Key takeaways:
- Novel carbon dioxide removal methods currently account for a limited share of the market but offer greater potential for durability and scalability.
- Current demand is largely concentrated within the voluntary carbon market, underscoring the need for regulation.
- The US has led in deploying economic incentives, while the EU has established the first public standard for carbon dioxide removal certification — positioning it as a potential benchmark.
Where carbon dioxide removal stands today
Although rapidly reducing emissions remains vital, atmospheric carbon dioxide removal (CDR) is also necessary to meet international climate goals and to compensate for hard-to-abate emissions. According to the latest scientific assessment, CDR must scale up from the current 2 gigatons to between 7 and 9 gigatons per year by 2050.
Most CDR occurring today relies on conventional methods, usually referred to as nature-based solutions such as afforestation and reforestation, while novel CDR technologies — like biochar, bioenergy with carbon capture and storage (BECCS), enhanced rock weathering, and direct air carbon capture and storage (DACCS) — represent a minor fraction of total CDR, currently 0.1% per year, but offer the potential of greater scalability and more durable carbon storage from centuries to millennia (Figure 1). In contrast, conventional CDR methods inherently carry a risk of carbon reversal. However, when properly designed and implemented, they can deliver valuable co-benefits, including ecosystem protection and improved biodiversity.
Figure 1: CDR Methodologies
Source: The State of Carbon Dioxide Removal
Approximately 90% of demand for durable CDR comes from the voluntary carbon market, driven primarily by technology and professional services corporations with net-zero targets that are seeking to purchase high-quality carbon credits. Around 80% of this demand originates in the United States. As the CDR industry scales, cost reductions are expected, potentially unlocking demand from a broader range of sectors.
CDR policy support
As with most emerging technologies, durable CDR requires supportive policy to accelerate its development and scale-up. Policy can foster innovation, create an enabling environment for investors, and stimulate both supply and demand. Measurement, reporting, and verification (MRV) policymaking can also play a significant role.
The United States has led mainly on economic incentives, with the Inflation Reduction Act and the Bipartisan Infrastructure Law significantly boosting the market for emerging CDR technologies. This momentum has slowed under the current administration, leading to a less favorable environment for CDR growth, as seen in the recent restrictions on the transferability of 45Q tax credits for carbon capture and storage (CCS) and carbon capture, utilization, and storage projects. In addition, the U.S. Department of Energy has canceled 24 grants totaling $3.7 billion — most of which had been allocated to CCS projects.
While the United States has scrapped its net-zero target, the EU has a legally binding target to reach net zero by 2050, and its 2040 emissions-reduction target is expected to be set at 90%.
The EU has well-established mechanisms to reach net zero, including the EU Emissions Trading System (EU ETS), the Effort Sharing regulation, and the LULUCF regulation, which manages natural carbon sinks. Moreover, the European Commission’s (EC) Action Plan for Sustainable Carbon Cycles considers carbon removal technologies, and its targets are reinforced by the Industrial Carbon Management strategy.
Specific CDR policy in the EU
The voluntary Carbon Removal Certification Framework (CRCF), adopted in December 2024, sets the standards and harmonized practices for the certification of carbon removals across the EU. To ensure the integrity of certified removals, activities must meet a set of quality standards that cover quantification, additionality, long-term storage, and sustainability. CRCF enables certified carbon removal activities to count towards nationally determined contributions, thereby supporting the EU’s own net zero target for 2050.
The CRCF regulation defines the following categories of certified activities:
- Carbon farming (≥ 5 years of permanence), includes temporary carbon storage, and soil emission reduction
- Temporary carbon storage in products (≥ 35 years of permanence), particularly in construction materials that enable buildings to act as carbon sinks
- Permanent carbon removal (> 100 years of permanence), including CDR technologies such as DACCS and BECCS.
MRV standards are essential to ensure transparency and credibility in CDR activities across both the voluntary and compliance carbon markets. The current MRV landscape is fragmented, with over 100 protocols identified, making comparability and consistency a challenge. By establishing an EU-level standard for CDR certification, the CRCF sends a strong signal to the market and helps to build trust in the sector.
Its definitions also lay the groundwork for the future integration of CDR into the EU Emissions Trading System —a move that could significantly boost demand for CDR. As part of this process, the EC is holding consultations on the future of the EU ETS, including the potential inclusion of various CDR methods, while the industry is advocating for a technology-neutral approach to ensure broad eligibility across different removal technologies.
The CRCF regulation was closely linked to the Green Claims Directive (GCD), which aimed to combat greenwashing by requiring scientific evidence for corporate carbon offsetting claims. This had been expected to increase demand for high-quality CDR credits. However, the EC recently announced the withdrawal of the GCD while it was still under negotiation in the European Parliament. This now-abandoned directive had been the only piece of EU legislation to consider CDR originating from the Global South—a major supplier of carbon removals.
Also at the EU level, a purchasing program for CRCF permanent carbon removal is under consideration, but it is unlikely to equal the size of that which has been seen in the U.S. The EU’s Innovation Fund can support low-carbon technologies, and could also consider launching a dedicated pilot procurement program for CDR.
In the EU, Denmark and Sweden are leading the way in CDR incentives
Denmark has already introduced incentives via dedicated CCS and CDR funds, amounting to approximately €350 million. It has set a target for 2030 to capture between 4 and 9 million metric tons (Mt) of CO₂ annually through the use of CCUS technologies. This roadmap also embraces Biochar Carbon Removal (BCR), BECCS, and DACCS. The government has a Pyrolysis Strategy that supports scaling BCR, and an agricultural carbon tax linking emissions to CDR incentives.
Sweden’s approach focuses on BCR and BECCS, with targets of at least 2 Mt of removals by 2030 and 10 Mt by 2045. To achieve these goals, a 20-year subsidy program amounting to €3.3 billion will be launched in 2026.
In Germany, the Federal Government has recently included CDR in the national budget for the first time, a largely symbolic move, but one that signals a growing willingness to integrate CDR into its climate strategy to achieve net zero by 2045.
What to expect from EU policy?
Despite progress at the Member State level, funding on the scale of U.S. programs is unlikely to materialize in the EU. As a result, EU-level financing is unlikely to close the gap in the short term.
The CRCF offers a much-needed foundation for certifying CDR, an essential step towards its eventual integration into the EU Emissions Trading System, which could significantly boost the European market, likely after 2030.
As the first public standard for CDR certification, the CRCF has the potential to become a global reference point. Given the EU’s leadership in policy and regulation, it may help to build trust in the market and encourage policy development in other jurisdictions.
