Meeting global climate targets will require not only scaling the decarbonization technologies but also increasing the amount of carbon removal from the atmosphere. Simply put, we need to develop carbon-negative solutions in addition to carbon-neutral solutions. According to the Intergovernmental Panel on Climate Change (IPCC), we’ve already burned through over 80% of our carbon budget for the 1.5°C target in the last decade. To keep us on track, close to nine gigatons of CO₂ need to be removed annually by 2050 in the average case, compared to the current carbon removal rate of around two gigatons per year.

Decarbonization through scaling green electrons and green molecules starts to look insufficient for several critical reasons:

  • Certain sectors like aviation, agriculture, and heavy industry face prohibitively expensive or technologically challenging pathways to zero emissions, making their carbon emissions “hard to abate.”
  • Emissions from existing infrastructure, mostly industrial plants, are “locked in” for decades without premature retirement, extending the historical carbon debt that must be addressed.

Carbon removal solutions, including both nature-based approaches and engineered solutions, complement the existing suite of decarbonization solutions by addressing residual carbon from hard-to-abate sectors and extracting legacy carbon.

Solutions Overview

Carbon Removal vs. Carbon Capture

While carbon removal and carbon capture are sometimes used interchangeably, these are two different technologies.

Carbon capture is an abatement technology, usually intercepting CO₂ at concentrated point sources such as power plants or industrial facilities before it enters the atmosphere. The focus is to prevent new emissions from entering the atmosphere by making the otherwise carbon-emitting process carbon-neutral.

On the other hand, carbon removal extracts existing CO₂ from the air. It’s not just carbon-neutral but carbon-negative, and it’s the only way to address historical carbon debt.

Within carbon removal space, various technologies exist, ranging from engineering-based to nature-based, with varying trade-offs.

Engineering-Based Solutions

Such solutions lean on advanced technologies and extract carbon through engineered systems.

  • Direct Air Capture Technologies

Direct air capture (DAC) technologies extract CO₂ directly from ambient air. DAC offers several advantages: it requires minimal land area compared to nature-based solutions, delivers highly verifiable carbon removal, and can scale significantly without biological constraints. However, contemporary DAC systems remain energy-intensive and expensive, with current costs ranging from $250-$600 per tonne of CO₂ removed. That said, companies like Climeworks, Carbon Engineering, and Heirloom, early movers who now operate commercial-scale plants, are working to drive down these costs through technological innovation and economies of scale, with projections suggesting costs could fall below $100 per tonne by 2035.

  • Enhanced Rock Weathering and Geological Storage

Enhanced Rock Weathering accelerates natural geochemical processes wherein certain minerals react with CO₂ to form stable carbonates. Through mineralization, the solution offers exceptionally permanent geological storage measured in thousands to millions of years. Carbfix, for example, injects CO₂ into basalt formations, where it mineralizes within two years. CarbonCure uses a similar approach but injects CO₂ into concrete during manufacturing, where it mineralizes while simultaneously strengthening the concrete. While these approaches promise very long-term carbon sequestration, the development costs are high due to the energy requirements for rock processing.

  • Ocean-Based Technologies

Ocean-based carbon removal solutions employ diverse engineering approaches beyond ecosystem restoration. Direct ocean capture (DOC) removes dissolved CO₂ from seawater using electrochemical processes that simultaneously address ocean acidification. Ocean alkalinity enhancement (OAE) adds alkaline materials to seawater to enhance CO₂ absorption capacity. Ocean Iron Fertilization introduces iron into iron-limited ocean regions to stimulate phytoplankton growth and increase carbon dioxide uptake from the atmosphere. However, almost all these technologies remain primarily at the pilot scale. Scaling these technologies requires not just overcoming the high implementation costs but also addressing the ecological concerns.

Nature-Based Solutions (NBS)

Different from engineering-based solutions, nature-based solutions lean on natural carbon sinks for carbon removal.

  • Terrestrial Carbon Removal

Terrestrial carbon removal involves capturing and storing carbon in terrestrial ecosystems like forests and soils.

Afforestation and Reforestation projects establish tree cover on previously non-forested or deforested lands, typically involving planting native or climate-adapted tree species. Forest Management projects can also qualify for carbon credits through practices like extended harvest rotations, reduced-impact logging, and fire management.

While forest-based carbon removal makes up most of the projects in this category, soil-based carbon removal through Soil Carbon Enhancement (SOC) has been gaining significant traction due to its economic and environmental co-benefits. Such projects are often developed along with other regenerative agriculture practices, including cover cropping, reduced tillage, crop rotation, and grazing management to improve soil health, water retention, and crop resilience. Major corporate players like Bayer and Cargill have established programs to incentivize and verify agricultural carbon sequestration, as well as refine methodologies to measure permanence and additionality.

  • Coastal Blue Carbon

Coastal blue carbon ecosystems represent some of the most carbon-dense ecosystems on earth, sequestering carbon at rates 3-5 times higher than terrestrial forests on a per-area basis. The three main types of coastal blue carbon ecosystems are salt marshes, mangrove forests, and seagrass meadows. Salt marshes are coastal wetlands flooded and drained by salt water brought in by the tides. Mangroves are salt-tolerant trees that grow where land and sea meet. Seagrass is aquatic grass found in shallow coastal waters. However, despite their high carbon storage potential, the implementation of such projects is extremely challenging due to complex ownership structures in coastal zones, technical difficulties in restoration, and the specialized expertise required. Only a handful of projects have been developed so far.

Hybrid Solutions

This final set of solutions combines engineering-based solutions and nature-based solutions, accelerating the natural carbon removal process with technologies.

  • Biomass Carbon Removal and Storage (BiCRS)

BiCRS combines the natural ability of plants to convert carbon dioxide into biomass with human engineering to store the biomass or its derived products belowground where it won’t decompose. Most of the existing projects focus on the direct storage of biomass or converting biomass into biochar for storage or further use. Charm Industrial took a different approach, converting agricultural waste biomass into bio-oil before injecting it into the ground. However, despite being hybrid, this category of solutions faces similar trade-offs compared to their peers, including scaling costs, life-cycle carbon impact measurement, and ecological concerns.

Why is Scaling Hard: Mismatch Between Supply and Demand

The carbon removal market faces a fundamental structural challenge that complicates its path to scale. For most projects, the sole revenue stream depends on selling carbon credits to a limited pool of buyers with increasingly stringent quality requirements. While an influx of projects is being planned and developed, demand has failed to catch up thus far, slowing down the market growth.

  • On the demand side, corporate and institutional buyers increasingly demand high-quality carbon credits with proven additionality, permanence, and precise measurement. This preference naturally favors engineered solutions like direct air capture and mineralization, which offer straightforward carbon accounting and verifiable long-term storage.
  • Such engineering-based solutions, however, face prohibitive upfront capital requirements and high operating costs. The resulting credits, while high in quality, remain too expensive for widespread adoption, limiting demand to a small segment of first-tier corporate buyers, such as Microsoft and Meta, who have premium status and deep pockets.
  • Conversely, nature-based solutions can remove large amounts of carbon at a lower cost. Yet, most of these solutions struggle to demonstrate high quality, including proving permanence, minimizing leakage, ensuring accurate measurement, and delivering verifiable community benefits. With buyers mandating integrity proof, nature-based solutions face a dearth of demands.

This mismatch between supply and demand creates a problematic dynamic: high-quality engineered removals remain too expensive for most buyers, while more affordable nature-based solutions face quality concerns that limit their market acceptance and price potential. Project developers thus find themselves caught between insufficient demand for premium-priced removals and quality skepticism for lower-cost alternatives. The resulting financing gap has stalled many promising carbon removal initiatives as developers struggle to secure the upfront capital needed when future revenue streams remain uncertain and potentially insufficient for attractive returns on investment.

Bridging the Gap: A Multi-Stakeholder Approach

Given this mismatch, scaling carbon removal is not just a technology or capital problem; it’s a multi-stakeholder system challenge that requires collaborative actions to develop the market. Each participant in the ecosystem has a distinct role to play in creating a more functional marketplace and bridging the gap between carbon removal supply and demand.

Policy Makers: the Bedrock of the Market

Policymakers lay the foundation of the market by mandating emission targets on industries.

The Paris Agreement’s Article 6, which enables carbon markets to meet country-level climate commitments, is one of the key reasons the market even exists. Science Based Targets initiative (SBTi) operationalizes this by guiding businesses to set emission reduction targets aligned with the net-zero goals. Its latest draft highlights the role of carbon removal in addressing residual carbons and proposes interim carbon removal targets to scale up the carbon removal industry.

Policymakers can also drive demands by procuring carbon projects and catalyzing the markets. The U.S. Department of Energy (DOE) launched a pilot program in 2023, allocating $35 million to purchase verified carbon removal credits. Assuming the program continues under the current administration, this will provide a meaningful liquidity boost to the industry.

MRV: Critical Tooling to Remove Friction

At the moment, diverse verification agencies exist, including Verra, Gold Standard, the American Carbon Registry, and Climate Action Reserve. With different verification and measurement methodologies adopted by different projects, buyers often struggle to differentiate projects and purchase high-quality carbon credits to meet organizations’ goals. As a result, standardizing the measurement, reporting, and verification (MRV) framework, especially around high-quality carbon credits, holds the key to growing the market.

There have been major advancements in the last few years: The Integrity Council for the Voluntary Carbon Market has developed Core Carbon Principles as a global benchmark for high-quality credits; The Carbon Credit Quality Initiative (CCQI) further offers standardized scoring methodologies for evaluating credit integrity, known as CCQI scores. While such standards help guide the markets, the implementation requires experimenting and adopting new MRV tools on the ground:

  • Measurement: Startups are revolutionizing carbon measurement through technological breakthroughs, addressing the major pain points of developing nature-based carbon removal projects. Pachama combines satellite imagery, LiDAR data, and machine learning to increase forest carbon measurement precision. Regrow Ag integrates satellite imagery with biogeochemical modeling for soil carbon quantification. Kuva Systems and Project Canary offer continuous emissions monitoring technologies that capture real-time data. These innovations shift carbon accounting from estimation-based to measurement-based approaches, fundamentally improving accuracy.
  • Reporting: Digital platforms are transforming how carbon data is collected, analyzed, and reported. Watershed’s enterprise carbon management platform automates emissions calculations across complex value chains. CarbonChain provides industry-specific tools that integrate with operational data systems. Flowcarbon has developed blockchain infrastructure, creating immutable records of credit transactions. These innovations address fragmentation and transparency concerns by creating standardized, auditable reporting systems.
  • Verification: Verification is being transformed by startups applying advanced technologies to traditional challenges. Sylvera, Calyx, and BeZero provide ratings to carbon projects, enabling comparison of voluntary carbon credits against consistent quality criteria. Within nature-based solutions, CarbonPlan has developed open-source verification tools that independently assess forest carbon claims against satellite data; Chloris Geospatial employs AI-driven satellite analysis to verify forest carbon stocks against claimed baselines. These innovations address the subjectivity and inconsistency that have undermined traditional verification approaches by providing data-driven, transparent assessment methodologies.

Corporate Buyers: More than Offtaking

Corporate buyers play a foundational role in the development of carbon markets. With a handful of first-mover corporate buyers having asymmetric power, these corporations not only provide future cash flows as off-takers but also shape the markets by defining the carbon procurement standards and supporting early-stage technologies.

Large corporations can set the standards by providing thought leadership and defining the best practices. Microsoft collaborated with Carbon Direct to establish scientific diligence methodologies that are now adopted by other major purchasers. Stripe’s detailed carbon removal procurement documentation, published openly, provides a benchmark for technical assessment that smaller buyers have leveraged to inform their own purchases. Meta further supports the ecosystem development with novel toolings, launching a global tree map to address the MRV gap in forest carbon credits in collaboration with the World Resources Institute.

Corporate buyers support early-stage technological advancements through innovative de-risking approaches. Buyer consortia is one way to share the risk through demand aggregation. Frontier Climate, backed by Stripe, Shopify, Alphabet, Meta, and McKinsey with an initial $925 million commitment, operates as an advance market commitment (AMC) for carbon removal, focusing on nature-based solutions. The First Movers Coalition, which launched at COP26 with members including Amazon, Apple, and Volvo, focuses on decarbonizing hard-to-abate sectors while supporting emerging technologies, including carbon removal.

Strategically building diversified portfolios provides another de-risking tool for buyers to support the long-term development of the ecosystem while meeting their strategic goals. Shopify balances investments across the durability spectrum, allocating approximately 50% of its Sustainability Fund to engineered solutions with high permanence while supporting immediate climate action through higher-volume, lower-cost nature-based approaches. Swiss Re’s carbon removal strategy explicitly combines near-term purchases of nature-based solutions with forward contracts for emerging engineered approaches, providing bridge funding for promising technologies.

Project Developers: Keeping the Reality in Mind

Project developers must prioritize transparency and integrity in technical fundamentals while building commercially viable business models. For project quality, this means implementing rigorous baseline methodologies with conservative assumptions, providing comprehensive “additionality’” documentation that withstands scrutiny, establishing robust long-term monitoring protocols that address permanence concerns, conducting thorough leakage risk assessments with corresponding mitigation strategies, and transparently reporting environmental and social impacts beyond carbon benefits. The most successful developers don’t simply meet minimum standards but anticipate evolving requirements, providing detailed technical documentation that facilitates buyer due diligence and builds market confidence.

Equally important is ensuring commercial viability through strategic team composition and market alignment. Successful developers assemble cross-disciplinary teams combining scientific expertise with industry-specific operational knowledge and financial acumen. They conduct thorough market analysis to understand buyer preferences before finalizing project design, develop multiple revenue streams beyond carbon credits to reduce financial vulnerability, determine minimum viable project scale to balance MRV costs with competitive pricing, and structure projects to deliver returns while managing risks. By focusing simultaneously on technical integrity and commercial fundamentals, developers can create projects that not only deliver genuine climate benefits but also attract the investment necessary to scale their impact.

Financiers and Investors: Patience, Innovation and Collaboration

The market scaling ultimately requires capital. Given the challenging business model, combining funding resources through blended finance is likely a must-have feature for the market to scale.

With many of the engineering-based solutions still at the pilot stage and not commercially viable, utilizing government grants can fill the initial gap. For nature-based solutions, concessional capital from philanthropists, development banks, and NGOs is particularly suited given their potential co-benefits in bringing financial returns to underserved communities. Catalytic capital may also come from private sectors, including venture capitalists with higher risk tolerance. Breakthrough Energy Ventures and Lowercarbon Capital have played a pivotal role in backing early-stage carbon removal companies in the past few years, investing in many of the now-familiar names, including Charm Industrial, Climeworks, Carbon Engineering, and CarbFix, as mentioned earlier.

As the technologies mature, carbon removal projects can also tap into equipment financing, debt financing, and finally, private equity and infrastructure investors for continued scaling. While venture debt investors are the most adept at funding early-stage projects, private equity and commercial banks are also showing increasing appetite to take on engineering risk and finance Nth-of-a-Kind (NOAK) infrastructure related to scale early-stage technologies, including carbon removal.

Corporate investors with strategic mandates are also uniquely positioned to accelerate carbon removal deployment. They usually come in with a large amount of capital and can support projects from end to end by providing early feedback, sharing their infrastructure, and eventually becoming customers or even acquirers. In fact, oil and gas companies have been investing heavily in carbon removal projects to diversify their business models. 1PointFive, strategically incubated by Occidental as its DAC arm, is now building the world’s largest DAC facility STRATOS in Taxes. While the captured CO₂ has been used mostly for enhanced oil recovery, such partnerships help build out the critical supply chain components necessary for gigaton-scale carbon removal, paving the way for the sector to grow.

Final Thoughts

While carbon removal shouldn’t be seen as our climate change silver bullet, it plays a vital complementary role alongside aggressive decarbonization—tackling legacy emissions and hard-to-abate sectors that would otherwise remain climate challenges. Scaling this promising sector demands creating an entirely new market ecosystem from scratch, requiring unprecedented collaboration between policymakers, regulators, corporate buyers, project developers, financiers, industry veterans, and innovative builders to imagine, experiment, and iterate.

The market must bridge the gap between demand and supply to develop and scale.

The work needs to start now.