A new legal analysis from A&O Shearman takes on a question the circular economy crowd can't ignore: how captured carbon counts under the EU Emissions Trading System, the proposed ETS revision, and the Carbon Border Adjustment Mechanism.

The piece, titled "Carbon capture, use and storage under the EU ETS, the proposed EU ETS revision and CBAM," sits at the junction of two files that European industrials are watching closely. On one side, the ETS — the bloc's carbon pricing engine. On the other, CBAM, the border levy designed to equalize carbon costs between EU producers and importers. Where carbon capture, use and storage fits into both is the thread A&O Shearman pulls.

Why does CCUS treatment matter for ETS compliance?

For hard-to-abate sectors — cement, steel, chemicals — capture and storage is one of the few routes to deep emission cuts that doesn't scrap existing assets. But the accounting question decides the economics. If captured and stored CO₂ counts as "not emitted" under the ETS, operators avoid surrendering allowances for those tonnes. If it doesn't, the technology carries a compliance cost on top of a capital one.

That's the core of the A&O Shearman analysis: mapping how CCUS is treated within the current ETS framework and what the proposed revision would change. It's a technical read, but the stakes are measured in allowance obligations — in effect, euros per tonne of CO₂ handled.

The takeaway is straightforward: the rulebook on captured carbon, not the capture technology itself, will set the pace of industrial CCUS in Europe.

How does CBAM enter the picture?

CBAM works by putting a carbon price on certain imports, mirroring what EU producers pay under the ETS. The A&O Shearman analysis examines how this border regime interacts with the CCUS provisions — specifically, whether and how carbon costs and captured emissions are reckoned when goods cross the EU border.

That interaction matters for anyone trading in CBAM-covered goods. An exporter outside the bloc who invests in capture could, depending on how the rules land, see that investment recognized in the border adjustment — or not. The analysis walks through that logic.

For Circular Wire readers, the material-stream angle is direct: captured CO₂ is increasingly a feedstock, not just a waste gas. Utilization pathways — turning captured carbon into fuels, chemicals or building materials — live or die on whether the regulatory framework treats them as storage, use, or emission.

The one-line version: CBAM and the ETS revision together will decide whether captured carbon is an asset or a liability at the EU border.

What happens next?

The proposed ETS revision is the milestone to watch. As it moves through the legislative process, each drafting decision on CCUS accounting — recognition of storage, treatment of utilization, interaction with CBAM declarations — locks in compliance arithmetic for operators and importers alike.

A&O Shearman's analysis is a compliance-side map of that terrain. The decider remains the final text of the revision and its implementing rules, and the dates attached to them.

Keep the filings bookmarked.