European businesses urged to invest in nature-based carbon removal

European businesses are being urged to invest in high integrity, local nature based carbon removal projects as climate policy tightens across the EU. The message is simple. Some emissions will remain, especially in sectors such as cement, aviation, shipping and certain manufacturing processes. Those residual emissions need credible removal, not creative accounting.

At the same time, Europe’s natural environment is under strain. More than 80 percent of protected habitats are assessed as being in poor condition, according to the European Environment Agency. Soil degradation is widespread. Water stress is increasing. These trends create direct risks for supply chains, agriculture, insurance, infrastructure and long term asset values.

This is the backdrop to a new push for nature based carbon removals, often referred to as NbCRs. These projects use activities such as afforestation, reforestation, improved forest management, peatland restoration and regenerative farming to remove carbon dioxide from the atmosphere. When properly verified, they can store carbon for decades while also improving biodiversity, soil health and water resilience.

For UK businesses trading in Europe, the shift matters. EU policy is moving ahead with clearer rules on what counts as credible carbon removal and how companies can use it. Investors and large buyers are also placing greater scrutiny on environmental claims. It is no longer enough to buy cheap credits from distant projects with limited transparency. The focus is moving towards local, high integrity projects aligned with European climate law.

The commercial question is therefore not whether removals will form part of corporate climate plans. In many cases, they will. The real issue is how to select projects that stand up to regulatory scrutiny and reputational risk. That is where recent EU developments become significant.

EU climate law sets a firmer trajectory to 2040 and beyond

In February 2026, the European Parliament approved a new legally binding target to cut net greenhouse gas emissions by 90 percent by 2040, compared with 1990 levels. According to the European Commission, at least 85 percent of that reduction must come from domestic action. A limited share, up to 5 percent, may come from high quality international credits. Final approval by the Council is expected in the first quarter of 2026.

This 2040 milestone builds on the existing 55 percent net reduction target for 2030 and the legally binding objective of climate neutrality by 2050. The Commission has described the 2040 target as providing a clear trajectory for investors and industry. Details of the proposal are available on the European Commission climate policy pages.

Alongside the headline target, 2026 is set to bring further policy reform. The Commission is expected to propose post 2030 updates to the EU Emissions Trading System in the third quarter. These are likely to cover maritime and aviation sectors in more depth, as well as industry and power generation.

Revisions to national climate targets are scheduled for the fourth quarter, under the Effort Sharing Regulation. In addition, Energy Union governance rules are under review, including plans for phasing out fossil fuel subsidies. Early proposals on electrification are due in the first quarter.

Funding is also significant. The next Multiannual Financial Framework for 2028 to 2034 is expected to allocate around 35 percent of an estimated two trillion euros to climate and environmental measures. Revenues from the Emissions Trading System, reported at roughly 9.6 billion euros in recent cycles, continue to support innovation and decarbonisation funds.

Crucially for nature based removals, the EU has adopted the Nature Restoration Law and the Carbon Removal and Carbon Farming Regulation, known as the CRCF. The CRCF establishes an EU level certification framework for permanent carbon removals, including land based activities. Further information is available via the European Commission’s carbon removal guidance.

At the same time, business groups such as the Cambridge Institute for Sustainability Leadership and the Corporate Leaders Group Europe have argued that high integrity NbCRs represent a strategic opportunity for Europe’s economy. They link climate delivery and nature recovery in a single policy narrative.

Examples of nature based carbon removal projects across Europe

Across Europe, practical examples of nature based carbon removal are already operating at scale. These projects vary in size, geography and methodology, but all aim to store carbon while delivering broader environmental benefits.

One example is the Ecobase afforestation and improved forest management programme operating across 24 EU countries. The initiative issues credits registered under Verra’s Verified Carbon Standard. It has been cited as the first multi country European forestry project to issue credits and pay landowners directly for carbon removal activities.

In southern Europe, the LIFE Carbon Farming initiative covers around 700 farms in Spain, Italy, France and other member states. It integrates regenerative agricultural practices with the Common Agricultural Policy. The programme aims to reduce farm carbon footprints by up to 15 percent by 2027 while sequestering thousands of tonnes of carbon dioxide in soils.

Coastal ecosystems are also in focus. Blue carbon projects in the Baltic Sea region, including work along the coasts of Estonia and Finland, restore wetlands and seagrass meadows. These habitats can lock away carbon in sediments at rates far higher than many terrestrial systems. They also improve water quality and support fisheries.

In Romania, reforestation projects in the Carpathian Mountains focus on native species and community involvement. Some initiatives have achieved certification under the Gold Standard, providing additional assurance on monitoring and social safeguards.

Demand from corporate buyers is rising. In 2026, a German developer issued a request for proposals seeking up to 600,000 nature based carbon removals. Meanwhile, project developers and marketplaces have expanded portfolios of Verra and other certified EU based credits.

However, policymakers and business coalitions stress that quality is paramount. Emerging frameworks such as the Corporate Leaders Group’s ten business principles for nature based removals and the European Rainbow Standard aim to ensure projects are locally relevant, scientifically credible and transparent.

What this means for UK companies trading with the EU

For UK SMEs, the immediate impact may appear indirect. The UK is outside the EU. However, many British firms export goods or are embedded in European supply chains. As a result, they face increasing scrutiny from EU customers and investors.

First, corporate climate claims are under closer examination. The EU’s focus on domestic action means companies cannot rely heavily on low cost overseas credits to meet perceived expectations. If your European client has committed to a science based pathway, they will expect you to demonstrate genuine emissions reduction and carefully selected removals.

Second, the CRCF signals a shift towards clearer definitions of what constitutes a permanent carbon removal. Projects will need robust monitoring, reporting and verification. Credits without transparent methodologies may struggle to gain acceptance in European corporate reporting.

Third, supply chain requirements are likely to tighten. Large companies subject to EU sustainability reporting rules are mapping emissions across their value chains. They will increasingly request primary data from suppliers. That includes UK based suppliers.

If you operate in hard to abate sectors such as construction materials, heavy transport or food processing, residual emissions will remain after efficiency measures. The question becomes how to address them credibly. Local or regional nature based projects aligned with EU standards may carry greater weight than distant, opaque schemes.

There are also financial considerations. The European Commission has identified annual adaptation investment needs of around 70 billion euros until 2050. This includes spending on infrastructure, ecosystems and food security. Public funds alone cannot cover that gap. Private capital will be expected to contribute.

Investing in or purchasing credits from high integrity NbCR projects can therefore serve several purposes. It can help manage residual emissions. It can strengthen relationships with European buyers. It can also demonstrate awareness of nature related risks, which are gaining prominence in financial disclosures.

However, there are risks. Low quality credits can create greenwashing allegations. Over reliance on removals instead of direct emissions reduction can damage credibility. Policy delays or changes in certification rules could affect project eligibility.

For UK businesses building their climate plans, the sensible approach is to treat removals as a complement to deep emissions cuts. Our experience supporting clients through Net Zero and ESG compliance requirements shows that investors and auditors now expect a clear hierarchy. Reduce first. Remove what you cannot eliminate. Disclose methods transparently.

In addition, aligning your strategy with a structured carbon plan makes discussions with European partners easier. A practical starting point is a documented pathway such as the one outlined in the SBS Net Zero Hub, which explains the steps from baseline measurement to credible neutralisation of residual emissions.

Key details on EU targets, funding and project standards

• The EU has approved a 90 percent net greenhouse gas reduction target for 2040, compared with 1990 levels, with final Council sign off expected in early 2026.
• At least 85 percent of reductions must be domestic, with a limited share from high quality international credits.
• The Carbon Removal and Carbon Farming Regulation creates an EU level certification framework for permanent carbon removals.
• The next EU budget for 2028 to 2034 is expected to allocate roughly 35 percent of funds to climate and environment measures.
• Nature based carbon removal projects include afforestation, improved forest management, regenerative farming and coastal wetland restoration.
• Business coalitions have issued integrity principles to reduce greenwashing risks and strengthen investor confidence.
• Private investment will be needed to help meet estimated adaptation costs of around 70 billion euros per year to 2050.

How to assess high integrity nature based carbon removals

From a consultancy perspective, the debate around nature based removals has matured. Five years ago, many companies simply purchased voluntary carbon credits at low cost. Due diligence was limited. Today, that approach carries reputational and regulatory danger.

When we speak to SME clients, we focus on three core questions. Is the project additional? That means it would not have happened without carbon finance. Is the carbon storage measurable and monitored over time? And are there credible safeguards for biodiversity and local communities?

In the EU context, alignment with the CRCF framework will become increasingly relevant. Projects that can demonstrate compliance with emerging EU certification criteria are likely to attract stronger corporate demand. They may also command higher prices.

Geography matters too. Local or regional projects can offer greater transparency. They can also contribute to the landscapes and supply chains that your business depends on. For example, a food producer might prioritise soil carbon initiatives within its sourcing regions rather than distant forestry projects.

Cost should be viewed in context. High integrity nature based removals often cost more than generic voluntary credits. However, the cheaper option may prove expensive if claims are challenged. Investors, customers and regulators are examining environmental statements closely.

Another consideration is disclosure. Under EU and UK reporting frameworks, companies must explain how they use offsets or removals. Clear documentation of project standards, verification bodies and monitoring cycles is essential. Ambiguous statements invite scrutiny.

Finally, removals should not distract from operational change. Energy efficiency, electrification and process redesign remain the priority. Only once you have reduced emissions as far as practical should you look to neutralise what remains. This sequencing builds credibility and reduces long term exposure to rising carbon costs.

For UK firms with European exposure, 2026 and beyond will likely bring tighter expectations on both climate and nature performance. Preparing now reduces disruption later. It also positions your business as a reliable partner in supply chains that are under mounting policy pressure.

Further information from official and independent sources

The European Commission’s climate strategy pages set out the legal basis for the 2040 target and the path to climate neutrality. The CRCF framework and guidance on carbon farming are also published on the Commission website.

The European Environment Agency provides data on habitat condition, soil health and water stress across member states. These reports help explain why nature restoration is now central to economic policy.

For UK context, the Department for Energy Security and Net Zero publishes guidance on voluntary carbon markets and corporate greenhouse gas reporting. Ofgem also explains developments in carbon pricing and electricity market reform.

Together, these sources show a consistent direction of travel. Climate targets are tightening. Nature restoration is moving up the policy agenda. Businesses that approach carbon removal with care, transparency and alignment to credible standards will be better placed to trade confidently across European markets.

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