European Parliament adopts framework for carbon removals

As the EU council attempts to placate business concerns about the pace of the energy transition while keeping progress roughly on track, the European Parliament has adopted a provisional political agreement with EU countries on a new voluntary certification framework for carbon removals. It is hoped that the framework will tackle greenwashing and, at the same time, spark growth in insurance and other risk financing tools to support this important part of the green transition. When the EU and parliament originally agreed the deal, the EU said that the voluntary framework was intended to facilitate and speed up the deployment of high-quality carbon removal and soil emission reduction activities. The EU specifically called for the wider use of insurance to help foster growth in the carbon removal market. A recent report published by Lloyd’s coverholder Kita Earth and management consultancy Oxbow partners estimated that the market for carbon credit insurance will be around $1bn in annual gross written premiums by 2030, rising to $30bn by 2050. The new EU legislation that covers different types of carbon removals, including permanent carbon storage through industrial technologies, carbon storage in long-lasting products and carbon farming, will give this market a shot in the arm. From a risk management perspective, the parliament also said that it aims to boost the use of these tools and improve the EU’s capacity to quantify, monitor and verify such activities in order to counter greenwashing. After the vote, rapporteur Lídia Pereira said: “We delivered! I am very happy that the European Parliament has given its final green light to the Carbon Removal Certification Framework. I look forward to a future in which those who actively remove and store carbon get a proper incentive to do it. I am also thrilled to see that farmers can have an extra revenue stream for all their efforts! The parliament was, once again, on the right side of history!” It was a busy week for the parliament on the environmental front as it also adopted a new law to reduce methane emissions from the energy sector, stricter rules on CO2 emissions for trucks and buses and new EU rules for the collection, treatment and discharge of urban wastewater. The new methane regulation is the first piece of EU legislation aimed at cutting methane emissions. it covers direct methane emissions from the oil, fossil gas and coal sectors, and from biomethane once it is injected into the gas network. After the vote, the co-rapporteur, Pascal Canfin, said: “This is the first EU law aiming to reduce methane emissions. Until now, methane was a blind spot in our climate policies. Now we are not only tackling domestic methane emissions but also those from our fossil fuels imports! This is further progress in the Green Deal to respect our international commitments.” The regulation on heavy duty trucks and buses says emission will have to be reduced by 45% for the period 2030 to 2034, 65% for 2035 to 2039 and 90% as of 2040. New urban buses will need to reduce their emissions by 90% by 2030, and become zero-emission vehicles by 2035. Emissions reduction targets are also set for trailers (7.5%) and semi-trailers (10%), starting from 2030. Rapporteur Bas Eickhout said: “The transition towards zero-emission trucks and buses is not only key to meeting our climate targets, but also a crucial driver for cleaner air in our cities. We are providing clarity for one of the major manufacturing industries in Europe and a strong incentive to invest in electrification and hydrogen.” The urban wastewater rules include monitoring various public health parameters and chemical pollutants, including so-called “forever chemicals” or PFAS. “The law introduces extended producer responsibility for medicinal products for human use and cosmetic products, to cover the costs of quaternary treatment (to remove micro-pollutants from urban wastewater). At least 80% of the costs will be covered by producers, complemented by national financing,” said the EU. Rapporteur Nils Torvalds said: “The legislation will significantly improve water management and wastewater treatment standards in Europe, especially with new rules on removing micro-pollutants coming from medicines and personal care products. We are making sure that the impact of the rules on the affordability of medicines will not be disproportionate, and that harmful chemicals such as PFAS will be monitored and better dealt with in the future.” Risk managers and their insurers will take interest in this move as litigation related to PFAS ramps up in the US in particular. Environmental activists will welcome the news but be disappointed that this move falls well short of an outright ban.

European Parliament adopts framework for carbon removals

Parliament also acts on methane and CO2 emissions for trucks and wastewater

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