How can businesses navigate the rapidly evolving carbon removals market?

As governments mull how to deliver on ambitious climate targets and corporates step up the race to reach their high profile net zero pledges, global interest in carbon dioxide removal (CDR) projects has grown steadily in recent years.

From technologies that promise to suck carbon dioxide directly from the air to the restoration of degraded forest, mangrove, seagrass and peatland habitats - and plenty in between - there is now a wide and growing array of methods for not just reducing emissions, but removing them from the atmosphere. And, driven by tightening regulations and rising pressure from shareholders and consumers, corporate investors have been pouring billions of dollars into the sector.

In 2025 alone, long-term offtake agreements for CDR credits announced by top corporates - including tech giants, airlines, and heavy industrial firms - totalled $13.7bn worldwide, according to carbon credit ratings and market research firm Sylvera.

Yet that headline figure does not tell the whole story. The same research shows that investment is set to deliver just 78 million carbon credits over the next decade at an average price of around $180 per credit, while only 200,000 CDR credits were actually retired - i.e. the moment a credit is declared to have been used to offset a tonne of CO2 and so is removed from the market to avoid being traded again and therefore double counted - last year. As such, today CDRs still only represent a fraction of the broader voluntary carbon credit market.

Moreover, the lion's share of last year's long-term offtake deals was concentrated among around 200 buyers, with Microsoft alone accounting for more than half the market according to some estimates. Recent reports suggest the tech giant is now looking to slow down its CDR purchasing activity, fuelling a sense of uncertainty around the near term future for a sector that is still tipped for rapid long term growth.

The reality is CDR remains a nascent market that is in urgent need of more capital investment to develop and scale. Yet scale it must: scientists increasingly agree on the urgent need to build out a range of CDR solutions to ensure sufficient capacity exists to deliver the 'net' in net zero by 2050, which is so critical for limiting global temperature increases.

"The science is very clear," said Rodica Avornic, policy director at CDR non-profit Carbon Gap. "Even if we decarbonise as aggressively as we can - and we definitely should at the end of the day - at the net zero point, or the climate neutrality point, there will still be residual emissions from hard to abate sectors such as aviation, agriculture, shipping, cement, heavy industry and so on.

"If we are serious about reaching this net zero target, which for the EU is enshrined into law, we really need to find a way to balance those remaining emissions responsibly, and the only way to do that is with carbon removal. So it's quite an important sector to make sure that we scale."

So, how is the emerging market for CDRs going to develop that scale, and what role are businesses likely to play? 

Avornic was one of several leading experts to offer their views on the emerging market for carbon removals during BusinessGreen's recent free-to-air webinar - Spotlight on Carbon: Understanding the new wave of carbon removal projects - which is now available to watch back on demand in full.

Hosted in partnership with SE Advisory Services, the wide-ranging discussion offered an overview of the fledgling CDR market, sought to highlight the challenges, risks, and opportunities associated with the sector, and explore how businesses can harness carbon removals to both scale up the market and support their own climate goals. 

One of the challenges that continues to dog the sector is that of trust. CDR still has its critics, who - as with carbon credits more broadly - argue removal projects risk distracting companies from actual decarbonisation efforts. Accusations also persist that the emerging market is built on uncertain science, patchy standards, and promises that may take decades to verify. Reputational challenges following numerous allegations of firms buying 'junk credits' in the voluntary carbon market continue to undermine confidence in the sector. 

But advocates for the approach - including the webinar panellists - argue the market is rapidly maturing with improving standards and increasingly robust verification systems, paving the way for it to become as essential component of the fast expanding net zero economy.

Avornic said that "the future of CDR really depends on credibility and trust", and on this front "I'm personally very happy because I see that the market is becoming more and more sophisticated". "We're seeing stronger certification systems stronger MRV [measurement, reporting and verification], and more scrutiny from buyers," she added.

Ronan Carr, lead analytical officer at UK-based carbon credit ratings agency BeZero Carbon, agreed there had "definitely been progress on MRV and some of the certification processes" which were helping to boost credibility and investor confidence in the CDR market.

But despite this progress, he still emphasised how any company looking to invest in the market should understand that - as with any other type of investment - there will always be an element of risk involved. "The most important thing is to understand and accept that there is risk in every carbon credit, and that you can never prove with 100 per cent certainty that a tonne has been removed," said Carr. "Once you accept that and you treat CDR like a risk asset, then risk can be analysed, assessed, understood and managed."

Indeed, such risks are increasingly manageable, Carr argued. "We don't expect perfection or zero risk in other walks of life or industries, whether in the investment industry, politics or elsewhere, and we shouldn't here, because it doesn't make sense," he said. "Once [companies understand that] we can use tools better, MRV, ratings, insurance and other mechanisms to understand and manage that risk."

On top of stakeholder pressure, policy and regulation is helping to drive the market forward in many countries and regions. For one, the introduction of the Carbon Offsetting and Reduction Scheme (CORSIA) will soon require airlines to invest in eligible CO2 credits to compensate for their emissions, driving demand for higher integrity carbon removal projects. Then there is recently-finalised Article 6.4 of the Paris Agreement, which establishes a centralised UN market system for governments to trade CO2 reduction and removals credits and is also building out a marketplace for CDR. Meanwhile, both the UK and the EU are drawing up their own regulated standards and certifications for CDR, with paving the way for carbon removals credits to be integrated into their Emissions Trading Schemes (ETS).

"Globally, there's definitely progress," explained Carr. "There are a number of jurisdictions now that are integrating the use of carbon credits more broadly into either their cap and trade schemes - like in Australia - or meeting carbon tax liabilities, as is happening in Singapore."

However, Avornic argued a great deal more policy clarity was still needed worldwide to help support the next phase of the sector's growth. "You know, the sector is still nascent, and the market is still mainly voluntary," she said. "If you don't create compliance systems and a way to increase demand, we won't scale at the level that we have to."

Also taking part in the webinar was Zander Dale, managing consultant at SE Advisory Services, who said he expected to see "a lot more engagement in the market" from businesses of all shapes and sizes as guidance, standards, and regulations continue to strengthen through to 2030.

But in the meantime, while demand for CDR is steadily increasing, he said there was not yet "enough projects and credits out there to meet that demand", which partly explains the relatively high price of carbon removal credits compared to other forms of offset credits.

"It's kind of a 'chicken and egg' situation," he said. "Yes the demand will be increased, but there needs to be projects and credits out there to supply it."

Another key factor that all speakers agreed would help spur further demand for carbon removals is set to arrive this year in the form of the hotly-anticipated update to the Corporate Net Zero Standard from the Science Based Targets initiative (SBTi). Having been in development for the best part of two years that standard is currently expected to arrive this autumn, setting out how companies seeking validation for net zero targets with the SBTi can use CDRs and carbon credits more broadly to support delivery against their approved climate targets. 

It remains to be seen precisely what the final draft of the updated SBTi Standard will say, but Dale said he was "personally quite excited for it to come out", as earlier drafts have included a push for firms to firstly focus on direct decarbonisation, but then engage with removals from 2035.

"I think that… is really going to come together to drive action and investment into CDR, by saying to companies: you can do this in a legitimate way, alongside carbon reductions, as part of your climate strategy," he said. "It's a very interesting space."

Carr agreed, reflecting on the fact that initial drafts of the SBTi's new Corporate Net Zero Standard appeared to "create a principle that [CDR] is a good thing to do, because you're putting a price on your emissions and taking responsibility for it today".

"It's not replacing a credible, high integrity decarbonisation strategy - that should come first," he added. "But it should still be recognised and applauded if companies are, in the meantime, compensating for their emissions today and continue to do so in the years to come."

So, with increasing impetus for investing in CDR coming down the road, how can and should businesses be engaging in this new market?

Dale said it was important for companies embarking on their CDR journey to link the purchase of credits with their long-term ambitions, so as to demonstrate how they are decarbonising first and foremost, with CDR investments only used to tackle their residual emissions.

Moreover, there are financial and strategic incentives for focusing on actual decarbonisation in the immediate term ahead of delving into the CDR market, he added. "If you reduce your emissions, you're going to pay less for the removals and carbon credits at the end," he explained. "So, if you have that, that is going to be pushing you to be decarbonising."

The speakers also highlighted various different options for businesses, including pooling together with others in 'buyers clubs' which can enable firms - especially small and medium enterprises (SMEs) with more limited resources and capacity - to source credits and bolster their climate strategies and future resilience.

Moreover, such 'buyers clubs' can enable firms to source a portfolio of various different types of CDR, some of which may offer immediate credits for retirement, and some that might be early in their development that are likely to generate carbon removals credits further down the line.

"Buyers clubs do help to de risk [CDRs] for the buyer, but also for the for the project developers who need that financing to get their projects off the ground and accelerate their development," said Carr.

But if looking to purchase CDRs on an individual basis, there is an array of different projects to consider.

Nature-based options, such as reforestation, mangrove and peatland restoration typically command lower price points on the market at present, and can often generate carbon removal credits more quickly, alongside an array of co-benefits in terms of climate resilience, carbon sinks, and habitat restoration. 

However, such projects also come with risks attached, requiring ongoing monitoring and protection to ensure wildfires or other climate impacts do not scupper their carbon sequestration potential. Consequently, some experts are increasingly classing nature-based solutions as less 'durable' options for carbon removals.

Then there are the technological and more 'durable' options, which promise permanent carbon removal, such as Direct Air Capture (DAC) and bioenergy with carbon capture and storage (BECCS). Such projects all but guarantee promised removals are delivered, but they tend to be at an early stage and come with high price tags, as well as financial or technical challenges as they scale up. 

Meanwhile, there exists a growing number of approaches to carbon removal that sit somewhere between natural and engineered, such as enhanced rock weathering - a technique that locks up CO2 in silicate rocks - and biochar, a carbon-storing charcoal-like material that can be spread on farmland. These offer co-benefits for agriculture, yet are also relatively early in their development journey, resulting in higher prices and limited availability.

Which option to invest in may depend on the sector a business operates in, or whether it is looking to secure retired carbon credits sooner or later down the line. For companies in the food sector, for example, it might make more sense to invest in biochar and regenerative agriculture approaches to remove carbon from the atmosphere. Major tech firms such as Amazon, Shopify and Google-owner Alphabet have been among the leading early-stage investors in DAC developers, meanwhile. 

"Not all removals are the same, and you cannot treat them the same," said Avornic, who reiterated the point that all the different CDR approaches are likely to be needed on the path to a safer climate, and that in order to de-risk their investments firms should consider a "portfolio approach".

"I'm very excited about the portfolio and the diversity of methods, because we do need all of them - nature-based solutions, biochar, BECCS, DAC, enhanced rock weathering, marine CDR - we need all of them," she added. "It's a really rich sector."

But whatever option companies take, all three speakers agreed companies should not be waiting around on developing a credible carbon removals strategy, as the market is moving faster than they may realise, and slow-movers risk being left behind.

"Beyond just the tech companies, we have to make sure that all the other sectors start taking CDR seriously, and to start thinking about it long term," said Avornic. "You need to start planning now for net zero. You cannot wake up in 2045 thinking 'oh, so what am I going to do with these residual emissions that I have?'"

Most companies that have been developing and evolving their climate strategies will have rightly been largely focused on reducing emissions from their core business, energy supplies, and wider value chain. But in order to build resilience both now and into the future, carbon removals are already becoming an increasingly important pillar of credible climate strategies, and that trend only looks set to grow in the coming years.

BusinessGreen's webinar - Spotlight on Carbon: Understanding the new wave of CO2 removal projects - was hosted in partnership with SE Advisory Services.

>> Watch back the full webinar  - on demand now <<

SE Advisory Services has also produced an essential guide to navigating the carbon credit market for forward-thinking companies, which can be accessed here.