Avoided emissions projects are supposed to be the low-hanging fruit funded before large amounts of money are spent on expensive carbon removals. But there is a lack of mechanisms that lets donors, or carbon credit buyers, support projects that effectively reduce emissions.

It makes more sense not to emit carbon than to remove it. Avoided emissions projects are supposed to be the low-hanging fruit funded before large amounts of money are spent on expensive carbon removals. But there is a lack of mechanisms that lets donors, or carbon credit buyers, support projects that effectively reduce emissions.

“There is a lack of mechanisms that lets donors, or carbon credit buyers, support projects that effectively reduce emissions.“

 of over 90% of avoided deforestation credits being ineffective. This comes on top of 

 showing most renewable energy credits deliver much less benefit than they claim. A problem for both categories is additionality, that we cannot be sure that the projects are making something happen that otherwise wouldn’t have. Carbon standards Verra and Gold Standard have stopped issuing new credits from grid-connected renewable energy projects (aside from in the absolute poorest countries). And due to quality concerns, Gold Standard never offered REDD+ avoided deforestation credits in the first place. This leaves a few niche categories of avoided emissions credits to fund such as improved cookstoves, methane collection and collection of refrigerants, some of which also have quality issues.

With carbon removals, additionality is much less of a problem. The direct air capture plant would not be built unless someone wanted to pay for carbon removal. Thanks to this, and due to the difficulties with financing avoided emissions, more carbon will be removed in practice than what would be optimal in theory (where avoided emissions are always preferred, 

I’ve written about this previously here

). This is especially true for the contributions companies, and individuals will make.

Right now, the best way to support projects that avoid emissions is likely to fund effective advocacy and policy organizations. Groups that make governments and decision-makers sharpen policies and invest more in the green transition. Funds donated to such advocacy projects can be many times more cost-effective per dollar spent than carbon credits (even assuming carbon credits worked). This is the conclusion of the research group Giving Green. They have spent thousands of hours evaluating the best donation opportunities to fight climate change, and their top recommendation is to support organizations like Clean air task force. Last week they released their 

, giving guidance to companies.

However, even if effective on the margin, advocacy projects can not scale to productively use the tens of billions of dollars that could be contributed by companies annually to climate projects. We also need new ways of getting money directly into effective avoided emissions projects. 

, recently announced the Energy Transition Accelerator. It is a carbon credit generating program that aims to replace fossil-generated electricity with renewable energy in developing countries. The key difference from earlier initiatives is that it would be jurisdictional. Meaning taking a more centralized approach, involving governments, to guarantee that the net effect is reduced emissions and not just more renewable energy. It is a promising program, but would still have challenges with proving additionality and would not be suitable for offset claims.

“A crucial part of the solution is to let go of the need to claim carbon neutrality”

A crucial part of the solution is to let go of the need to claim carbon neutrality. Traditional carbon credits can’t live up to the claims; Buying expensive carbon removals makes it near impossible for large companies to offset their entire footprint; Funding advocacy projects, grassroots organizations or R&D efforts are not at all translatable to neutrality claims. Accepting uncertainty and focusing on the expected impact of contributions is key. Those who want to support climate should be open to going beyond buying a specific amount of credits. 

In summary, to help mobilize the funds for climate projects needed to reach global climate targets we need to keep innovating and evaluating current efforts. To make sure the money is used effectively we need to be humble and not just choose projects that allow for claims or are without risk.


illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

Why is it so difficult to fund projects that reduce emissions?

“All companies that plan to use removals in the future should spend a portion of climate budgets on it today.”

The number of larger buyers of CDR is still very low. 16 companies bought more than 1000 tonnes of durable carbon removal in 2022, and the number of big buyers is not growing very quickly. The dynamics are still upside down with more marketplaces than companies that have removed carbon, and even fewer large buyers. Why are so few companies buying carbon removal at scale?

Robert Höglund

“All companies that plan to use removals in the future should spend a portion of climate budgets on it today.”

2022 saw a lot of progress for carbon removal. 

launched their $1 billion commitment. The overall CDR market grew 530% (although dominated by one purchase). The US announced record-breaking support mechanisms for CDR. Lots of new suppliers got started, and many new companies have started buying small amounts of removals. All numbers for the CDR market in 2022 are detailed in the 

The thing that really stuck with me from working on the CDR.fyi report is that the number of larger buyers of CDR is still very low. 16 companies bought more than 1000 tonnes of durable carbon removal in 2022, and the number of big buyers is not growing very quickly. The dynamics are still upside down with more marketplaces than companies that have removed carbon, and even fewer large buyers. 

Why are so few companies buying carbon removal at scale?

 I can think of at least five reasons.

One reason is 

. Taking action always carries some risk of backlash. Many companies prefer not to talk about what they do for climate, so-called 

, but also to companies doing nothing. For example, since old-school carbon credits have been so criticized and companies bashed for their carbon neutrality claims, some companies fear that their customers will not be able to differentiate between durable carbon removal and cheap low-quality credits. (I was not expecting this but have heard it expressed from several companies.)

Another reason is a 

. Companies feel they have little to gain by purchasing expensive tonnes today. The Science based target initiative (SBTi) for example does require permanent carbon removal to fulfill net zero targets, but does not incentivize the deployment of removals before target dates.

, requiring in-house expertise and direct contact with suppliers. This has been been made easier by marketplaces and buyer’s clubs, but buyers might not feel comfortable with outsourcing quality control until 

standards are more developed and universally agreed upon

. Purchasing carbon removal from companies using new methods has meant taking a leap of faith that not everyone is willing to do. When deliveries are verified against standards by third parties and delivered tonnes are put on registries more companies will likely feel comfortable buying carbon removal.

Last but not least, the high price point of durable CDR and that companies are 

 is likely holding purchases back. Sinking prices are dependent on CDR technologies ascending the learning curve. For that to happen carbon needs to be removed. Everyone cannot wait with buying carbon removal, lower prices in the future are conditional on purchases being made now. 

If a proper market for CDR does not get started today, there risk not being any carbon removal to buy when companies are getting ready to reach their net zero targets.

The voluntary carbon removal market has a very important role to play. It can kickstart new removal methods, grow existing ones from the lab into full-scale deployment and widen the starting field. The world needs carbon removal at scale, both because some emissions are very hard or expensive to reduce, but also to increase the number of mitigation options available and to have the chance to bring temperatures back down.

Many carbon removal companies are dependent on venture capital, but climate investors are

 slowing down their capital deployment due economic headwinds

. It might be harder to raise new rounds.

Investors need to see significant market growth and for investments to find a path to profitability - and that requires scaling sales. If not, the voluntary carbon removal market risks coming to a halt before it even got off the ground. Government spending will keep some companies alive and likely still reach impressive scale, but without the voluntary market, the sector would likely be much less diverse, and perhaps without the best ideas.

Three key recommendations to avoid this scenario are:

Get more companies, individuals and countries to pre-purchase carbon removal, and give praise to those that do. 

All companies that plan to use removals in the future should spend a portion of climate budgets on it today.

, for example by requiring companies to set interim targets. (SBTi has announced that they are going to publish more on this topic).

 and get tonnes and pre-purchases on registries to increase trust and decrease the risk of double counting or ineffective methods being scaled up. All delivered tonnes must be put on a public registry as is the case with old-school carbon credits.

Let’s all fight to make this happen in 2023!


This article is also published on the author's 

​. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

You can’t wait with buying carbon removal

How much carbon will we need to remove from the atmosphere? The answer is often determined by looking at how much emissions are expected to remain. For example, seeing that the world still emits 12 billion tons of CO₂e by 2050 in the IEA Announced Pledges Scenario, and drawing the conclusion that the slower emissions reductions are, the more carbon will be removed. But counterintuitively, the opposite is true.

How much carbon will we need to remove from the atmosphere? The answer is often determined by looking at how much emissions are expected to remain. For example, seeing that the world still emits 12 billion tons of CO₂e by 2050 in the 

, and drawing the conclusion that the slower emissions reductions are, the more carbon will be removed. But counterintuitively, the opposite is true.

What determines how much carbon is removed is the cost-effectiveness of using it. Since the vast majority of emission reductions are cheaper than carbon dioxide removal (CDR), these should be pursued first. 

Just because some emission reduction measures were not taken, it does not mean carbon removal is the better option.

 If emissions are reduced slowly, it means there still are a lot of cost-effective reduction opportunities left to pursue. The faster emissions are reduced, the sooner carbon removal becomes the cheapest mitigation option. Crucially, CDR is part of the mitigation toolbox but is often discussed as if it was outside it. This point has been emphasized by climate scientist Glen Peters 

What primarily will determine how much carbon is removed is its cost.

 Demand for durable and socially and environmentally sustainable CDR at <50 USD/t would likely be in the order of tens of billions of tons per year. While at 150 USD/t the demand might only be a couple of billion tons.

An important detail is that when making funding decisions today, 

we should look at the overall lifetime cost of a carbon removal method rather than just the cost of the initial deployments.

 If we project that direct air capture will be needed at a gigaton scale, and the price will drop quickly as it is deployed, then the price for the first few million tons removed is almost insignificant for the overall cost-effectiveness of the method.

The above analysis assumes that the most cost-effective will be deployed first. However, there is a big difference between what a global central planner would do and a real-world scenario where different actors make decisions based on their limited information and capabilities. 

In practice, more carbon will be removed than what is optimal in theory.

For example, a car-free individual living in an apartment might not have many investment opportunities to reduce their emissions, in which case carbon removal could be the best option. The same goes for many companies with most emissions in Scope 3. It can also apply to countries. In some cases, national policies to reduce emissions may be ineffective or very expensive per tonne CO₂ avoided, and carbon removal be the more efficient choice even if other actors in the world have cheaper mitigation options

 In practice, it might be difficult to finance emission reductions elsewhere, and there have been grave issues with the additionality of such efforts in the past.

As demonstrated, the need for carbon removal in reaching net zero is determined by the cost of different mitigation options. But CDR might be needed not only to reach net zero, but also to bring temperatures back down. However, this will be a big undertaking. To reduce temperatures by 0.1C, about 

 would need to be removed from the atmosphere, costing trillions of dollars in even the most optimistic cost scenario. If that will be done is up to future generations to decide. 

What we need to focus on is reaching net zero as fast as possible, making the best possible use of all the methods in the mitigation toolbox.

. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

The faster emissions are reduced, the more carbon will be removed

Carbon removal is necessary to stabilize temperatures along with massive emission reductions. Governments will need to pick up most of the bill. Still, corporate support can play a very important role in catalyzing CDR and other climate solutions, getting new technologies off the ground, and scaling projects that otherwise would not grow. Today, most companies are not contributing nearly as much as they could.

, Eli Mitchell-Larson and I explore how corporate funds for CDR and wider climate action can be scaled up.

“We find that companies with the lowest emissions can generate the most money for climate.“

We find that companies with the lowest emissions can generate the most money for climate. Both in relative and absolute terms. In the report, we look at a subset of the world's biggest companies, finding that 

firms generating around 15% of emissions generate 85% of profits

. Many of them make profits between $10,000 to $100,000 per tonne of CO2 emitted. The inverse is also true, companies causing around 85% of emissions collect only 15 % of profits. 

This illustrates the limitations of the polluter pays principle for financing external climate solutions.

gap between what companies can afford and what they are willing to pay

 for external climate solutions like carbon removal. The companies’ ability to pay depends on their profits per ton emitted and the internal investment needs they have to reduce their own emissions. Companies that can reduce their emissions through investment or purchase decisions should do so as a priority. But typically, companies with high profits and a low emission intensity have fewer such opportunities. These companies have enough money implement a credible internal carbon fee and use the money to fund climate projects like carbon removal.

The potential for impact is immense. Over $27 billion could be generated for climate yearly

 if just 141 high-profit companies (the number we analyzed) spent $100 per ton they emit, representing a small share of their profits. This is 2-3 times more than the total spend on global climate philanthropy annually and 13 times more than the value of the voluntary carbon market. However it is only a small share of the investments needed for the green transition.

The fair share of corporate climate change contributions varies depending on the context. Some companies can afford to pay more than others. To compare climate efforts, contributions can simultaneously be evaluated as a percentage of revenues, percentage of profits, and absolute dollar amount per ton of CO2 emitted. What looks ambitious from a particular angle (for example, looking at a high internal carbon price) might look more modest when viewed as a share of profits. And inversely, a company with a low spend per ton they emit might be a market leader when viewing it as a share of revenue. 

This is shown with real data in the graph below, the ones paying a high price per ton emitted are not necessarily the leaders when it comes to contributions as share of profit or revenue, and vice versa. The graph also illustrated how relatively low ambitions are today and how much headroom there is to raise them.

A sample of companies’ spending on carbon removal, carbon credits and other climate projects shown from three perspective, builds on publicly available data (2021 data). See more details in the report

The bar should be raised. Most companies can radically increase their climate support without undermining profitability. High-ambition corporates should embark on an “arms race” to outdo one another.

We can all play a part in making this happen. Executives can increase climate spending, pressure suppliers, and make their companies more transparent. Customers and employees can ask for more climate ambition and openness. Policymakers can create tax incentives, set standards, disclosure requirements, and monitor green claims made by businesses to enhance corporate action. Together, we can help bridge the ambition gap. 

Illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

Who should pay for carbon removal?

And other surprising conclusions from thinking about permanence

The most common way to talk about the longevity of carbon removed is to talk about permanent or temporary removal solutions. That is the vocabulary I have been using too. But in many cases, it does not accurately capture the characteristics of the storage methods available.

And other surprising conclusions from thinking about permanence

The most common way to talk about the longevity of carbon removed is to talk about permanent or temporary removal solutions. That is the vocabulary I have been using too. But in many cases, it does not accurately capture the characteristics of the storage methods available.

A more granular vocabulary around CO2 storage would take into account that some methods are inherently temporary, some are permanent, and some just have a risk of reversal. The graph below is my attempt to map the different important distinctions for CO2 storage.

If, for example, mineralized , the carbon has zero practical risk of being re-released. Biooil stored underground, and carbon stored in concrete (either through CO2 injected or as biochar) are other examples. Dissolved inorganic carbon in oceans could also be seen as essentially permanent storage.

Carbon stored with a very low risk of reversal

Liquid CO2 injected in geological reservoirs is very durable but not technically permanent. It is likely to remain for thousands of years, but for example, earthquakes could lead to CO2 rerelease. With the way, injection is done and monitored today the risk of reversal is likely very low though. In a similar manner, biomass buried in an anoxic environment can remain inert until disturbed.

CO2 captured by macroalgae that sink in the deep ocean stays away from the atmosphere for over 800 years but is all but certain to be re-released. The same applies to biochar. Once tilled into soils, almost nothing can lead to a sudden re-release of the carbon, but it slowly decays until it is almost all gone after centuries or millennia (depending on its quality and soil conditions).

Carbon with a high (but not certain) risk of reversal

The main examples here are carbon stored in living biomass, forests, mangroves, seagrass, soils grasslands etc. This carbon is stored in the short carbon cycle. The risk of reversal is high, forests can die, burn- or be cut down, but they can also remain for millennia. Soil carbon gains can be reversed if the land, for example, is tilled, but carbon in undisturbed soil can remain indefinitely. Another example is captured CO2 stored in materials such as wood and plastics. This could be burnt, but also remain for a very long time.

Carbon stored temporarily for a very short time

Deferred timber harvests is the main example. Landowners are paid to wait one, or a few years, with cutting down their trees, this is then sold. (NCX and Sky Harvest are two players doing this.) The climate benefit of inherently short-term removal is, however, 

 if the deferral contracts are not continuously renewed. 

“Long-lived carbon removal” is probably the most accurate way to talk about carbon removal methods where it is very likely that the carbon will be stored for at least hundreds of years. When talking about most methods that restore carbon to nature, they can be referred to as having a high risk of reversal or being “vulnerable”.

Does this list depict the most to least valuable storage methods? It could be, but it is not guaranteed. Costs, co-benefits, carbon payback time, possibilities to actually determine how much CO2 is stored, the actual levels of risk of reversal, possible ecological and social risks, and more must also be weighed in when determining what storage method to choose.

Any attempt to simplify carbon storage will produce misleading conclusions. For example, treating forestation as inherently short-lived will underplay its importance. In the same way, realizing that durable, but reversible carbon storage needs to be maintained has practical implications that make a difference when comparing them to permanent solutions.

One interesting example of where the classification matters is emissions from corn ethanol. Most of the life-cycle emissions from producing ethanol comes from carbon lost from soils when new land is used to grow corn. That’s a very different type of emission (originating from the short carbon cycle) than burning fossil fuels (from the long cycle). Restoring carbon to soils elsewhere could be a valid way to offset these emissions. This is a way of doing “like-for-like removal”, returning to the short carbon-cycle what was lost from it. Carbon restoration to the short cycle can also be used to offset other types of land use change emissions, such as cleared forests, and potentially compensate for greenhouse gasses with a short lifetime such as methane. To net out emissions from fossil fuels, long-lived storage away from the short carbon-cycle should be used.

The methods used to restore carbon to soil must be proven to work, though, and forestation must be done in a socially and ecologically responsible way. If carbon credits are sold, they must be additional. Much of the potential from carbon restored to nature will likely 

 come through the sale of carbon credits, but this is an example of how carbon credits with a high risk of reversal can be used in carbon accounting

. Illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

Carbon can be temporarily stored for a long time

How do CDR suppliers get access to the money they need to remove carbon?Funds are needed today to build facilities, buy land and equipment, pay contractors and sometimes build renewable energy. Venture capital helps, but is typically not used for project financing.

Derisking prepurchases to build capacity.

How do CDR suppliers get access to the money they need to remove carbon?Funds are needed today to build facilities, buy land and equipment, pay contractors and sometimes build renewable energy. Venture capital helps, but is typically not used for project financing. As Shashank Samala from Heirloom recently said on the 

 they need “1000 dollars in project infrastructure finance for every one VC dollar”. Of course, CDR suppliers need to sell their product, but the way it is done today is arguably not accelerating development fast enough.

Carbon removal is sold in mainly three ways:

1) Through the sale of “ex-post” carbon credits, where the carbon has already been removed and verified before sold. The supplier is selling the right to claim the removal. There are very few such credits available from durable CDR methods, those that do exist are mainly from biochar. Ex-post credits put all the upfront costs on the supplier and also leave them with the risk that the credits will be unsold.

2) Another way is offtake agreements where a price is agreed today but paid upon the CO2 being removed and verified. Offtake agreements mean suppliers need to finance their facilities using funds other than income from sales. They can take these offtakes to the bank, but typically the agreements must be very long, sometimes decades, for banks to give credit on reasonable terms.

3) The third way is pre-purchases, where the tons to be removed are paid for today. This provides the seller with cash on hand to build or operate their facility and work on research and development. The fastest way for a CDR company to grow would likely be to presell all its credits from a facility. However, all the risk of non-delivery is then put on the buyer, decreasing their appetite for these deals, apart from the most altruistic buyers.

Since ex-post credits and offtake agreements leave suppliers without enough cash to build their actual facilities, it would mean a lot for the sector if prepurchases could be scaled up. Here is where insurance comes in.

If a third party can insure the delivery of pre-purchased tons, the buyer is relieved of risk. If the carbon is not removed, the buyer gets their money back. Having a mechanism like this in place means pre-purchases goes from being the least attractive to the most attractive way of buying removals. Without taking any risk, buyers can claim they are helping to scale CDR by paying for new capacity to be put into place. And suppliers can scale faster, on better financial terms.

 is a CDR insurance company that just launched. They are offering precisely what is described above, providing insurance to buyers for purchases from screened and approved CDR suppliers.

(Just as I published this article, another insurance for the voluntary carbon market was launched by 

 to “provide cover for third-party negligence and fraud”. The press release is a bit short on information on how it will work or if it covers prepurchases.)

New ways to scale CDR faster and give access to project finance for CDR suppliers are really needed. The supply of ex-post durable carbon credits is minimal. My assessment is that in 2021 probably less than 50 000 tons of CO2 were durably removed and sold as such, most of it biochar. The new direct air capture facilities being built will not be operational until 2–3 years from now, and most of them are also quite small, just removing a few thousand tons per year. (Although there are 

.) The same applies for ocean capture facilities that are at an even earlier scale. Mineralization is starting to be deployed through, for example, spreading basalt on farmland, but it is starting from scratch. Biochar is also scaling up but from a small base.

I hope Kita gets of to a flying start and that other actors also get involved in insuring carbon removal. We need all the levers we can get to scale this sector from almost nothing to a multi-gigaton solution that helps to reverse the climate crisis.

. Illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & 

 writers, their opinions do not necessarily represent those of illuminem.

Is insurance the key to scaling carbon removal?

The market for durable carbon removal does not exist. Yet. What we have is a heterogenous space consisting of hundreds of companies with ideas on how to remove carbon. Many of them have lab results, business plans and some equity funding. A handful has started removing carbon outside of the garage or the lab. Supporting carbon removal companies can involve making pre-purchases delivered from pilot facilities not yet built.


The market for durable carbon removal does not exist.

What we have is a heterogenous space consisting of hundreds of companies with ideas on how to remove carbon. Many of them have lab results, business plans and some equity funding. A handful has started removing carbon outside of the garage or the lab. Supporting carbon removal companies can involve making pre-purchases delivered from pilot facilities not yet built.

"Currently, buying carbon removal works the same way as supporting creators on platforms like Kickstarter or Indiegogo."

Currently, buying durable carbon removal works the same way as supporting creators on platforms like Kickstarter or Indiegogo. There you make a pre-payment for a product that doesn’t exist yet to enable its creation. You might make a 300 dollar donation to a book-writing project by an author you really like but that hasn’t been able to get a contract with an established publisher. You will get a copy of the book if everything works out, and others will then be able to purchase it at a much lower price. But it doesn’t really make sense to sell your right to this book to someone else. And if someone paid another creator to write a book, that is not a fungible “book credit” that you would see as analogous to your purchase.

"Any investments require a lot of due diligence and understanding of the supported technologies and companies."

In the same way, carbon removal companies can use funds from pre-purchases to build and test their technologies. A pre-purchase from one company isn’t fungible with a purchase from another. Any investments require a lot of due diligence and understanding of the supported technologies and companies. That raises a high bar on participation and is one reason why there are only around a dozen large buyers of durable carbon removal. Buying CDR also requires a lot of trust since most companies lack third-party certification or verification.

I think these facts are essential to understand for anyone interested in purchasing carbon removal to understand. Still, it might not be obvious to someone looking at the marketplaces selling removal credits today.

Actors like the advanced market commitment Frontier understand this and are explicit that not all the carbon they pre-purchase might materialise. Precisely like a donation on Kickstarter might end up in you not receiving a product.

When the companies reach maturity, volumes delivered rise, and certification becomes ubiquitous, we might get a real market. Then a ton removed and stored from a direct air capture company might be fungible to a ton removed by a BECCS company. for example.

How long might it take before we have a CDR market? I think it is at least three years away. By 2025 mega facilities like 1point5 and Carbon Engineering’s 1 million ton/year DACCS plant are expected to be operational together with large actors like Stockholm Exergi delivering BECCS. But even then tons removed across different methods might not be directly comparable.

The timing also depends on how much money flows into carbon removal. Currently, existing known pre-purchases are in the 

, but aggregated commitments for this decade reach billions (Frontier, NextGen, First movers coalition, Swedish, US government and others).

Besides pre-purchases and pre-commitments to purchase, a lot of equity has been going into carbon removal. Climeworks’ 650 million raise being the biggest. However, the recent market downturn might have a negative impact on the possibility of getting venture capital for CDR companies.

, companies that can be modular have an advantage. If you have to build a 1 million ton/year facility, costing billions, you are probably going to have a lot harder time finding funding than if you can start with a 1000 ton facility that costs less than 1 million in CAPEX.  Those with low-capital costs compared to operating costs are better positioned.

A lot of VC money has been going into software, and today there are 

more resellers of carbon removal than there are companies actually durably removing 

carbon. For CDR to grow and a market to materialize, more money needs to go into hard tech solutions, both equity and pre-purchases. And since CDR needs to grow 

, we are in a hurry. What is at stake is nothing less than the world's ability to reach net zero and avoid the catastrophic effects of climate change.

Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.

The Carbon removal market doesn't exist

A large number of contenders are needed to find the technologies that will work best to remove carbon.

April 2022 was the biggest month ever for carbon removal. Climeworks received a $650 million investment. The advanced market commitment vehicle 

 was launched, promising near $1 billion in CDR purchases by 2030. LowerCarbon announced a $350 million carbon removal investment fund. The new IPCC report once and for all showed CDR is unavoidable. And now, Xprize has revealed that 1133 teams entered the competition and has given a $1 million milestone award to 15 teams.

To put the last figure into context, only about 40 companies have made a 

to date (nearly half of them selling biochar). For the CDR space to thrive, we need a large starting field of companies, therefore it is encouraging to see so many teams working on carbon removal exploring different solutions. And there are more teams out there. Far from all CDR companies entering the competition, many biochar suppliers did not, for example.

287 of the 1133 teams were eligible to compete for the prize. 60 were shortlisted for the milestone award. Xprize had

 published a list with info on all competitors

 and we can use it to draw insights into the CDR space.

Xprize had divided the teams into Land, Air, Rock, Ocean or MRV, but to get more context I mapped up the top 60 teams according to which specific methods for removal they use.

The graph above shows that Direct air capture is the most common solution in the top 60 teams. Various land-based biomass methods (algae, bamboo for building material, bio-oil etc) come second, and biochar as its own category comes third. Fewer companies are working with ocean and mineralization solutions.

“It is encouraging that a hard-tech method like DAC attracts so many new companies.“

It is encouraging that a hard-tech method like DAC attracts so many new companies. Direct air capture can be done in many different ways. CO2 can be captured using filters, solvents, electrochemical approaches, and methods that utilize minerals as the capture agent. There are multiple different ways CO2 can be captured and regenerated for each approach, and every DAC company has its own tech. Since we do not know which methods will be the most efficient, it is crucial that a broad group of DAC companies get funded and get to research and deploy their techniques.

Looking at where the teams come from it stands clear that carbon removal is dominated by North America. Of the top 60 teams, 26 came from the US, 8 from Canada, 15 from Europe and 11 from the rest of the world.

If we look at all the 287 eligible teams, the US takes a smaller share but still dominates. The list includes teams from 50 countries. (Including 5 teams from Ukraine, I hope that the people in these teams are safe and will be able to continue their operations.)

The US is also by far, the country that gives most government support to CDR. In 2022 alone $

l, and there are plans to spend much more, for example, $3,5 billion for four Direct air capture hubs.

Among the 15 winners of milestone awards, we find:

Six Direct air capture companies: Heirloom, Sustaera, Mission Zero, Carbyon, Verdox and Calcite (Heirloom and Verdox teaming up with Carbfix, and Mission Zero with 44.01 for mineralization of the captured CO2).

Three biochar suppliers: Netzero, Takachar, and Bioeconomy institute.

Three ocean teams, two electrochemical, Planetary and Captura, and one growing Kelp, Marine Permaculture Seaforestation.

One on-land algae method (that seems more geared to CCU), Global Algae Innovations.

One mineralization solution, Carbin Minerals

(You can find four of these companies explaining their methods in great detail at Open Air Collectives 

It is important to understand that the near future for CDR companies looks very different depending on the method they are working on.“

It is important to understand that the near future for CDR companies looks very different depending on the method they are working on.

For most Direct air capture companies, the focus is on getting out of the lab or small demonstration facility and building first-of-a-kind removal plants removing thousands of tons per year. They will also focus on R&D. Bringing down the cost of DAC is only in part about scale, it is also about reaching breakthroughs in the actual tech. (Most CDR companies are starting small, but there is a notable exception with Occidental building a 1 million ton/yr plant with Carbon Engineering and

The same point about R&D applies to ocean CDR companies. But here there are also many unsolved scientific questions regarding how carbon removal methods affect the ocean. We don’t have the answers regarding risks to marine life, nutrient competition, how fast oceans take up CO2 from the atmosphere when it's removed from the water, and more. Startups working with CDR can provide answers to some of these questions simultaneously as they work at refining their tech, but large scale-up need to wait until we have more answers. For on-land mineralization, similar points apply even if the number of unanswered questions is fewer.

The picture is different for biochar suppliers. There are technological developments to be made (see for example, Climate robotics make-biochar-in-the-field approach), but the technique is more mature and is being rapidly scaled up. As I previously

, most of the near-term volume growth in actual carbon removed will be coming from biochar. A lot of innovation will happen in creating strong business models that also deliver co-benefits. Although even here, there is still more to learn on the scientific side. Even if we are reasonably sure about biochar being a durable method, more studies are needed to give more precise answers.

Now Xprize continues, the grand prize winner of $50 million, and three winners to share $30 million will be announced in 2025, and new teams can still enter the competition. I hope to engage with many companies that applied for Xprize. The Milkywire Climate Transformation Fund that I manage supports CDR companies with prepurchases. It is a very exciting space, the number of companies is growing fast, and buyers will need to evolve how we evaluate and find the most promising solutions.

Xprize reveals the starting field carbon removal needs

In everyday language, ‘buying carbon credits’ and ‘offsetting’ are used interchangeably. But they are not the same. To stop greenwashing while increasing funding for climate projects, there is an urgent need to separate the unit, a carbon credit, from the activity, making a climate claim.

Eli Mitchell-Larson

It's possible to support climate projects for their own sake, without offsetting emissions

A ‘carbon credit’ is a noun, describing a unit, often tradeable, that represents a quantified way of supporting emission reduction and carbon removal projects. 

‘To offset’ is a verb, a claim a company or individual can choose to make after purchasing carbon credits to cancel out against their greenhouse gas emissions. This can reduce the urgency and desire of the purchaser to deal with that carbon. When an organization ‘offsets’, they do so in order to claim that they have 

 for some or all of their emissions, or as part of a larger strategy to claim to be “carbon neutral” or “

”. Using the noun ‘offsets’ to refer to carbon credits is not helpful, since it implies that the credits can only be bought for offsetting purposes.

When a company makes an offset or compensation claim for their emissions, the climate is supposed to be better off, with one fewer ton of CO2 in the atmosphere than there otherwise would be, thanks to the carbon credit purchase. However, if buyers rely on the carbon credit types 

, upholding such a claim under scrutiny is near impossible. For renewable energy carbon credits, it has become very difficult to ensure that the project the credits ostensibly fund wouldn’t have been built anyway, or that new renewable energy leads directly to the retirement of fossil energy. For credits from protected forests, it is incredibly tricky to prove that they lead to less deforestation on a global basis, especially when taking indirect carbon leakage into account, or that the forest won’t be cut down in the future. For projects that grow trees, there are few ways to ensure the forest will retain its carbon over the very long-term.

Several companies have now begun to support climate solutions and purchase carbon credits without calling it compensation. Examples include 

 which has purchased avoided emissions credits and 

 which have purchased expensive carbon removal from new suppliers using nascent methods, without making offsetting claims.

The focus for corporates supporting climate should be on creating as much long-term positive impact as possible and contributing to global net-zero rather than buying a set amount of tons to compensate for and offset its own emissions today. 

The latter often leads to a race to purchase credits as cheaply as possible rather than on the basis of the actual climate impact that those credits are generating. For cheap credits, the impact is often low or non-existent. Exclusively compensation-based strategies can lead to the exclusion of higher-cost, but potentially high-impact solutions, such as new methods for removing carbon directly from the air. Such techniques need support today to drop in costs, but they will not receive this support if the only commitments companies are willing to make are on the basis of compensating for internal emissions at the lowest cost.

The concept of offsetting also excludes support for impactful solutions that will deliver removals or emission reductions in the future. Examples include supporting advocacy projects (as recommended by 

), grassroots organizations outside carbon markets, and R&D into new climate solutions, none of which can generate carbon credits.

Furthermore, to only ask for companies to offset the emissions attributed to them obscures the fact that some businesses can give much more support to climate solutions than others. Companies with high-profit margins and low emissions, such as those in the finance, consultancy, and IT sectors, should be expected to pay more to external climate projects to remove each ton of carbon they emit than, for example, manufacturing companies with lower profit margins and higher emissions.

Purchasing carbon credits can be one (although not the only) way of helping the world reach net-zero, but the concept of offsetting as it works today is not sufficient, let’s move beyond it.

Carbon credits are not offsets

In 2021 carbon dioxide removal (CDR) went from a niche interest of enthusiasts to something the public heard of, and that corporates and politicians started to care about. In whatever way you measure, carbon removal grew multifold. 2022 is set to be an even stronger year; here is some of what to expect.

Count on fast growth, but keep expectations in check

I think carbon removal today might be where solar was in the early 1980s. It’s hyped, and we had some breakthroughs, but it's still very, very small. Solar in 1983 was worth 

in sales (700 million USD in today's value). 

 of durable carbon removal are only 20-30 million USD for the last two years. Most of that is payments for future removals, with some of it being commitments to buy in the future and not money paid out today. This number doesn’t include all purchases since not all of them are public, but definitely the biggest ones.

Another comparison is that solar energy stood for 

. The equivalent for CDR would be 0,001% of all CO2 emitted, translating to around 360 000 tons. My best estimate of carbon durably removed, and sold as such during 2021 is less than 50 000 tons, although I think the number will be several times higher in 2022.

Judging from requirements for corporate net-zero commitments and what governments already have promised to pay for, I think we can expect permanent carbon removal to grow to cover at least 0,1% of today's CO2 emissions by 2030 (meaning minimum 36 million tons, but hopefully much more). But even to achieve that, CDR must grow as much in 8 years as wind and solar did in 20-30 years. 

Much of the near-term volume growth is going to come from biochar.

You can’t miss it!

Robert Höglund

Robert Höglund

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