The Barriers Holding Back Carbon Removal Investments

A widening gap persists between long-term demand for carbon dioxide removal (CDR) and current levels of corporate procurement. 

While companies broadly accept CDR’s role in achieving net zero targets, investment remains constrained by uncertainty across the market.

Research from the Carbon Business Council indicates that sustainability and supply chain leaders remain hesitant, citing unclear regulation, inconsistent verification standards and difficulty building a financial case. 

Respondents highlighted the need for clearer policy frameworks, credible measurement of climate impact and stronger cost justification before committing capital.

“Demonstrating that robust and trustworthy processes have been followed is important to support the development and credibility of the carbon dioxide removal market,” says Nora Callander, a spokesperson for financial communication at energy giant Equinor. 

“Applying high-quality standards and ensuring transparent reporting, including separate disclosure of emissions, captured CO₂ and the use of credits, are key elements in building confidence.”

Fragmented market limits capital allocation

CDR credits are competing for budget against established decarbonisation investments, including energy efficiency, fleet electrification and renewable energy power purchase agreements. Unlike these mature markets, carbon removal remains fragmented.

Procurement teams must navigate conflicting registries, inconsistent methodologies and varying durability claims, making standardised evaluation difficult.

In a cost-sensitive environment, this lack of uniformity complicates investment decisions.

Ben Rubin, Executive Director at the Carbon Business Council says: “Ultimately, verification becomes bankable when it’s consistent and when project developers, buyers and financial institutions all trust the underlying methodology.

“Getting there requires coordination across scientific, regulatory and market actors, a significant part of what the Carbon Business Council works on.”

Diverging regulatory risk

Regulatory uncertainty is a key constraint, with regional differences shaping procurement strategies. 

In the US, the absence of federal policy has pushed companies toward voluntary frameworks such as the Science Based Targets initiative to manage risk.

In Europe, ambiguity centres on how CDR will be treated under the Corporate Sustainability Reporting Directive and the Green Claims Directive, leaving companies without clear compliance pathways.

Capital allocation is also affected by careful consideration of reputational risk. Investing in removals before achieving meaningful Scope 1 and Scope 2 reductions can affect a company’s standing in sustainability-focused procurement processes.

Ben explains: “Advances in monitoring, reporting and verification technology are making it possible to measure carbon removal with much greater precision. Integrity initiatives at the market level are also improving for what qualifies as a credible carbon removal credit.”

Many companies are deferring CDR purchases, prioritising internal emissions reductions and supply chain optimisation in the near term, with procurement pushed to the 2030–2040 period. 

While this approach aligns with short-term financial discipline, it introduces longer-term supply risk.

Industrial-scale CDR projects, including direct air capture and enhanced weathering, require substantial upfront capital, infrastructure development and extended verification timelines. 

Limited early demand may constrain future capacity.

Cost clarity remains critical

Cost remains closely tied to policy and standardisation. Businesses report that clearer rules on the use and disclosure of carbon removal would improve internal investment cases.

“Although CDR is often perceived as a costly decarbonisation tool, it is lower on the Marginal Abatement Cost Curve than many abatement options available to hard-to-abate sectors,” Nora explains.

Pricing variability reflects the sector’s early stage, with costs differing by technology, scale and maturity.

“Carbon removal costs vary significantly today depending on the approach, the scale of deployment and how new the underlying technology is. That range is normal for an emerging sector,” Ben says. 

“Early-stage clean energy technologies followed a similar arc, with costs dropping substantially as manufacturing scaled and sustained demand gave developers confidence to invest. CDR is earlier in that curve, but the same dynamics are at work.

“The more useful frame for businesses may be less about absolute price and more about what they’re buying. Cost, durability, co-benefits and verification quality all factor into the actual value of a removal credit.”

Strategic buyers move ahead

Despite market constraints, select corporates continue to deploy capital into CDR. In May, Microsoft agreed a deal with BioCirc to secure 650,000 tonnes of permanent carbon removal over seven years.

The project will capture CO₂ from BioCirc’s Danish biogas plants and transport it for storage in the North Sea via INEOS infrastructure.

“BioCirc’s project offers a permanent and scalable approach to CO₂ removal while contributing to a broader energy system transformation,” says Phillip Goodman, Director of Carbon Removal Portfolio at Microsoft. 

“And scalable, high-quality, highly traceable CO₂ removal solutions like BioCirc’s are crucial to the development of a robust global CO₂ removal market.”