objectives of why it wants to go very, very ambitious. Is it realistic? I mean, the EU has a 55% reduction target by 2030. It’s currently not on track. It’s on track for 51. So we’ll need additional measures to achieve 55. Some countries are more ahead than others. And also it’s contingent on a lot of carbon capture and storage, fossil CCS and CDR.
Without it, it won’t be able to achieve these 90%. So yeah, whether this will actually be the direction of travel depends entirely on the new parliament and the new commission, which will come into force later this year. They might water it down or they might back this kind of ambition.
Radhika Moolgavkar: Can you just explain if you know how they’re defining or how they’re measuring the cost of inaction? Does that include things like Public health outcomes, obviously environmental catastrophes. Just curious how they came to that number.
Sebastian Manhart: It’s a mix. It looks at a number of things. I mean, especially in Europe, very prevalent. The costs of adaptation as well as all the catastrophes that are already happening on a yearly basis. So that’s kind of the primary one. But it also looks at industry and obviously what it would mean for one pathway. Versus the other in terms of industrial growth. And a lot of it is banking on millions of sustainable, high quality green jobs, right? So there’s also this idea that a higher ambition here will have some consequences.
An example, I mean, I’m a trained economist. If you’re going to put a lot of money into something immediately, you will probably first drive up inflation, which will not really help right now. But it will also lead to lower prices of renewable energy in the long term, which will then stabilize the situation and lead to a lot of growth. So that’s currently the thinking, but again, it’s obviously a very complex topic.
Radhika Moolgavkar: Yeah, very complex. I just, you know, it’s a huge number. So I was just curious sort of what the general inputs were. So you mentioned that this target, at least the 55% target, and I assume the 90% target also includes some sort of carbon removal. So what gets you excited about this idea of incorporating carbon removal into the emission targets and what concerns you?
Sebastian Manhart: So the 55% one actually only has land use, land use change and forestry, Lulu CF target of 300 something megatonnes. It doesn’t have any industrial removal targets right now. For this 2040 one, what they’re suggesting in the impact assessment, again, this is very much hidden in the notes, 300 pages in, but it’s 75 megatonnes of durable carbon removal by 2040. And which, you know, it’s great to see actually a number put down of this kind of ambition. And I’m super excited about that. I really hope that this number can make it into the actual proposal and then the legislation because we need this kind of ambitious, clear, dedicated carbon removal targets.
And the challenge that I see is first and foremost right now, for example, Lulu CF, DPS and CDR, it’s all just thrown into the same buckets. And that is highly problematic because then it can lead to a lot of adverse outcomes in terms of how we achieve this. So we need to differentiate it. And civil society as well is very clear. Carbon Market Watch is running a huge campaign on this. We need separate targets. And we’re not seeing links to the CSCF yet. Again, that’s a problem. Like if it says 75 megatonnes, what do we mean?
We should mean durable removal as certified in the CSCF. And right now, and again, recurring challenge, it’s only mentioning air capture and bioenergy will come capture and storage. And this is a recurring theme that people say durable removal, but they only mean ducks and vex. And again, that’s so limiting. That’s part of the solution, right? So we need to look beyond that. But yeah, overall, I think it’s very promising. Again, we’ll have to see how especially the new parliament picks this up. But by end of next year, we will have a target set in stone in Europe.
Radhika Moolgavkar: So a side question, and I don’t know if you can answer this, but it’s interesting that the EU favors DACs and BECs. We often hear the same complaint here in the US, except it’s probably just DAC, right? BECs even gets left behind. So do you have a sense of why those technologies have broken out the way they have in the EU? Is it because they’re easy to measure? Do they have good lobbies? Why are they so popular, do you think?
Sebastian Manhart: I think there’s a bunch of ways to answer that, right? I mean, from a regulatory perspective, we’ve got the 2009 DCF directive, which essentially manages monitoring and liability for point source DCF. But it does now provide a framework already for monitoring and liability of transport and geological storage of ducts and decks, right? So it makes it much lower risk from a regulatory perspective. And I think when I’m a policymaker and I’m looking for low hanging fruits, that’s what I’m going for. The second one is in Europe, that is going to be the huge volumes in the next 10 years.
Like if I look at the projected volume coming online between 2025 and 27, you know, a vast majority of those 75 megatonnes is going to be back. So I totally get it from a volume perspective. Dax, sometimes in Europe, I’m a little bit more like we don’t really have the energy mix, right? Right now, 22% of Europe’s energy consumption is renewable, 22%. We’ve got such a long way to go until we have a fully renewable grid and energy consumption. And so I’m a bit confused why there’s so much emphasis right now on ducks.
I think it’s going to be part of the solution. But if I think about right now, biochar carbon removal, enhanced rock weathering, other solutions will be able to deliver much more. So yeah, but I think it comes down to, again, the risk as a policymaker and taking the low-hanging fruits.
Radhika Moolgavkar: That makes a ton of sense. So you were talking about some of the potential economic and social implications, but can you maybe expound on other besides maybe green jobs, other social implications or economic benefits of such a rapid transition away from fossil fuels? And, you know, do you see any specific concerns from certain member states or industries that might slow this down?
Sebastian Manhart: Yeah, I think it’s good to understand kind of the broader context in Europe. So first, like in many places, we’re seeing a shift to the political right, right, which are parties that are generally tend to be more climate skeptic. We’re also seeing, you know, we’ve come out of a period of very high inflation, five plus percent at times eight plus percent. We’re seeing sluggish growth. I mean, in general, less than one percent at the moment. Germany has just down revised their forecasts, right? Like this is really important. High energy prices.
The prices in Europe are more than twice the American energy prices. All of this creates a big picture that I think is really important when you think about where Europe wants to go. The wars now that are happening, the over-reliance on Russian fossil fuels, all of that is playing into this increased ambition by policymakers to break free of a lot of these challenges. So that’s where kind of, you know, creating green jobs, but also finally create, you know, low cost renewables, a renewables grid. Those are all things that policymakers want to get going as soon as possible.
It will have a lot of unintended consequences for a lot. And I know that on this show, you cover the environmental justice component quite significantly. So, and two things I think to highlight there, which probably most people don’t know about in Europe, we have two vehicles to target environmental justice and kind of the people left behind or the industries left behind. For the people, it’s called the Social Climate Fund, which is a significant fund. It’s around 87 billion euros over a course of six years that is specifically going to people living in energy poverty.
And this is used by the member states. They make a 25% contribution, but it goes specifically to help people out who are basically left behind in this process. And then we’ve got the just transition mechanism, which is also 55 billion euros, which goes to industries. So this is something that governments can essentially use to help out industries that are being left behind. It’s not a perfect situation. There will be a lot of hiccups, but I personally think that we’ve got a good mix of vehicles funded by, by the way, polluters, because a lot of this is coming through the ETS allowances to make up for the challenges that we’ll have in the green transition.
Radhika Moolgavkar: I have a follow-up. You did mention the shift rightwards in terms of the government. I was in London in October and I did hear some conversations about the UK pulling back because obviously they’ve had a shift rightward to their environmental commitments. Do you anticipate anything like that from the EU member states or is that a concern at all?
Sebastian Manhart: A huge concern. I mean, we have a European election this June. And the forecast is that the right, and it’s also the far right, is going to probably have unprecedented gains. This will have an impact on climate policy. In Europe, we’ve got big elections. I mean, Germany has a big election next year, and there’s a lot happening right now. I don’t know how much people here follow in terms of the far right party and what’s currently happening in terms of protests against it in Germany. So there’s a lot happening, and it will have a big impact, undoubtedly.
And we’ve rarely seen... Far right gains correlate with more climate ambition and money for CDR. So it’s to be seen, I’m hopeful, but it is a fairly bleak situation in many places right now.
Radhika Moolgavkar: Yeah, I think that’s why the Biden administration is pushing money out as fast as they can, right? Like just get it out the door because once it’s gone, it’s gone. All right, let’s move on to the green claims directive, which is the third bucket that we were going to talk about today. So the GCD aims to combat greenwashing and increase consumer trust in corporate environmental claims, which if it’s successful would be a huge help even to me because I’m always confused when I go to the grocery store, for example. So what are the key provisions of this directive and how will it be enforced?
Sebastian Manhart: Yeah, and maybe again, starting with some really interesting research that the European Commission did in the impact assessment to this. They found that 53% of all environmental claims in Europe were misleading. And 40% unfounded. So this is just context of why it’s happening. And when we say environmental claims or green claims, they’re the same. And there’s two types of green claims. Maybe just for the listeners, you know, there’s product claims about a product being carbon neutral. Think the Apple Watch. And then there’s corporate claims about a company being net zero, for example.
But these are always external marketing, user-facing, client-facing claims. And this is a huge challenge. And I’m very glad that the EU is stepping in here. Now, what exactly does the directive do? How is it enforced? I think the first thing to mention is that there’s going to be a pre-verification of environmental claims. So if you’re a company making these claims, you have to submit them before being able to make them, and they need to be accredited before you can make them. Then there’s massive penalties, up to 4% of global annual turnover can be These are very similar amounts to what has been done in the GDPR for privacy infringements, but it has tea.
You will have to pay a lot of money if you get this wrong. For example, the EU commissioner, one of them immediately said about the Apple announcement, absolutely not. This would not fly in Europe in the future. And there are some exemptions. This is also important. If you’re a micro enterprise, so you have less than 10 employees, if you’re even a small and medium sized company, less than 250 employees, there are provisions in terms of when you have to comply and to which extent. But yeah, it is a big, big, important piece of regulation that will change quite a lot.
Radhika Moolgavkar: Yeah, I have to say the Apple piece just very specifically was baffling to me because both I read their carbon neutral claim and then I tried to dig into what that meant. Couldn’t really find anything. And then I read their report and well, the claims they made, let’s just say I thought like if a Delta Airlines had made those same claims, they would have been under a much bigger scrutiny than Apple was.
Sebastian Manhart: Yeah, it’s very interesting. It was a good clip, wasn’t it? I mean, they got some PR out of it.
Radhika Moolgavkar: Yes. Weather was a good clip. Yes. Okay. So how, how is CDR specifically impacted by the GCD?
Sebastian Manhart: Actually, significantly. So originally there was a fear of a, of a ban on all types of offsets to back up a green claim, because this was kind of the direction of travel of the GCD. Now that’s not been the decision. And to be, again, to be clear, it’s not yet a finalized piece of legislation. This is kind of the parliament has changed. Almost finalized its eternal stance. But this is what I’m currently talking about is basically the parliamentary committees which lead the way have come out with this negotiating position. And what it has, it has a lot of good stuff in there.
It has a like-for-like principle in there. So, you know, durable emissions, long-term emissions with durable removal, short-term emissions with temporary removals. And it says that this is also great that CDR has to be certified under the CSCF if you want to use it as an offset. So it’s only durable, You know, carbon removal under the CSCF here. And it also allows extra EU offsets to be used if they are certified under an equivalent scheme to the CSCF. So all of this is really great. It does also say, and this is where I personally think it’s a bit more controversial, that you can only use it You can only use it for residual emissions.
So none of these carbon removals can be used for anything that’s not residual. Residual is not defined, which is kind of the problem, right? So this is very limiting and civil society is pushing for this. And I guess that this is the safe choice. Industry is not pushing for this because it will lead to delayed climate action. In my view, and many share this, rather than saying residual emissions only, you should say durable carbon removal under the CSCF only, like for life principle, and then the price of durable carbon removal will be so much higher.
Then if you start buying at 5 or 10 or 30% residual emissions, it doesn’t really matter that much in my perspective. So I would let the price and the quality regulate it more than saying residual, which doesn’t mean anything right now. But again, this is kind of one of the challenges that I think it still has. But yeah, it will have a huge impact because if I’m a buyer and I want to keep making green claims, which I do. And I will shift my purchases from emission avoidance and reduction to TSEF certified renewables.
Radhika Moolgavkar: Yeah, I totally agree with you on the residual emissions. You could always contact Holly Jean Buck, who wrote a paper on that, if the EU needs some definitions. But it’s never made sense to me. I’ve always been like, exactly your point, like the cost of CDR is so much higher. Why wouldn’t they reduce if this was the forcing mechanism? So hopefully they will Rethink that and your advocacy can maybe impact it. So there’s also, you know, some reporting bills. Is this the EU’s version of the California Bill 1305, which we discussed with Holly Jean Buck and Wil Burns a few episodes ago, or different or overlapping?
Sebastian Manhart: Well, I think what they share is they both kind of are attempts at starting to regulate marketing claims for carbon offsets, right? But they do it in kind of different ways. Again, I’m not an expert on the California bill, but my understanding also from listening to your show is that the California bill is really about businesses starting to make information available. Publicly, right? It’s much more about the reporting side to actually show what they’re doing. And it targets only really the voluntary carbon market and it’s less specifically focused on green claims.
And it’s also not really providing a framework like what I just told you, all the details I told you in terms of also enforcement and everything else, I don’t think that’s part of the California bill in green claims. So kind of similar area, but I would say the European one goes quite a bit further when it comes to green claims.
Radhika Moolgavkar: He’s always a head of the U. S. in terms of regulation. So what impact do you think the GCD will have on businesses that are particularly small and medium-sized? And are you concerned about these bureaucratic burdens, maybe disproportionately disadvantaging smaller companies?
Sebastian Manhart: That’s obviously a risk. I mean, having run a startup myself of around 40, 50 employees, I know that these are huge concerns. I remember when the GDPR came into force and we had to figure out how to do it. That’s scary. And I would say first micro enterprises, so less than 10 people are exempt. And then small and medium sized enterprises are not exempt, but just to remind people 99% of European companies are SMEs. So this is a hugely important segment. But the European Commission is tasked with, for example, facilitating.
So again, there will be funding to help small and medium-sized companies in particular. But I think it will be good because first, it will increase consumer trust, which should help industry in general. And second, it creates a level playing field. If you also with the big companies, because now you all have to play by the same rules and maybe a small company can’t afford some potential lawsuits that a big company would have had. And so now they all have to abide by the same and they all get fined comparatively the same.
So I think it will also help with competition. But again, that’s just my hypothesis.
Radhika Moolgavkar: All right. Well, I want to know as a final few questions, how do these three initiatives, you know, the emission targets, the GCD, the CRCF interrelate in the EU’s broader climate strategy?
Sebastian Manhart: So in the EU, the overarching goal is the Green Deal, which foresees net zero by 2050, right? And then we’ve got a couple of vehicles to get there. We’ve got the Lulu CF, or land-based sector. We’ve got the emission sharing regulation and the emission trading system, which between them cover all other sectors. Those are huge vehicles that have existed for a long time. None of them, with the exception of Lulu CF, currently includes CDR. And so this is why a lot of things are now happening. I would say the emission targets are a key stepping stone towards 2050 targets, right?
And that will apply to 27 member states and will lead to subsequent legislation in 27 member states. The CFDF is really just the building block that you need for everything else. So kind of the foundational policy. And the green claims directive is very much focused on one specific application, which is green claims, user-facing green claims. So this is kind of where these three, they play slightly different roles, but they’re obviously interconnected. And one thing that I think people will see more and more will be reference of the CRTF in other legislations, like it is happening in the green claims now.
And I know that a lot of people are very interested. Example, compliance markets. The EU Commission has to come up with a proposal by 2026 for ETF integration, which at the earliest will be implemented in 2031. And it is very, very likely that it will reference the CSEF permanent removals as the first removals to be integrated. But yeah, that’s how they kind of go together.
Radhika Moolgavkar: All right. And then final question for you, Sebastian, which is maybe a little broad, but What can other regions, other countries learn from the EU process? And what would you advocate to other parts of the world to adopt from this EU process or these bills that you’ve seen? What are your favorite pieces of legislation?
Sebastian Manhart: First, after all this bragging about EU policy, let’s start with a word of humility. We do not have, we’re not the best at policy in general. We have found a way to do policy that works for the European continent. American policymaking is very different, but also very effective in doing stuff. If I look at how quickly capital has been deployed at carbon removals in the US, it keeps being deployed, as we saw last week from the DOE again, compared to Europe, which is still talking about definitions, it’s just a different approach.
And it also reflects the electoral realities. In the US, you have very little predictability. Two years, everything changes every two years. Whereas in Europe, we have a lot of predictability through the European Union. That’s where we can make 2040 targets that will then flow down to 27 member states and that will likely not change. A lot of things change, but not these foundational building blocks. So I think very different scenarios. I personally find that kind of predictability and long-term planning very, very useful. And what other countries I think can take away from this I think the CSEF could become the gold standard that a lot of other countries might copy and paste quite literally with a couple of adaptations, right?
Like you’ve got hundreds of experts Debating this for years with industry input, with academic input, civil society input, and come up with a really solid framework. So if you’re thinking of doing something in the CDR space and you need a reference point, it might be good to piggyback off what the European Union is already doing. But again, all to say that I wish, for example, the European Union was moving quicker on a lot of capital deployment. But yeah, on definitions, certifications, on that stuff, we’re pretty good.
Radhika Moolgavkar: I sometimes wonder if the states in the US are becoming more like the EU and that they’re predictable, that they’re either Democratic or Republican, but our federal government is much less predictable. And every two years we have turnover, like you said. Well, Sebastian, as always, I learned a ton. I so appreciate you being on the show and would love to check in with you in a few months as things progress and make sure the EU is still on track. And thanks so much for joining us.
Sebastian Manhart: Thank you for having me. Always a pleasure.
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