The Evolution of the Carbon Removal Industry through Market Expansion, Regulatory Changes, and Technological Innovation

In the past five years, carbon removal has experienced remarkable growth, evolving from negligible market interest into a multi-billion dollar sector with over 100 companies and significant government engagement. Forecasts suggest the industry will remove 4 Gt of carbon per year by 2040, with projections indicating a cumulative investment in CDR technologies ranging from $6 trillion to $16 trillion. Some experts predict that 2024 will be a 'hot' year for investments in carbon removal startups and that the purchasing of carbon removal will also see significant growth. However, quickly scaling carbon removal to a climate-significant level remains a challenge.

Taylor Swift's use of a private jet to get to SuperBowl, resulting in significant carbon emissions, spotlighted the carbon removal industry's challenges, notably its reliance on private companies and market-driven solutions. Critics argue this approach enables high-carbon activities to continue by offering a semblance of environmental responsibility without addressing the root causes of climate change. In response, a report titled “Agenda for a Progressive Political Economy of Carbon Removal ” was released, advocating for a shift towards government- and community-led carbon removal efforts in the U.S. The report critiques the current industry's trajectory and proposes a more equitable, sustainable approach to achieving climate goals.

EU Carbon Removals Certification Framework Agreement

On February 20, negotiators from the Council and the European Parliament reached a provisional agreement to establish the EU's first certification framework for carbon removals, carbon farming, and carbon storage in products. This represents a revolutionary step forward in growing the carbon removal industry, enhancing carbon removal and achieving Climate Neutrality by 2050.

This voluntary framework aims to facilitate and accelerate high-quality carbon removal and soil emission reduction activities in the EU.

This regulation marks a step towards integrating a comprehensive carbon removal and soil emission reduction framework into EU legislation, contributing to the EU's 2050 climate neutrality goal under the European climate law.

The framework covers atmospheric or biogenic carbon removals and differentiates between permanent carbon removal, temporary carbon storage in products, carbon farming, and soil emission reduction activities. It extends the scope to include soil emission reductions and specifies activity duration requirements.

Activities must meet quantification, additionality, long-term storage, and sustainability criteria. The Commission will develop certification methodologies, with priorities for certain activities.

Units correspond to one metric tonne CO2 equivalent of certified net benefit. Certified units are exclusively for the EU's climate objectives and must not contribute to third countries’ NDCs.

Clear obligations and rules are set for operators, including liability for CO2 release reversals during the monitoring period.

A common EU-wide registry will be established four years post-regulation enforcement to make certification information publicly accessible.

Providing a framework for carbon removal represents a significant initial step towards tangible efforts to reduce carbon emissions, especially as carbon offsets have proven to be disappointing. The research, published last year by the Guardian, Die Zeit, and SourceMaterial , has exposed that forest carbon offsets certified by Verra, the world’s leading certifier for the $2 billion voluntary offsets market and utilized by corporations such as Disney, Shell, and Gucci, are largely ineffective and might worsen global heating. It found that over 90% of the rainforest offset credits, which are popular among companies, are "phantom credits" that do not equate to real carbon reductions. This investigation casts significant doubt on the claims of carbon neutrality made by various renowned companies, questioning the actual effectiveness of these offsets in addressing the climate crisis.

A New Gigaton-Scale Industry

Carbon removal is emerging as a new gigaton-scale industry, with projections indicating that achieving net zero by 2050 will require a cumulative investment in CDR technologies ranging from $6 trillion to $16 trillion. However, current investment trajectories risk falling significantly short, with an estimated gap of $400 billion to $1.6 trillion needed by 2030 to align CDR capabilities with 2050 targets, underscoring the critical need for enhanced funding and innovation.

The 2023 Year in Review analysis by CDR.fyi indicates the carbon dioxide removal (CDR) industry is on course to achieve 3 gigatons per year in cumulative removals by 2040, with CAGR of deliveries at 140% from 2020 to 2023. The sector, driven by significant deals such as Microsoft's with ?rsted for BECCS and various agreements for DAC, shows a market trend of rapid growth, with carbon removal purchases increasing at a CAGR of ~500% from 2020 to 2023. However, despite the current trajectory suggesting the feasibility of meeting midcentury durable CDR targets, the industry must sustain exponential growth in both technology and buyer base to align with the IPCC's recommendation of 6-10 gigatonnes of CDR by the second half of the century, focusing on durable solutions to achieve net zero and limit global warming to 1.5°C.

Carbon Removal Innovations

Investment insights

• Varaha (Feb 2024), a leading developer in regenerative agriculture and carbon removal in India, has secured $8.7 million in Series A funding to expand its tech capabilities and operations across Asia and Sub-Saharan Africa, signaling a growing demand for high-quality, nature-based carbon credits.
• Frontier (Sep 2023): Carbon removal technology for Stripe, raised $7M. Key investments in Banyu Carbon and Carbon Blue for CO2 capture from seawater.
• Equatic (May 2023): Developed seawater electrolysis for CO2 removal and green hydrogen production, raised $30M. Investors include the Chan Zuckerberg Initiative and Temasek Foundation, with a Boeing agreement for carbon-negative hydrogen delivery.
• SeaO2 (May 2023): Entered a pre-purchase agreement within a $2.35M Climate Transformation Fund with Klarna and WRLD Foundation.
• Ebb Carbon (Apr 2023): Electrochemical CO2 removal from seawater, raised $20M in Series A. Backed by Prelude Ventures and Evok Innovations.
• Captura (Jan 2023): Offers carbon capture from seawater via electrodialysis, raised $12M in Series A. Funded by Equinor Ventures and Aramco Ventures, with a pilot facility in Quebec for ocean CO2 removal.
• The U.S. Department of Energy has announced a $100 million initiative aimed at advancing the CDR industry, focusing on projects that demonstrate advanced technologies for CO2 removal, permanent storage, and utilization. This funding, part of the broader effort to combat climate change and achieve net-zero emissions, supports a variety of CDR pathways and establishes testbed facilities to explore and optimize these technologies, marking a significant step towards the goal of removing billions of tons of carbon dioxide annually.
• Carbon to Sea (Jun 2023): Launched by Meta’s former CTO, Mike Schroepfer, as a $50M non-profit to fund research into OAE.
• Microsoft signed a significant pre-purchase agreement with Heirloom for 315,000 metric tons of CO2 removal from enhanced weathering.

CARBON MARKETS INDICATOR

Source: Trading Economics

EU carbon prices have dipped below €65 due to a combination of improving weather conditions, a slowdown in the manufacturing industry, falling natural gas prices, and an unusually hot winter. These factors, alongside increased renewable energy production and the decoupling of GDP growth from CO2 emissions in major economies, suggest a temporary shift in the carbon market despite ongoing efforts to accelerate the green energy transition.

FUTURE OF CARBON REMOVAL INNOVATIONS

One of the concepts ideated during my Sustainable Innovation Challenge is CarbonCaptureCrete .

It is a concept of a specially developed concrete-like material (adapted for 3D printing) that capture CO2 from the atmosphere. This material not only has the structural integrity and durability of traditional concrete but also acts as a carbon sink, actively contributing to the reduction of greenhouse gases in the environment. By integrating this material into the urban landscape, we can create a built environment that actively contributes to a more sustainable and resilient future.