Advancing the carbon takeback conversation: flexibility and pilot pathways

Introduction

In January 2025, the Carbon Balance Initiative, Oxford Net Zero, and the Carbon Capture and Storage Association jointly released Markets & Mandates, a report examining how governments can catalyse the large-scale deployment of geological carbon storage through complementary market and regulatory instruments. Drawing on the United Kingdom as its principal case study, the report concluded that emissions trading alone is unlikely to drive sufficient deployment over the medium to long term and identified a Carbon Takeback Obligation (CTBO) as a promising supply-side mechanism to complement industrial policy, accelerate durable storage, and undergird robust carbon pricing. In this piece, we build on that foundation by examining several important design choices before exploring how built-in flexibility and targeted pilot applications can foster confidence among policymakers and market actors in CTBO frameworks.

Quick primer: what is a Carbon Takeback Obligation?

At its core, a CTBO is designed to achieve geological net zero: a state in which every ton of fossil carbon extracted from underground is matched by a ton returned there (or otherwise permanently sequestered). As commonly formulated, the mandate falls on fossil fuel suppliers, who are required to recover an increasing fraction of the carbon dioxide emissions embedded in the products they bring to market, rising to 100% by a target date around mid-century. Though the archetypal design centres on fossil fuel suppliers, it is possible to imagine functionally similar obligations applied to major industrial emitters as well.

Why does this approach matter? Because it creates a structural demand signal for durable carbon storage, anchored in legal obligation rather than the vagaries of voluntary corporate procurement or year-to-year public appropriation. In short, it matters because a CTBO is designed to reduce reliance on public subsidies and, over time, to shift the cost of recovering geologic carbon from taxpayers to the industries best positioned to coordinate that work.

Key design components and decision points

Translating that core principle into workable law requires a number of important design decisions. The Markets & Mandates report helpfully organises those choices into five categories: (1) the shape and endpoint of the stored fraction, (2) obligation placement, (3) technology and location accreditation, (4) governance mechanisms, and (5) interaction with other climate policies.

Scope and obligation placement merit particular attention here. Policymakers must decide which fuels (e.g., oil, gas, coal) are covered, and where along complex supply chains the duty attaches, at extraction/importation, collection, refining, or some combination of these.

Part 1 of this series highlights how a useful analogy can be drawn from the federal framework for Superfund remediation. This existing program is potentially instructive, not because of its broadly retroactive application, but because it assigns liability for hazardous waste cleanup to an extensive set of "potentially responsible parties." This mechanism allows recovery from those most readily reachable, while preserving private rights of contribution among co-responsible upstream actors.

Other key choices include the trajectory of the stored fraction, for example, several climate and energy-policy researchershave modelled a quadratic ramp toward 100% storage by a defined endpoint year. Another is the compliance mechanism, which ought to rely on tradable Carbon Storage Units (CSUs) backed by robust monitoring, reporting, and verification (MRV) standards and durability criteria measured in centuries or millennia. A fee-based backstop pegged to the actual cost of abatement would pair well with certificated CSUs. This backstop could function by tallying up the residual emissions that were not abated through front-end, private-sector compliance. Delinquent parties would then be charged a per-ton rate calibrated to the balancing authority's actual cost of procuring an equivalent quantity of CSUs, effectively billing the delinquent payer for generating or procuring CSUs on its behalf.

Importantly, this design feature closes the loop between delinquent obligations and abatement outcomes. A well-designed backstop can also be paired with border adjustments to address leakage, together with thoughtful integration into existing state or regional emissions-trading and industrial-policy programs.

Advancing the conversation: introducing flexibility

A common concern about ambitious supply-side mandates is that policymakers and market actors may hesitate to commit to a rigid, decades-long compliance pathway. Such hesitancy isn't necessarily motivated by climate scepticism or antagonism. The economic and geopolitical conditions that shape global energy markets in 2026 are unlikely to be the conditions that govern ten years from now, and any law that contemplates 100% fossil carbon recovery by mid-century must reckon with that uncertainty. Indeed, this has been a major shortcoming of other preferred policy approaches, like allowance markets (i.e., cap-and-trade or cap-and-invest).

One way to address this concern is to build flexibility into the implementation framework, perhaps by empowering a politically accountable decisionmaker with statutory discretion. Imagine that Congress vested the President, or the head of a particular agency, with limited authority to pause or delay an incremental increase in the required stored fraction upon a public finding of necessity, such as a severe economic disruption, a national security emergency, or a verified supply-chain bottleneck in the deployment of geological storage capacity. The number of permissible sequential delays could be capped to ensure full compliance by a date certain. For instance, if the default, earliest compliance endpoint were set at 2050, authorised delays might permit that endpoint to slide to 2065, but no further. The default trajectory, meanwhile, could be designed to keep pace with more aggressive implementation in periods when economic and infrastructural conditions support it.

Guardrails like these would be essential, and other flexible design features may be equally important to rendering ambitious climate targets more achievable. The underlying idea is simple: well-designed flexibility can substantially improve a CTBO's political viability without undermining its long-term credibility or durability. Indeed, thoughtful flexibility provisions would allow the program to bend in a controlled way rather than risk being repealed outright in the face of future political or economic headwinds.

Testing the waters: pilot applications for a CTBO

While built-in flexibility can temper some concerns associated with committing to mid-century climate goals, sector-specific pilots can assuage others by improving and further expanding institutional capacity. Pilot applications of carbon recovery principles would boost demand for carbon sequestration, offer policymakers and regulators an opportunity to build institutional expertise, and demonstrate operational feasibility before any nationwide rollout. They also provide a forum for refining MRV systems and carbon credit markets while keeping political and economic risk contained.

We see at least four near-term applications worth serious consideration.

Fossil fuel extraction on public lands. A pilot focused on federal mineral leases could effectively harness domestic industry's robust expertise and existing infrastructure. Federal lessees produce a substantial volume of oil, gas, and coal from federal acreage each year, and the federal government already collects detailed production data through royalty reporting. Federal land managers could condition new and renewed leases on a recovery obligation tied to a specified (and increasing) percentage of the carbon content of the fuels extracted.

Federal mineral lessees are not just any fossil producers; they sit at the upstream nodes where carbon recovery can be coordinated cost-effectively. Indeed, many producing firms have pertinent expertise, they already perform subsurface injection of carbon dioxide for enhanced oil recovery or dedicated storage; maintain the geologic-mapping, well-design, reservoir-management, and long-term-monitoring competencies; and engage operators with access to low-cost abatement opportunities.

Federal land managers may already have authority to run this pilot without further congressional action. Indeed, their proprietary discretion to set the terms of new and renewed leases under the Mineral Leasing Act, the Outer Continental Shelf Lands Act, and the Federal Land Policy and Management Act is broad. While new statutory authority may not strictly be required, however, Congress could consider a pilot provision in ongoing permitting and mineral-leasing discussions, particularly given proposals that could insulate the terms of new leases from future revision.

Aviation fuel. More than 3,000 publicly owned airports in the United States already control their fuel-supply chains through exclusive contracts with fixed-base operators (FBOs). Home-rule cities and counties, in particular, may have the legal tools to require that jet fuel suppliers procure CSUs commensurate with a defined share of the fuel sold at the airport.

The political case for this pilot approach may be unusually strong. Aviation is among the most stubbornly hard-to-abate sectors, and even the International Air Transport Association concedes that meaningful progress on the industry's residual emissions will depend on durable carbon removal. Yet there is little to no compliance demand for removals coming from the aviation industry today, leaving the sector a bystander to the scale-up of a technology it will need more than most others by mid-century. A locally administered recovery duty, particularly one focused on private jets, the most carbon-intensive (per capita) slice of aviation traffic, could begin to fill that gap.

Here, we highlight one category of plausible early-mover jurisdictions worthy of further consideration: airports serving Western mountain destinations that draw heavy private-jet traffic and face acute climate vulnerability.

To proceed with this pilot approach, some federal-law questions would have to be navigated along the way. Various sources of federal preemption cabin what an airport proprietor can regulate, and the dormant Commerce Clause imposes its own limits on locally administered programs that touch interstate markets. These would be material obstacles to an approach of this kind, and would counsel in favour of prudent design.

We wonder whether a locality could plausibly avoid federal conflict by adopting one of several lighter-touch forms. An ordinance trained on the fuel sold at the airport, rather than on the aircraft itself or its operator, may raise fewer preemption questions. Building in a compliance-flexibility surcharge option, under which fuel buyers may satisfy the duty by paying into a locality-administered fund that procures qualified CSUs on their behalf, reduces both transaction costs and the kind of differential treatment of out-of-state actors that triggers Dormant Commerce Clause scrutiny in federal court. And, for jurisdictions whose home-rule footing is uncertain or contested, a more practical posture may be to skip the ordinance entirely and embed the duty in the airport's contract with the FBO, either as an outright contractual requirement or as a bid-evaluation preference in the procurement of FBO and fuel-supply services. A contracting preference may, in turn, motivate FBOs and their fuel suppliers to purchase CSUs across their entire portfolios in order to remain competitive for local contracts.

Ports and shipping fuels. Many of the same features that make airports a promising sector for pilot projects also apply to ports. Like fixed-base operators at municipal airports, port authorities exercise meaningful control over fuel supply chains, oversee a manageable roster of obligated parties, and operate at jurisdictional scales where targeted experimentation is feasible.

The case for testing a CTBO in the maritime sector has only grown sharper in the wake of the International Maritime Organization's recent decision to defer a vote on a global carbon levy on bunker fuel. The episode revealed a structural fragility of the bunker-fuel carbon-tax approach: a per-ton fee, set administratively and adjustable at regulators' discretion, can feel arbitrary to those who must pay it, and is correspondingly easy to dislodge politically.

A CTBO is harder to characterise that way. Its stringency is anchored not in a contested estimate of the social cost of carbon but in a physical relationship between the volume of fuel sold and the geological storage required to neutralise it. The result is an obligation that reflects a more credible long-run abatement pathway than a fee whose level may not bear any defensible relationship to the cost of decarbonisation.

Fossil carbon tariffs. A broader category of pilot lies at the national border, in the flows of fossil carbon into and out of the United States. Extending a recovery duty to imported or exported fossil products would function, in effect, as a carbon border adjustment mechanism, one anchored in a physical relationship between the volume of the underlying carbon and the durable storage required to offset it. One can imagine why domestic fossil fuel producers might value modest insulation from foreign competitors whose products carry no comparable takeback obligation, and there may be broader public interest in an import control mechanism designed to channel compliance costs into domestic supply chains. On the other hand, attaching a takeback obligation to gas export volumes through new legislation might even be capable of bridging two constituencies that have consistently found themselves at odds.

Sector-specific pilots like these share several common advantages. They involve a manageable number of obligated parties and a tractable measurement task. They reduce political risk while preserving, and in some cases enhancing, political salience. Perhaps most importantly, they create early, predictable demand for industrial carbon recovery, accelerating learning-by-doing in a sector that voluntary markets have struggled to scale. Each pilot would also advance the broader public conversation about extended producer responsibility for attaining geological net zero, concepts that underwrite a CTBO in the first place.

Conclusion

The case for a Carbon Takeback Obligation ultimately rests on a simple structural insight: geological net-zero pathways require enormous volumes of permanent carbon storage, and voluntary markets, episodic subsidies, and downstream-only carbon pricing have not produced, and are unlikely to produce, investment at the speed and scale that the science demands. A CTBO addresses that structural gap by attaching a duty of recovery to the suppliers best positioned to coordinate it.

Yet structural insight alone will not carry a comprehensive policy across the finish line. Sensible flexibility provisions can make a CTBO politically viable without weakening its long-term credibility, and well-designed pilot applications can demonstrate operational feasibility while building the institutional capacity that any ambitious program will eventually require.

There are good reasons for policymakers to begin exploring these incremental pathways, through federal mineral leasing, local airport contracting, and port authorities, so that the groundwork is in place when comprehensive national policy becomes politically possible. Industry stakeholders, for their part, should engage early in shaping these pilots to ensure cost-effective compliance, durable monitoring, and continued innovation in the carbon recovery sector.