This Summer, all eyes will be on the latest version of the EU ETS. Responsible, commercial CCUS needs to have a central place.

Are we in danger of robbing Peter to pay Paul?

It is now being accepted that, by enabling captured CO₂ to be converted into measurable, verifiable emissions reductions that can support compliance and cost efficiency, carbon capture and utilisation (CCU) can play a highly useful role in carbon emissions trading schemes.

So, why not take what is just a nasty waste gas we don’t want or have any use for, CO₂, and turn it into something that isn’t just neutralised as a greenhouse gas (so, carbon capture and storage, CCS) but a useful commercial product—say, something that our farm animals or farmed fish would want to eat?

But is this just moving that carbon back into the food chain: have we actually achieved anything at all in terms of fighting GHGs? Wouldn’t it be better just to go the normal CCS route and push all that harmful CO₂ safely underground?

Increasingly, these aren’t abstract questions. Using our proprietary technology, for example, we are already starting to work with one of Europe’s largest organic animal food producers to do just that—go beyond CCS, important as it is, to potentially highly profitable CCU, carbon capture utilisation.

If we are just moving the carbon ‘upstream’ (into cattle in this plan), is that undermining the whole CCU vision? The best way to answer this question is to look at the current state of play around Emissions Trading Schemes—market-based policies designed to reduce greenhouse gas emissions by placing a (usually declining) limit (or ‘cap’) on total emissions allowed from specific sectors.

As the UK’s ETS guidelines state, that ‘cap’ represents the total amount of particular greenhouse gases that can be emitted by the sectors covered by the scheme (aviation, power, and industry). This cap is in turn divided into allowances, each equivalent to 1 tonne of CO2 equivalent greenhouse gas.

Why we all need a sound but sustainable ETS

Within an ETS, CCU projects can help regulated emitters lower their net reportable emissions by capturing CO₂ at source and using it in products such as fuels, chemicals, building materials, or synthetic feedstocks, thereby displacing fossil-derived alternatives.

Where robust monitoring, reporting, and verification (MRV) frameworks are in place, and where the utilisation pathway demonstrably delivers additional, lifecycle-based emissions reductions, CCU can reduce an operator’s need to purchase allowances on the market.

Policymakers are beginning to agree that while not all CCU pathways qualify equally—particularly where CO₂ is re-released in short-lived uses—by lowering demand for allowances, improving price stability, and incentivising investment in low-carbon industrial innovation alongside CCS and direct emissions abatement, longer-lived or circular applications can and do actually align well with the main objectives of an emissions trading scheme.

Critically, the EU’s ETS, the world’s first international emissions trading system and is now in its fourth (2021-2030) phase, is being revised this year, with new proposals expected by July 2026 to align with 2040 climate targets, focusing on carbon removals and expanding scope.

That’s necessary because, as it stands, the ETS does not broadly reward CCU unless the captured CO₂ is permanently bound in a product in a way that ensures it won’t return to the atmosphere. And critically, temporary or short-lived CCU uses (e.g., turning it into fuels or products that release CO₂ upon use) do not currently reduce your ETS liabilities.

What all this matters to the foodstuff problem is that animal feed contributes 41% of all global livestock emissions, according to the Food and Agriculture Organization (FAO). But CCU science and learned best practice, backed by data, is progressing rapidly, and a lot more is being understood now about the value of different types of CCU.

That’s why it’s extremely important that the Commission has been specifically told to assess how to account for emissions from CO₂ that is captured and used in non-permanent products and fuels, which are later re-released.

Using CCU as a guaranteed way to prevent re-release

There’s a lot of complexity in all this yet to be worked out, especially on who should pay for what and at what stage of the ETS cycle. Plus, it’s too early to say for definite what route of travel the EU will decide on in terms of a revised emissions trading scheme.

BUT there are definite signs that we’re moving towards solid policy guidelines for accepting CCU as a legitimate approach. We see great value, for example, in calls that future ETS rules should actively incentivise the use of captured CO₂, recognise CCU as a legitimate form of carbon recycling, and support carbon circularity, particularly for hard-to-abate sectors aiming to reduce their reliance on fossil resources, like agriculture.

We’re also encouraged by conceptualising in a recent discussion paper produced by the  Sino-German Energy Transition Project (EnTrans) project which specifically notes that no allowances need to be surrendered for CO2 “if it is captured and permanently bound in a product, thereby preventing its re-release”.

Transforming carbon dioxide into microalgae-derived animal feed surely meets this definition of “Permanent CCU”. Plus, the same study also notes that ​​the use of CO2 from Direct Air Capture (DAC) or CO2 from sustainable biomass in mineralisation products would be considered as carbon removals under the EU’s CRCF (Carbon Removal Certification Framework) Regulation.

Bottom line: the world needs not just CCS but CCU and turning waste gas into a resource for agriculture needs to be accepted as a legitimate action under the next iteration of the EU’s emissions trading system.

Much must be worked out, but we are confident putting carbon safely back into the food chain via recycling and not by other more polluting means should be the way ahead for both Europe, the world—and the whole biosphere. We’re doing it already.

Want to find out how? Get in touch with our team.