Carbon Direct unveiled its 2024 State of the Voluntary Carbon Market report, highlighting a growing demand for carbon dioxide removal (CDR) technologies.
While the voluntary carbon market (VCM) continues to show promise, CDR solutions remain a relatively small part of the market—accounting for just 4% of the $1 billion VCM. The report signals an urgent need to scale up CDR efforts to meet global climate goals.
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CDR’s Growing Role in the Carbon Market
The push for carbon dioxide removal is gaining traction. Unlike traditional carbon credits, which offset emissions, CDR actively removes CO2 from the atmosphere through a variety of techniques, such as direct air capture and soil carbon sequestration. As companies and governments aim for net-zero emissions, CDR offers a complementary strategy for addressing hard-to-abate sectors that cannot yet fully decarbonize.
However, despite its growing popularity, CDR remains underrepresented in the broader voluntary carbon market. According to the latest report from Carbon Direct, CDR credits make up just 4% of the VCM’s total value, a fraction that’s far below what will be needed in the years ahead. This imbalance highlights a significant gap in the market—a gap that could hinder global efforts to combat climate change.
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Demand for CDR Is Outpacing Supply
The report makes it clear that the demand for CDR solutions is poised to skyrocket in the coming decades. By 2050, global climate targets will require the removal of 5 to 10 billion tons of CO2 per year. But the current pace of CDR project development is nowhere near sufficient to meet these ambitious goals.
As of now, global financing for CDR projects falls far short of the amount needed by 2030. Carbon Direct estimates that by that time, demand for CDR credits will reach 50 million tons annually, representing only a small fraction—less than 5%—of the total CO2 removal needed to align with the Paris Agreement’s 1.5°C climate goal.
The shortfall in supply could put pressure on the VCM, where prices for high-quality CDR credits could rise sharply as demand outstrips availability.
Scaling Up
To meet global climate goals, scaling up CDR will require significant investment and policy support. Both the private and public sectors must work together to build the infrastructure and funding mechanisms needed to accelerate CDR technology deployment. This includes expanding research into new methods of CO2 removal, improving efficiency, and reducing the cost of these solutions.
Governments can play a crucial role by implementing policies that incentivize investment in CDR, such as carbon pricing, tax credits, and other financial mechanisms. Meanwhile, businesses and investors need to step up their commitment to funding these technologies.
With global demand for carbon credits expected to rise, the voluntary carbon market has a critical role to play in driving innovation and investment in carbon removal technologies. The challenge now is whether the market can move quickly enough to meet the climate targets of the coming decades.