Debunking common misconceptions about a Carbon Takeback Obligation

This is article 3 of 3 in the Carbon Takeback Obligations series. Here is article 2.

Introduction

Two competing developments frame this final instalment of our series. On the one hand, the concept of a Carbon Takeback Obligation (CTBO) is gaining attention on both sides of the Atlantic as a way to ensure that fossil fuel producers take responsibility for the carbon their products introduce into the economy. On the other hand, prominent voices continue to chastise carbon capture and storage (CCS) and carbon dioxide removal (CDR) as incapable of solving climate change. The most recent example is ProPublica's False Promises feature, which declared that there is "no conceivable way" carbon capture can solve runaway climate change. The responses came quickly. Jack Andreasen Cavanaugh did a thorough job of explaining where False Promises falls short – faulting it as incurious for never asking why carbon capture has failed to deploy at scale, or what the alternatives are in the sectors where the models say we need it. And Noah Deich distilled the dispute to its essence: carbon capture may be a lousy solution, but it is not a false one.

It goes without saying that this is an ongoing debate. Surely, some advocates will continue to call for nothing less than the abrupt elimination of fossil fuels, rather than emissions – casting climate change like a cancer to be excised, rather than a metabolic condition perhaps more akin to planetary diabetes. We are not going to settle this debate in a single blog post (or a series of them). But it is worth reiterating that CCS and CDR should not attract nearly as much scepticism when they are viewed not as freestanding climate "solutions," but as building blocks for a durable – and politically viable – compliance pathway under a robust CTBO. Even in that role, CCS and CDR remain compliance options, not prescriptions; in many applications, market actors will pass them over in favour of electrification or other, more cost-effective means of emissions reduction. When understood in that context, these technologies can be understood as instruments that serve pro-climate ends.

As such, our goal here is to clear up common misconceptions about the CTBO. Our hope is to help readers get past the surface level, because this is not a simple yes/no, good/bad proposition. The approach is worthy of greater thought and attention, and it should not be derailed before more robust debate occurs.

Misconception #1: a CTBO prolongs fossil fuel use

The claim: A CTBO gives the fossil fuel industry a "licence to operate" indefinitely.

The reality: Contrast that objection with the current state of affairs, in which industry enjoys a free licence to operate and emit, indefinitely, largely without limit. Over time, a CTBO corrects the price of that licence until it equals the full cost of abatement.

The policy starts from a pragmatic premise: fully eliminating fossil fuel use within a few decades may simply be unrealistic. A CTBO therefore focuses on abating fossil emissions, requiring producers to permanently store a rising fraction of the carbon content of the geological feedstocks withdrawn to make their products – climbing to 100% by mid-century. The expected effect is a significant reduction in fossil fuel use, because compliance costs rise as takeback obligations increase, and those costs are embedded in fossil products, dampening demand throughout the economy.

In other words, a CTBO does not extend the fossil fuel industry's current licence to operate. Rather, it eliminates the licence to operate unabated.

Misconception #2: a CTBO will exacerbate greenwashing

The claim: Compliance will rest on cheap, short-lived, and often unreliable offsets.

The reality: A CTBO is anchored in the principle of "like-for-like" balancing – geologically sourced carbon, which perturbs the atmosphere for millennia, must be balanced by comparably durable storage, meaning geological sequestration or mineralisation with permanence measured in climate-relevant timescales.

Most nature-based solutions are excluded from compliance precisely because they are harder to monitor and prone to reversal. And the compliance instrument itself – the Carbon Storage Unit (CSU) – is denominated in tonnes of CO₂ physically returned to the geosphere (or simply "recovered"), not in avoided emissions or paper offsets. To be sure, uncertainties remain for emerging methods such as enhanced rock weathering and marine CDR. Those methods should be incorporated into a CTBO scheme wherever feasible, but how to do so responsibly is an unsettled area.

The larger point, however, should not be lost: durable storage sits at the very heart of a CTBO. Greenwashing concerns, whatever their force against today's voluntary offset markets, are not substantiated here because, by design, a CTBO forecloses reliance on low-quality offsets.

Misconception #3: a CTBO is just another term for cap-and-trade

The claim: It's cap-and-trade by another name.

The reality: A CTBO is a rate-based performance obligation, not an aggregate emissions cap. Takeback obligations are assessed against observed production levels, which makes the instrument considerably more flexible than traditional cap-and-trade; regulators need not fix economy-wide allowances on the front end – a much harder job, and one that has bedeviled allowance markets from the outset. Compliance is instead met through verified storage or tradable storage units, and it can be enforced through a variety of mechanisms, including fees pegged to the actual cost of abatement.

That last feature deserves emphasis. A fee-based enforcement mechanism creates a clear, physical link between fossil fuel use and the recovery of residual (i.e., the leftover unabated) carbon emissions. The resulting price signal is a discovered value, as in cap-and-trade, but one that is responsive to rolling energy production levels while remaining anchored to real-world abatement costs.

Misconception #4: an economy-wide CTBO is too complex to administer

The claim: Tracking carbon takeback obligations across the entire economy is unworkable.

The reality: A CTBO targets a small number of upstream actors – i.e., extractors, importers, gatherers, and/or refiners – which radically simplifies monitoring relative to policies aimed at millions of downstream emitters. Most of the pertinent data – e.g., fossil fuel volumes, assays, carbon content – is already collected for marketing, regulatory, and tax purposes.

Indeed, one of the CTBO's most elegant features is that it eliminates the need for downstream market actors to perform tedious lifecycle analyses. Instead, the requisite monitoring relies on common sense: account for the geological carbon produced and injected into the economy, on the front end, and the amount of carbon recovered (i.e., captured/removed and durably stored), at the back. The regulator's primary function is to keep tabs on the geological entry and exit gates. And, because much of that machinery already exists on the supply side, the case for administrability is stronger still.

Misconception #5: a CTBO crowds out other climate policies and technology pathways

The claim: A CTBO competes with carbon pricing and industrial policy for finite political capital, just as CCS and CDR displace investment from electrification pathways.

The reality: The political capital point can be addressed succinctly. A CTBO complements industrial policy and functions as an indirect carbon pricing mechanism. To be sure, it may be the most politically viable carbon pricing mechanism on offer. And, as we explained in our second instalment, smaller-scope pilot applications offer a practical way to work out the kinks and build consensus around the concept before any comprehensive rollout.

The zero-sum investment critique reflects the deeper misconception. The notion that a dollar spent on CCS/CDR is a dollar taken from renewable energy, electrification, or energy efficiency misunderstands both capital markets, which are not fixed nor zero-sum, and the CTBO itself, which relies on private compliance spending rather than scarce public subsidies. More importantly, a CTBO would improve the business case for each of those technologies. By internalising the cost of emission abatement into fossil products, the obligation makes carbon-free substitutes comparatively more attractive across the economy.

The point is worth re-emphasising: under a CTBO, the decision to invest in CCS or CDR for compliance purposes would be made independently by market actors, who retain every incentive to reduce emissions wherever reduction is the more cost-effective course – as it increasingly is. The policy framework simply ensures that continued withdrawals of geologic carbon are counterbalanced by commensurate recovery.

Conclusion

A CTBO is not a loophole for fossil fuels. It is a practical mechanism to ensure accountability, establish meaningful carbon pricing, and accelerate carbon recovery. Its role is twofold: it drives down emissions by requiring fossil fuel products to fully internalise the costs of their carbon, and it creates a predictable market for durable carbon removal. Reasonable minds can and will continue to disagree over design details – indeed, we have flagged several open questions across this series. But that debate should proceed from an accurate account of what the policy is and what it does. Let's debate it on the merits.

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