On the Governance of Carbon Dioxide Removal – A Public Economics Perspective

Climate policy increasingly requires carbon dioxide removal (CDR). We describe its role, characterize optimal flows for non-permanent removals and describe optimal pricing regimes under different information and liability conditions. Non-permanent removal – though to a certain extent optimal – creates liabilities that warrant careful risk management. Thus, seemingly cheap land-based technologies can become expensive. We discuss possibilities for integrating CDR in the EU policy architecture and define four tasks: managing the emission cap; R&D support; quality certification of removals; management of liabilities from non-permanent CDR. We propose three institutions for these tasks: a European Carbon Central Bank, a Carbon Removal Certification Authority and a Green Leap Innovation Authority.