The European Commission’s plan to purchase 250 million tonnes of carbon removal credits between 2031 and 2040 could leave EU member states with a bill of more than €37 billion, according to a Swedish bank analysis reported by Carbon Pulse on September 25. The finding strikes at the financing logic of what is arguably the largest public demand signal the engineered carbon removal market has ever been offered: if the allowance sales meant to fund the purchases fall short, either national budgets absorb the difference or the flagship commitment shrinks. For CDR developers pricing offtake negotiations and for investors underwriting project finance, the question of who pays is now as important as the question of who buys.
How the Purchase Mechanism Is Supposed to Fund Itself
The proposal, tabled by the Commission on July 17 as part of the ETS revision for the 2031 to 2040 trading period, is designed to be self-financing. The EU would sell 250 million emission allowances and use the proceeds to buy an equivalent volume of CRCF-certified removals, with a further 10 million allowances set aside as a contingency reserve. The Commission’s own budget estimate for the purchases ranges from €35.7 billion to €55.5 billion, a spread that reflects how uncertain allowance prices are a decade out.
The arithmetic is deliberately simple: sell one EUA, buy one tonne of removal. With EUAs trading around €80 today, the 250 million allowance sales would raise roughly €20 billion, well short of even the low end of the purchase budget. The design only works if carbon prices climb roughly in line with the Commission’s assumption that EUAs cross €200 sometime in the late 2030s.
Purchases would be executed by the Commission as offtake contracts, potentially with a small upfront payment and the balance paid on delivery. The first offtakes could happen as early as 2031, and the procurement method, whether tendering, reverse auction or flat-rate pricing, has not been decided.
Where the €37 Billion Hole Comes From
The Swedish bank’s warning, as reported, is that the funding shortfall could push a bill of more than €37 billion onto EU countries. The gap has two distinct drivers, and they compound each other.
The first is price risk on the funding side. If EUA prices underperform the trajectory assumed in the impact assessment, the allowance sales simply raise less money than the purchase programme needs.
The second, and more structural, driver is the cost assumptions on the spending side. The proposal leans heavily on BioCCS, the technology expected to dominate the eligible pool, and assumes its cost falls below €200 per tonne by 2036, cheaper than an EUA. Unsubsidised BioCCS today costs more than €300 per tonne. Cost reductions are plausible, particularly on transport and storage, but a near-halving within a decade is an aggressive planning basis. DACCS assumptions are similarly optimistic. If real-world costs track above the Commission’s curve, every tonne purchased consumes more of the budget than planned, and the shortfall grows from both directions.
Notably, biochar carbon removal, the third permanent methodology certified under the CRCF, was excluded from the scheme despite a favourable assessment in the Commission’s own impact assessment, a decision already questioned publicly by the lead Member of the European Parliament negotiating the file. The proposal’s cost modelling estimated biochar at around €37 per tonne, and concluded it would be too cheap, crowding out other pathways.
Three Ways Brussels Could Close the Gap
The policy options are visible in the proposal’s own architecture, and each carries a different set of losers.
More money is the first. The proposal includes a review clause: the Commission is to report on progress towards the CDR purchasing target by the end of 2034 and has signalled it could request additional funding if the estimated budget falls short. That converts a market design problem into a member state budget negotiation in the middle of the next decade.
Buying less is the second. Reducing volumes below 250 million tonnes would break the climate accounting the mechanism rests on, the principle that each allowance sold into the market is neutralised by a tonne removed, with no net increase in emissions. A smaller programme preserves the budget but undermines the integrity logic that justified selling the allowances in the first place.
Broadening the basket is the third. Integrating lower-cost removals, starting with biochar and potentially extending to nature-based removals under permanence guarantees such as contracted durability, would pull the average portfolio cost below the planned threshold. This is the cheapest fix, and the one that reopens the political fight over which technologies count.
What It Means for Developers, Investors and Buyers
For CDR developers, the headline 250 million tonne commitment remains the most bankable public demand signal available, but the funding analysis argues for caution in how offtake terms are modelled. Contracts that assume the full programme volume at Commission-assumed prices embed a policy risk that is now quantified. It is also worth noting that the scheme is not the only route into the ETS: an operator that builds its own BioCCS capacity can use the removals against its own compliance obligations from 2031, outside the purchase budget but deducted from the same 250 million tonne ceiling.
For investors, the €37 billion figure reframes diligence. The relevant question is no longer only whether a project can deliver tonnes, but whether the public buyer of last resort can pay for them at the prices projects need. Earlier work by Carbon Gap on EU funding programmes reached a parallel conclusion: what Europe has allocated to carbon removal to date falls well short of what its targets imply.
For compliance buyers and industrial firms, the indirect stakes are allowance supply. The 250 million EUAs funding the purchases are part of the same cap that sets their costs, and any redesign of the mechanism, whether more funding, fewer tonnes or a broader technology basket, shifts the post-2030 balance between allowance scarcity and removal supply.
What to Watch
Three markers from here. First, whether the Parliament and Council, both aiming to form positions by year-end, amend the technology scope or the funding structure, with the biochar exclusion the most obvious pressure point. Second, the procurement design when it emerges, since reverse auctions would expose the true cost of BioCCS and DACCS delivery against the Commission’s assumptions. Third, the trilogue outcome expected in 2027: national transposition is due by the end of 2028, entry into force in January 2029, and any weakening of the 250 million tonne figure in that process will tell developers how much of the demand signal to underwrite, and how much to treat as political weather.
