Carbon capture, use and storage under the EU ETS, the proposed EU ETS revision and CBAM

In this article, we examine the current rules and proposed changes to the regulatory framework for carbon capture, use and storage (CCUS) under the EU ETS Directive, the EU ETS Proposal and the EU’s Carbon Border Adjustment Mechanism (CBAM), established under Regulation (EU) 2023/956 (the CBAM Regulation). We describe how CCUS is currently treated under the EU ETS, how the EU ETS Proposal would expand that treatment, and how the CBAM implementing regulations address CCUS for third-country producers. We conclude with a comparative assessment highlighting certain tensions that may arise between the EU ETS Proposal and the current CBAM framework.

CCUS encompasses three distinct activities: (i) the capture of CO₂ at the point of emission (e.g. from industrial flue gases) or directly from the atmosphere; (ii) the use of that CO₂ in products or processes (carbon capture and use, or CCU); and (iii) the permanent geological storage of that CO₂ (carbon capture and storage, or CCS). Each of these activities receives a different treatment under the EU ETS.

Download the full report to learn more.

Footnotes

1. European Commission, proposal for a directive amending Directive 2003/87/EC and Decision (EU) 2015/1814, 2026/0212 (COD), July 17, 2026; read the press release IP/26/1596, and the full legislative text of the proposal.

2. “International carbon credits under the proposed EU ETS revision and CBAM implementing regulations”, August 4, 2026.