The global imperative to combat climate change has never been more urgent. To limit global warming to 1.5°C, the world must remove a staggering 5-16 billion metric tons of CO₂ annually by 2050. However, with emissions continuing to rise, the question looms large: can we scale up Carbon Dioxide Removal (CDR) fast enough to make a meaningful impact?
What exactly is CDR? Carbon dioxide removal encompasses a range of technologies and natural methods that capture and store CO₂ from the atmosphere. CDR plays a vital role in achieving global climate goals, as simply reducing emissions is insufficient to curb global warming. According to the Intergovernmental Panel on Climate Change (IPCC), removing 5-16 billion metric tons of CO₂ each year by 2050 is essential to keep global warming below 1.5°C. CDR credits enable companies and governments to offset their emissions by funding projects that actively remove CO₂ from the air.
Unlike traditional carbon offsets, which focus on emission reduction or avoidance, CDR credits ensure that CO₂ is extracted from the atmosphere and stored for the long term. The voluntary carbon market (VCM) is projected to expand significantly, with CDR credits playing a pivotal role in this growth. The market is expected to soar from $2 billion in 2023 to over $50 billion by 2030, underlining the increasing importance of carbon removal initiatives.
CDR operates by capturing CO₂ from the air and securely storing it in geological formations, biomass, or other stable repositories. There are two primary categories of CDR methods: natural and technological. Natural methods include afforestation, soil carbon sequestration, and ocean-based approaches, while technological methods encompass Direct Air Capture (DAC), biochar, and enhanced mineralization. The permanence of carbon dioxide removal is critical, as high-quality CDR credits must ensure that CO₂ remains stored for centuries or even millennia to prevent its release back into the atmosphere.
Recent studies have demonstrated that engineered carbon removal solutions like DAC have the capacity to store carbon for over 1,000 years, making them highly effective for long-term carbon management. Globally, various projects are already implementing these solutions. For instance, in Iceland, the Orca plant by Climeworks is the largest DAC facility, capturing 4,000 metric tons of CO₂ annually, with ambitious plans to scale up to 1 million tons per year by 2030. In the United States, the Department of Energy has committed over $3.5 billion to support DAC projects through the Regional DAC Hubs initiative.
The burgeoning CDR market is witnessing a surge in demand from corporate buyers, governments, and voluntary markets. In 2024, purchases of high-durability CDR credits soared to almost 8 million metric tons, marking a substantial 233% year-over-year increase from 2023. Major players in the market include tech giants like Microsoft, which accounted for 63% of total CDR purchases in 2024, aiming to achieve carbon negativity by 2030. Google followed suit with significant purchases, while frontier buyers such as Stripe, Shopify, and Watershed continued to support promising carbon removal projects.
Market trends indicate a continued rise in demand for high-quality CDR credits, driven by more companies setting science-based climate targets. However, the supply of such credits remains limited, leading to a notable price premium. High-durability CDR credits currently range between $100 and $600 per ton, with industries like aviation, cement, and steel production emerging as major buyers. The aviation sector, for instance, is projected to require 300 million tons of carbon removals annually by 2050 to meet the net-zero objectives of CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation).
Leading the charge in scaling carbon dioxide removal solutions are several companies and organizations focused on reducing costs, enhancing efficiency, and expanding the availability of high-quality carbon removal credits. In 2024, top CDR credit suppliers included Stockholm Exergi, excelling in BECCS (Bioenergy with Carbon Capture and Storage); Ørsted, a Scandinavian utility securing significant deals; and 1PointFive, a major supplier in DAC backed by Occidental Petroleum. The emergence of new startups in the CDR space highlights the sector’s dynamism and potential for innovation.
Despite the promising growth of the CDR market, it faces several challenges that must be addressed to sustain its momentum. High costs remain a significant barrier, with engineered solutions like DAC still expensive, ranging from $100 to $600 per ton of CO₂ removed. However, with projected cost reductions through economies of scale and technological advancements, there is optimism that costs could decrease by 40% by 2035. Efforts by key players like Climeworks and Carbon Engineering to enhance energy efficiency are crucial in driving cost reductions.
Scalability is another critical challenge facing the CDR market, as the current supply of high-quality credits falls short of the burgeoning demand. In 2023, only 2.4 million metric tons of CO₂ were removed, a fraction of the estimated 5-10 billion metric tons per year required by 2050. Scaling up to gigaton levels necessitates not only technological enhancements but also significant infrastructure expansion in terms of land, energy, and storage. Addressing these challenges will be imperative in ensuring the continued growth and effectiveness of carbon dioxide removal initiatives.
