Carbon Dioxide Removal (CDR) has experienced a significant surge in growth in 2023, despite facing uncertainties and setbacks. According to data from CDR.fyi, there has been a record high increase in CDR purchases of 437% for the first half of this year compared to the full year of 2022. CDR.fyi is the largest open data platform dedicated to monitoring CDR, providing updated information to market players and stakeholders to guide investment decisions and scale.
The platform tracks high-permanence CDR purchases and deliveries (with a lifespan of 100+ years) from public and private data disclosures. In their progress report for the first half of the year, CDR.fyi highlights the major results. While the growth in CDR purchases is promising, it is currently concentrated in the hands of a few players. To achieve gigatonne-scale removals annually, the industry needs to experience a 40% to 50% annual growth rate by the end of the decade.
So far, 4.1 million metric tonnes of CDR have been purchased, but only 2.6% of that has been delivered, amounting to approximately 109,000 tonnes. However, the market trends show significant improvements, especially in CDR purchases. The first half of 2023 has been a defining moment for the CDR market, with purchases reaching around 3.4 million tonnes, a growth of 5.6 times compared to the full year of 2022. In contrast, the previous year recorded only around 610,000 tonnes of CDR purchases.
Interestingly, the substantial increase in purchases can be attributed to a few major transactions. The three largest purchase deals account for 95% of the total purchases in the current year. These transactions involve companies such as Ørsted and Microsoft, NextGen, Frontier and Charm Industrial, and JP Morgan. However, the delivery of the removals does not match the pace of purchases, with only over 33,000 tonnes delivered. Nevertheless, there has been an improvement in the length of time from the CDR pre-purchase deal to delivery, suggesting that processes have become more efficient. This increased confidence in CDR buyers to make forward purchases. In fact, corporate CDR buyers are committing to long-term contracts, aligning with their net zero targets, with contracts lasting over five years.
CDR.fyi also reported a 14% increase in the number of CDR buyers in the first half of 2023 compared to the same period in 2022. However, most of these buyers purchase less than 100 tonnes a year, which is insignificant compared to the amount of carbon they emit. The top 10 corporate CDR buyers and suppliers are listed in the leaderboards.
When it comes to CDR methods, CDR.fyi data reveals some shifts in distribution trends. The majority of purchases, 88%, come from Bioenergy with Carbon Capture and Storage (BECCS), primarily due to the Ørsted and Microsoft CDR deal. Bio-oil accounts for 4% of the total volume, Direct Air Capture (DAC) represents 3%, and Biochar only makes up 2% of CDR purchases. However, it is interesting to note that CDR from biochar makes up 91% of total deliveries. Bio-oil and enhanced weathering account for 6% and 3% of deliveries, respectively. The diversity in carbon removal methods indicates that the CDR market is exploring various ways to mitigate climate change, with different methods having different potentials for scale-up. Many of these methods are still in their early stages and require more investments to reach commercialization.
While the trends in the CDR market are encouraging, CDR.fyi predicts that purchases will reach 6 million tonnes by the end of this year, a tenfold increase from 2022. However, it is important to note that many major companies are still not participating in the market, and only a select few are supporting and investing in the emerging carbon credit market. The report does not include purchases from governments, which have the capacity to buy CDR at scale. However, there has been some progress in the public sector, with the US Department of Energy (DOE) recently announcing its commitment to support CDR suppliers. The US government is set to become the first in the world to provide direct payments to carbon removal suppliers. As the market continues to deliver high-permanence CDR, it is expected that more support and investments will pour in, enhancing the capacity of various carbon removal methods and reducing the cost of technologies.
