Fragility of carbon removals market starts with a mismatch between buyers and sellers
Stripe, McKinsey and other innovators to date have grown the market, seen as an integral component of the transition to net zero, but prices must come down to attract other buyers. Read More

It sounds like something from Economics 101: For a market to function, buyers must be willing to pay enough for sellers to make a profit. Yet new data suggests the market for carbon dioxide removal (CDR), seen by many as an integral component of the transition to net zero, has not reached that milestone.
Take biochar, a carbon-negative soil amendment made by heating biomass in a low-oxygen environment. The approach has generated buzz recently, with Google, Mitsubishi and others inking significant deals. But when CDR.fyi, a market data provider for carbon removal, surveyed buyers and sellers on prices, the results revealed a gap in expectations. Biochar sellers said they required an average of $187 per ton to make a reasonable profit; when asked to name a price for biochar credits that felt expensive, buyers quoted an average of $155.
Expectation gaps
Gaps between profit for sellers and buyers’ perceptions were seen in six of the seven CDR methods covered by the survey, carried out in partnership with Opis, an organization that tracks the prices of energy commodities. The spread was largest for direct air capture with carbon sequestration (DACCS), with suppliers requiring $822 to make a profit and sellers considering $558 as expensive. The only category where the trend was reversed — mCDR, or methods for storing carbon dioxide in oceans — is a relatively nascent area that has seen limited sales to date.
The finding makes for alarming reading, at least at first glance. The IPCC has stated that tens of gigatons of carbon dioxide must be removed from the atmosphere annually by 2050 in order to avoid the worst consequences of climate change. In the absence of significant government purchases, the voluntary market for carbon removal is the leading mechanism for scaling CDR technologies, deployed aggressively by players such as Climeworks, which operates direct air capture plants.
Yet the divergence in expectations between buyers and sellers can be explained by the evolution of the removals market, which is only around five years old, said Robert Höglund, co-founder of CDR.fyi. He noted that the market has to date been driven by the “early innovators,” such as Frontier, a partnership between Stripe, McKinsey and others, as well as the Climate Transformation Fund, a project from environmental impact platform Milkywire that Höglund helps manage. These organizations, as well as companies such as Microsoft, have been willing to pay high prices for CDR credits in order to support the growth of the startups developing removal technologies. Given the willingness of the early innovators to back risky and expensive new approaches, the gap in price expectations is not surprising.
‘Relative immaturity’
“The startup costs associated with CDR technologies are steep and many projects are in the nascent stages of development,” said Spencer Meyer, chief ratings officer at BeZero, a company that assesses the quality of carbon credits. “There is also a limited number of projects producing credits. All of this impacts the price of CDR credits.” Meyer noted that BeZero did not rate direct air capture projects until last year. This shows “the relative immaturity of this market compared to other sub-sectors, which inevitably has an effect on price,” he added.
The next wave of buyers will, however, be more focused on price, predicted Höglund. There are signs that the market may be evolving to meet their expectations. Asked about prices in 2030, the spread between answers from sellers and buyers narrowed for most categories. In DACCS, for example, suppliers expected to need to charge an average of $436 to make a profit, $22 less than what buyers said they would then consider expensive. This suggests that while direct air capture is unlikely to be considered a bargain anytime soon, buyers who value the technology’s attributes, which include relatively easy verification of impact, may at least be willing to pay enough to support suppliers.
That rosy version of CDR’s future rests on the assumption that the next wave of buyers, which Höglund dubs the “early adopters,” will actually enter the market. If they do, they will likely be buying credits to satisfy company climate goals rather than to support startups. At present, nothing compels companies to purchase removals credits. The Science Based Targets Initiative (SBTi) requires companies to use removals to compensate for emissions they cannot eliminate, but only toward the end of their journey to net zero. Höglund and others have argued that the SBTi should require companies to ramp up removals purchases much earlier, which would push many more buyers into the CDR market.
“It’s not a credible natural pathway to say that we need removals, but we’re going to start buying them in 2038,” said Höglund.
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