An analysis conducted by the carbon removal market platform CDR.fyi has revealed that only 0.5% or 32 companies with Science-based targets have purchased durable carbon removal. This highlights the limited involvement of businesses in the carbon dioxide removal (CDR) sector, which is crucial in the fight against climate change. In order to meet climate goals, the demand for carbon removal credits must reach 40 to 200 million tonnes of CO2 per year by 2030, amounting to $10 to $40 billion. CDR.fyi is the largest open data platform dedicated to tracking high-permanence carbon dioxide removal, providing accurate data to guide investment decisions and promote industry growth.
Out of nearly 6,000 companies with Science-based targets, only 32 have purchased CDR credits. Last year, the CDR platform reported the delivery of just over 45,000 tonnes of permanent carbon removal credits. To reach the required level of 40 million tonnes by 2030, this figure would need to increase by approximately 1000 times. While this growth may seem ambitious, several companies have plans to develop facilities capable of removing carbon on a megatonne scale. Currently, CDR purchases of future tonnes exceed deliveries, with most of these transactions being offtake deals that involve carbon credit delivery over several years. To achieve the 2030 target, CDR credits must be ordered by 2026 at the latest.
Forecasting the long-term requirement for carbon removals is challenging, but even the lowest estimates suggest that billions of tonnes will be needed by 2050. According to a separate analysis by the Boston Consulting Group (BCG), the CDR market will continue to be driven by voluntary demand from large corporations. The BCG estimates that by 2030, demand for durable CDR will range from 40 to 200 million tonnes of CO2 per year, with a market value of $10 billion to $40 billion. These figures are projected to increase significantly to 80 to 870 million tonnes of CO2 per year, or $20 billion to $135 billion, by 2040. However, these projections represent the low scenario, as the high scenario suggests a demand of 200 to 870 million tonnes of CO2 per year in the same period, with a market value of $40 billion to $135 billion. Clearly, there is a pressing need to scale up the CDR industry to meet these projections. The BCG analysis also indicates that while voluntary demand will dominate the CDR market, compliance demand is expected to grow, reaching approximately 15% by 2040.
To achieve the target of 40 million tonnes of carbon removal capacity by 2030, investment in CDR should exceed $100 billion. However, according to data from CDR.fyi, only around 4.8 million tonnes of CO2 have been purchased to date. If the current growth rate in CDR purchases is maintained, it may be possible to reach the 40 million tonnes capacity. This would require a significant increase in the number of large corporate buyers, as currently, there are only six buyers ordering an average of 100,000 tonnes. To reach the target, the number of CDR purchasers would need to grow to 4,000. These buyers play a crucial role in driving market growth and fostering the innovation necessary to build a diversified CDR supply chain. The BCG report suggests that as the price of carbon credits drops, the range of buyers is likely to become more diverse. Currently, early buyers with corporate net zero pledges, such as Microsoft and J.P. Morgan, are the primary drivers of CDR demand. However, by 2030-2040, the CDR market can expect to see a broader range of industry buyers if average prices decrease.
The BCG study also revealed that the quality of the credits is a key driver for most CDR buyers. Currently, durable CDR accounts for 26% of the carbon credit portfolio mix, but this is projected to increase to 35% by 2030 and 48% by 2040. Additionally, approximately 70% of buyers stated that they would increase their CDR purchases if there were guidance from scientific or standard setters. Recognized bodies such as the Science-based Target Initiative (SBTi) and VCMI can influence purchasing behavior by providing guidance on how carbon removals can be included in corporate Net Zero targets. These standards can facilitate faster project lead times and carbon credit issuance. Furthermore, clean incentives are necessary to attract more buyers of carbon removal credits. Around 80% of surveyed CDR buyers stated that their spending would increase with government incentives.
In conclusion, the carbon removal industry is vital for achieving climate goals, yet only 0.5% of companies with science-based targets are investing in it. Scaling up the industry requires increased corporate support, government incentives, and guidance from leading organizations. It is crucial that more companies recognize the importance of carbon removal and actively participate in the CDR sector to combat climate change effectively.
