To meet the climate challenge, reducing greenhouse gas emissions is critical — but maybe not enough. Doing so will likely also require “negative emissions” — that is, removing GHGs from the atmosphere and then storing them in biology, underground, under the ocean or in products.   

At a system level, carbon dioxide removal, or CDR, technologies neutralize residual emissions from hard-to-abate industrial sectors, such as aviation, agriculture, shipping and industrial processes. They also take back already-emitted CO2; this is a critical role given that the world is on course to overshoot the 1.5°C carbon budget. Many scenarios to a 1.5°C pathway see a significant role for negative emissions. In April, the UN Intergovernmental Panel on Climate Change called CDR “a necessary element.”   

At an organizational level, most companies will need CDRs to meet their net zero goals. Specifically, the Science Based Target initiative requires organizations to use carbon removals to neutralize the last 5% to 10% of their emissions to make a net zero claim.   

There are a number of different ways to remove carbon. Natural climate solutions, such as re-forestation, are well understood and widely practiced; these can capture and store carbon for hundreds of years. However, they come with risks of the carbon returning to the atmosphere, for example, as a result of wildfires. Then there are “engineered solutions” — bioenergy with carbon capture an storage stores CO2 produced from biomass energy generation, while direct air capture, or DAC, sucks carbon out of the atmosphere. These engineered solutions can store carbon for millennia, but are typically expensive compared to natural climate solutions.  

The IPCC has estimated that limiting warming to 1.5°C would need CDR to remove six to 10 gigatons a year of CO2  by 2050. To put this into perspective, six gigatons is one-sixth of global emissions in 2021. On that scale, CDR will be a major industry, as much as a $1 trillion market by  2050.   

Against this backdrop, players such as Carbon Capture  Drax, Oxy 1Point5 and Stockholm Exergi have set ambitious targets to deploy CDR. A number of startups are also entering the space, and private-sector investment is picking up. Earlier this year, DAC developer Climeworks raised $650 million and climate-focused venture firm Lowercarbon Capital raised $350 million to invest in carbon removal startups. In April 2022, a group of companies, including McKinsey, created Frontier, which pledged to purchase $925 million of carbon removal by 2030.   

There are several priorities to scale up CDR — and there is momentum on all of them.  

Defining high-quality standards

The absence of agreed-upon high-quality standards to measure CDR, for example on impact, verifiability and safety, has challenged efforts to provide structure to the CDR market. It is fair to say that there are many different perspectives on whether certain technologies and players can deliver high-integrity removals. That can make the market difficult to navigate. In December 2021, the European Commission announced it would launch a certification system. In March 2022 the newly-established Integrity Council for the Voluntary Carbon Market announced plans to publish a comprehensive set of global standards for carbon credit quality, including removals.   

Creating a market for CDR credits

Establishing an economic value for carbon removal, in the form of carbon credits that can be sold or traded could increase demand for CDR technologies, but the market is nascent. There are efforts to grow it. In May 2022, a consortium of private-sector players announced their plan to join the SouthPole NextGen CDR Facility and to purchase more than 1 million tons of CDRs by 2025. The First Movers Coalition, which comprises nine national governments and more than 50 companies, launched new commitments to purchase CDR technologies.

In February 2022, the B2B carbon removals marketplace, Puro.earth, launched a public registry for engineered CO2 removals. Financial institutions are also taking steps to formalize voluntary carbon markets. In July 2021, a group of banks began to develop the Carbonplace platform to make it easy and transparent to transfer high-quality carbon credits, including CDR.  

Promoting national commitments.

Government spending on CDRs is still low, but growing. In May 2022, the U.S. government allocated $3.5 billion to establish regional DAC hubs, and the U.S. Department of Energy launched the Carbon Negative Shot to spur innovation and reduce the cost of CDR. In addition, the Inflation Reduction Act includes a tax credit of up to $180 a ton of CO2 removed and sequestered. Norway is spending $3 billion on a plan to capture CO2 emissions for underground storage and the European Union has announced a $1.1 billion fund to support decarbonization projects, including CDR. In 2021, Sweden announced plans to support bioenergy with carbon capture and storage in the form of a reverse auction for carbon credits.

Agreeing on clear, internationally-accepted accounting principles

The Science Based Target initiative has begun to incorporate high-quality carbon removals in its methodology. So does the UN’s Race to Zero campaign. At COP26 in November 2021, parties agreed to create emission reduction credits that can be bought by countries, companies or individuals.   

These moves are encouraging, but should not be oversold: CDR is still at an early stage, with only a few small CDR plants in operation. In October 2021, the bio-oil CDR company Charm Industrial claimed to have delivered the world’s “largest permanent carbon dioxide removal delivery of all time” with 5,000 tons; that is a drop in the bucket in the context of the six to 10 billion tons the IPCC has said is needed by  2050. 

The world’s first large-scale DAC plant — meaning with a capacity of at least one million tons a year — is only scheduled to go operational in the mid-2020s. Meeting the IPCC’s projection would mean building at least four such plants per week between now and 2050.   

McKinsey research last year concluded that, on current trajectories, the CDR industry will miss the IPCC mark by a large margin. Increasing investment is therefore an urgent priority. Given the sums involved, market development is key. Investors are calling for more policy support from governments to support the CDR market.   

Net zero is not just a number; it is an equation. On one side is cutting emissions; on the other is removing carbon altogether. As we know from the trajectory of renewables — falling costs leading to rising adoption — rapid change can happen. Scaling up negative emissions in a sustainable way is not an impossible dream.