A roadmap for catalyzing the market for carbon removal

Today, hundreds of American companies are working to remove carbon from our atmosphere. Carbon removal is no longer science fiction or a hypothetical premise — it is happening now, in communities across the countryopens in a new tab and employing thousands of Americans. These companies drive their local economies, creating jobs for people skilled in mining, construction, transportation, and engineering. Carbon removal is also becoming embedded in essential industries like wastewater treatment, agriculture, and steel. Without a doubt, the U.S. is the humming center of gravity for this growing industry.

What carbon removal needs today is a larger, more diverse pool of customers. The good news is that the United States has a long and successful history of building a runway for American companies and industries to take off. Industries we take for granted now, once required a concerted effort to develop and build. Railroads initially lacked a customer base but benefited from public support to amass private development, and internet and computing power originated from government research programs before becoming widely commercialized. These investments have paved the way for American businesses, unlocked tax revenue and jobs for communities across the U.S., and solidified America’s place as a technology leader on the global stage. Now the next wave of federal policy must do the same for carbon removal.

The best carbon removal policies will reinforce America’s leadership in energy and innovation and attract new legions of private sector capital. So far the government has only utilized a limited number of policy options to grow demand. While helpful, there are far more options at our disposal, including those that integrate with existing trade and industrial policies. Any one of these can make a measurable difference for the carbon removal industry, but a portfolio approach will be needed to achieve a gigaton-scale industry. 

This year, our Alliance aims to set forth the next generation of carbon removal policies, all focused on creating a robust market for durable carbon removal. And while we know that it's important to think beyond 2030, we feel it’s critical to develop policies that can be passed and implemented before that — which is why our work has a particular eye to being politically feasible today and widely supported by carbon removal companies themselves. Specifically, we will explore the following five policy levers as a way to build this critical market for carbon removal, and we will be publishing concrete recommendations for lawmakers.

Trade Policy

Carbon Border Adjustment Mechanisms (CBAMs) are gaining momentum internationally. CBAMs impose import tariffs based on a product's pollution intensity.  In the U.S., there are a number of legislative proposals related to CBAMs, including the Foreign Pollution Fee Act of 2023, the Clean Competition Act, and the PROVE IT Act of 2024. Estimates from the Boston Consulting Groupopens in a new tab project that the implementation of these mechanisms across the globe could generate up to 550 million tonnes per year in durable carbon removal demand by 2050.  

Our work will examine how carbon removal can be integrated as a compliance mechanism within CBAM policies to protect against fraud and low-quality offset purchases from foreign polluters and stimulate the domestic carbon removal industry. 

We recommend that permanent, high-quality carbon removal initially be included alongside other options to reduce tariff liability (e.g. in supply-chain emissions reductions and non-durable carbon removal), with ramping mandatory minimums for permanent carbon removal. This minimum requirement for carbon removal should increase over time as the durable removals industry scales and high-quality credits become broadly available and affordable. We also recommend a number of provisions to create oversight on claims to reduce tariff liability by bringing together expertise on carbon removal monitoring, reporting, and verification (MRV) to audit claims and prevent fraud. 

You can read our full recommendations in our newly released memo: CBAM and carbon removalopens in a new tab.

Industrial Integrations

Carbon removal companies in the United States are already working in partnership with dozens of existing industries — from forestry to agriculture to mining to municipal waste management. Frequently, carbon removal technologies present opportunities for industrial process improvements in both decarbonization efforts and productivity or new revenue streams within these sectors. Alliance members like CREW Carbonopens in a new tab, Vaulted Deepopens in a new tab, Arcaopens in a new tab, and Planetaryopens in a new tab have a successful history of working directly with industrial partners. Federal policy can stimulate these types of partnerships by creating targeted incentives for carbon removal integrations, removing regulatory barriers, or implementing new industrial standards that promote carbon removal activities. 

We believe that through effective federal policy, industrial integrations can also become a key source of demand for durable carbon removal. These policies will have the dual impact of promoting carbon removal and bolstering essential American industries. At a time when traditional American industries like pulp and paper are strugglingopens in a new tab, carbon removal can provide an opportunity for revitalization.

Market Infrastructure

The market for durable carbon removal is nascent and lacks many of the guardrails and infrastructure typically found in mature commodity markets. Properly designed market infrastructure will prevent market manipulation and fraud, reduce systemic risk, encourage transparency and standardization, and increase investor and buyer confidence. Our Alliance will explore key initiatives to develop this market infrastructure including finding opportunities to standardize offtake contracts, streamline project diligence requirements, clarify market-based rules related to compensatory claims, and develop key MRV policies.

Price Supports

While many corporations are interested in purchasing or investing in carbon removal as part of their sustainability strategies, the budding market and, in particular, high price is a barrier for both carbon removal buyers and suppliers. Challenges around pricing prevent existing players from making larger investments and new players from entering the market altogether. We’ll explore levers like backup buyer contracts, price subsidies, and contracts for difference as long-term policy tools to stabilize prices and bring competitively-priced removals to voluntary and compliance markets.

Federal Procurement

Long term, federal procurement can be a significant source of demand for durable carbon removal. In the meantime, small-scale purchasing can still be catalytic by creating a strong market signal for private-sector purchasers on the credibility of carbon removal companies, setting implicit market standards, and increasing transparency in the diligence process. Our Alliance is committed to working with the federal government to continue and expand programs like the Carbon Dioxide Removal Purchase Pilot Prize and other approaches to government procurement, including future versions of the Carbon Removal and Emissions Storage Technologies (CREST) Act and the Carbon Dioxide Removal Leadership Act.

Continuing U.S. leadership

The United States has a headstart on developing the carbon removal industry — in fact, today, there are over 200 companies headquartered or launching carbon removal projects in the U.S., per CDR.FYIopens in a new tab. This competitive advantage has been secured through forward-thinking federal policy, but other countries are catching up. If we want to ensure our continued success and build a robust domestic carbon removal industry, the federal government must continue to support carbon removal businesses and work to unlock the full potential of the industry.

Photo by chandler denise on Unsplash