Carbon dioxide removal (CDR) is increasingly recognized as essential to achieving net zero targets, particularly for hard to abate sectors such as aviation, heavy industry, and agriculture. Yet while corporate commitments to CDR are growing, the market remains underfunded, fragmented, and complex.
Our latest analysis, conducted in collaboration with the World Economic Forum and leading CDR portfolio manager ClimeFi, sheds light on the financial and contractual structures shaping today’s CDR market and outlines what business leaders need to consider as they engage.
Scaling carbon dioxide removal technologies and financing needs
CDR operates in a complex financial and contractual landscape. Capital structures, debt accessibility, pricing models, and offtake agreement terms vary widely across CDR technologies, influencing how quickly each pathway can scale.
For instance, high durability engineered solutions such as direct air capture (DAC) and bioenergy with carbon capture and storage (BECCS) offer permanent storage, a significant plus. But they are also capital intensive and require long term financing and highly structured offtake contracts.
In contrast, more mature technologies such as biochar have seen greater offtake activity and delivery volumes, but can present storage risks depending on how the biochar is produced and from what material. Among other downsides, biochar also often contains other hazardous contaminants and produces methane as a byproduct during its production, a significant environmental trade-off.
For buyers, this means balancing durability ambitions — that is, the degree to which removed carbon can be stored permanently — with financial risk, supply constraints, and contract flexibility. This represents an increasingly strategic procurement challenge.
Why offtake agreements are critical for CDR projects
Long-term offtake agreements, which guarantee a project developer a market for removed carbon, sit at the heart of scaling carbon removal technologies. By providing predictable, long term revenue streams, they enable project developers to make investment decisions and secure sufficient financing to expand capacity to sustainable levels. As more CDR facilities are commissioned over the next two to three years, these contracts will be essential to closing the gap between planned and operational capacity and aligning with net zero emissions pathways by 2030.
Despite regulatory uncertainty — particularly around the eligibility of CDR credits for Scope 3 emissions under frameworks like the Science Based Targets initiative — buyers are already making advanced market commitments. This signals strategic conviction and a willingness to invest ahead of full regulatory clarity.
Barriers slowing the growth of carbon dioxide removal markets
Still, significant challenges remain. High costs, regulatory uncertainty, limited long term demand commitments, and fragmented market structures continue to constrain growth. Engineered removals often cost several hundred dollars per tonne, making large scale procurement difficult without policy incentives, risk sharing mechanisms, or long term offtake commitments.
Carbon markets add another layer of complexity. Voluntary markets, while widely used, remain largely unregulated and suffer from inconsistent standards around permanence and additionality that undermine buyer confidence. Compliance markets such as the EU Emissions Trading System focus primarily on emissions reductions and provide limited support for removals.
Fragmentation between voluntary and compliance systems reduces liquidity and slows investment — particularly for smaller projects.
Comparing carbon removal technology pathways and their tradeoffs
CDR technologies fall broadly into engineered, nature based, and hybrid solutions, each with distinct cost, scalability, and risk profiles:
- Direct air capture (DAC) offers high measurability and durability through geological storage or mineralization, but it is energy intensive and expensive, with costs currently ranging from $500 to $1,200 per tonne.
- BECCS combines biomass energy with carbon capture to deliver net negative emissions. It benefits from integration with existing bioenergy supply chains and costs typically between $200 and $600 per tonne.
- Biochar, produced via biomass pyrolysis, is the most commercially mature pathway, with stable pricing averaging around $192 per tonne and strong delivery performance. There are, however, many potential environmental risks and trade-offs.
- Enhanced rock weathering (ERW) accelerates natural geochemical processes and offers significant scalability potential, though its measurement, reporting, and verification (MRV) remain complex.
Biochar currently leads in delivered volumes, while DAC attracts the largest investments and relies heavily on advance purchases and prepayments to finance scale up.
Market dynamics and funding trends in carbon removal
Funding patterns reflect these differences. Engineered solutions such as DAC and BECCS dominate public and private investment due to their durability and long term scalability. In 2024, 98% of DAC purchases occurred in the United States, highlighting the importance of policy support like the 45Q tax credit, which is a federal incentive for capturing carbon dioxide and storing or using it.
Hybrid solutions like biochar and ERW have attracted around $400 million each, largely from venture capital, drawn by lower costs and faster deployment potential. However, limited alignment with subsidies and MRV uncertainty continue to restrict broader financing.
Geographically, DAC activity is concentrated in the US and Europe, while BECCS and biochar benefit from more diverse global footprints linked to agricultural and biomass supply chains.
Creating bankable offtake contracts to accelerate CDR deployment
To unlock scale, CDR offtake agreements must be “bankable,” with predictable cash flows, fixed pricing, clear milestones, third party verification, and tenors aligned with financing structures. Today, however, incentives are misaligned, with buyers seeking flexibility, suppliers tailoring contracts to technology risk, and marketplaces often overlooking lender requirements. The result is inconsistent contract terms that inhibit financing.
A more collaborative contract framework — developed with input from buyers, suppliers, and financiers — could standardize key terms and improve interoperability across agreements. Climate and impact funds also play a critical role by aggregating smaller and midsize projects into investable portfolios, helping to bridge financing gaps for developers that are too large for early stage funding but too small for traditional project finance.
Strategic opportunities for leaders in carbon removal
Carbon removal will be indispensable to meeting global decarbonization goals. For business leaders, understanding the financial and contractual realities of the CDR market is no longer optional. Greater transparency in supplier financing profiles and offtake structures can help align buyer demand with supplier capabilities — accelerating investment, reducing risk, and enabling CDR to scale at the pace required to reach net zero.
