Carbon Removal in the Voluntary Carbon Market: Scaling Climate Action

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As the global climate crisis continues to escalate, the need for effective solutions to mitigate greenhouse gas emissions has become more urgent than ever. The voluntary carbon market (VCM), where companies can purchase carbon credits from certified providers, is playing an essential role in the fight. Among the various types of carbon credits, carbon removal, or carbon sequestration credits, have been receiving increasing attention as a crucial tool in the fight against climate change. Carbon removal credits, sometimes referred to as negative emissions credits, are generated through activities that remove carbon dioxide from the atmosphere. Examples include reforestation, soil carbon sequestration, direct air capture with carbon storage, and more. These activities play a vital role in achieving the ambitious global temperature goal set by the Paris Agreement and in transitioning to a net-zero economy. In this article, we’ll explore the role the VCM is playing in scaling carbon removal, the pros and cons of different carbon removal methods, and what businesses need to know to get started. We’ll cover the following topics:

Download the Ultimate Guide to Building a Carbon Credit Portfolio to learn how building a diversified, balanced portfolio of carbon credits can help you mitigate market risk.

Addressing carbon emissions is a vital part of fighting climate change

Why tackling climate change must be a top priority

Climate change poses one of the most significant challenges of our time. Some regions are already experiencing climate change induced severe heat incidents that are not survivable by humans. And Columbia University predicts that extreme hot zones like these could put up to one third of humanity in uninhabitable conditions by 2070. Other climate change impacts such as frequent and intense storms, floods, and droughts have become more common, impacting ecosystems, agriculture, and communities worldwide. According to a United Nations (UN) article, climate and weather-related disasters surged five-fold in the 50 years between 1970 and 2019, accounting for 74% of all reported economic losses. More recently, World Meteorological Organization Secretary-General, Professor Pettari Taalas, noted that, in 2022: 

“Continuous drought in East Africa, record breaking rainfall in Pakistan and record-breaking heat waves in China and Europe affected tens of millions, drove food insecurity, boosted mass migration, and cost billions of dollars in loss and damage.” 

Unfortunately, even though these effects are becoming more frequent, they play out over long periods of time. This contributes to climate denialism, making it difficult for decision makers to respond with measures that have tangible climate impact. 

How do GHGs such as CO2 cause climate change?

An increased concentration of greenhouse gases (GHGs) in the atmosphere traps heat close to the earth’s surface in a greenhouse gas effect. This helps to stabilize the atmosphere, but an excessive amount of GHGs leads to the climate change impacts described above. Carbon dioxide, or CO2, is the most prevalent GHG in the atmosphere, and it’s primarily emitted through human activity such as the burning of fossil fuels. Governments and businesses around the world, recognizing the urgency of the situation, have taken various measures to reduce carbon emissions. Some of the most effective approaches include decoupling economic growth from CO2 emissions, implementing climate policies including carbon pricing, and promoting renewable energy and sustainable transport. While reducing emissions remains a priority, it’s becoming increasingly important to also remove GHGs already present in the atmosphere. This is where carbon removal comes into play, helping to address climate change and achieve the goals set out in the Paris Agreement.

What’s the Paris Agreement?

The Paris Agreement, which entered into force on Nov 4, 2016, is the world’s leading mechanism for fighting climate change. Adopted by 196 countries at the UN Climate Change Conference (COP21) in 2015, it represents a binding global commitment to tackle climate change. It aims to do this by reducing GHG emissions, adapting to climate change, and aligning financial flows with achieving these goals. The primary goal of the Paris Agreement is to limit “the increase in the global average temperature to well below 2°C above pre-industrial levels,” and, if possible, “limit the temperature increase to 1.5°C above pre-industrial levels.” However, in recent years, world leaders have stressed the need to limit global warming to 1.5°C by the end of this century. That’s because the UN’s Intergovernmental Panel on Climate Change (IPCC) indicates that crossing the 1.5°C threshold risks unleashing far more severe climate change impacts. And, to limit global warming to 1.5°C, the IPCC report states that GHG emissions must peak “before 2025 at the latest and decline 43% by 2030.” 

Exploring carbon removal methods: From nature to technology-based

 Why is carbon removal needed?

While reducing emissions is essential for reversing climate change, it won’t get us across the finish line. Current policies have us on track to more than double the 1.5°C target by the end of this century – well beyond the Paris Agreement goal. And hard-to-abate sectors such as agriculture, aviation, and cement and steel do not yet have a viable path for complete decarbonization. To balance this and ensure a sustainable future for generations to come, carbon dioxide removal (CDR) is emerging as an essential part of the path to net-zero emissions and beyond. CDR removes CO2 from the atmosphere through different methods, often divided into nature or technology-based, although it’s more complex in practice. And carbon removal credits in the voluntary carbon market are playing a significant role in incentivizing and financing novel carbon removal projects. 

CDR is “a crucial part of the effort to achieve net zero emissions for many reasons including offsetting residual emissions from hard-to-abate industrial sectors and those that have not yet had technological breakthroughs to operate at zero emissions, as well as taking back already emitted CO2 given the likely overshoot of the 1.5C carbon budget.” 

McKinsey

Understanding carbon removal: Which process removes carbon dioxide from the atmosphere?

Carbon removal already exists in nature, where ecological processes capture and store carbon. For example, photosynthesis by plants and trees absorb CO2 from the atmosphere. Oceans, grasslands, and soil also act as natural carbon sinks. This is known as sequestration, carbon sequestration, or biological sequestration (biosequestration). However, while existing natural processes are a vital part of mitigating climate change, they can’t address the scale of carbon emissions resulting from human activities.

Beyond existing processes, there are various nature and technology-based methods for removing and storing carbon dioxide, with new innovations happening all the time. In the context of achieving climate goals, only emissions and removals generated by humans count. That is why the IPCC defines CDR as “anthropogenic activities removing carbon dioxide (CO2) from the atmosphere and durably storing it in geological, terrestrial, or ocean reservoirs, or in products”.

Types of carbon removal credits: Pros and cons

One of the challenges is that every carbon removal method has pros and cons, so we can’t solely rely on one type to reach decarbonization goals. It’s important that we build out a mix of different methods. Research by the Coalition for Negative Emissions shows that a portfolio of CDR solutions can be sustainably scaled to meet decarbonization goals.

To be categorized as a CDR method, a project must “capture CO2 from the atmosphere and durably store it,” according to the State of Carbon Dioxide Removal report. The report, compiled by multiple researchers, provides a comprehensive assessment of different CDR methods, but here are a few examples: 

  • Afforestation/reforestation: This method involves planting trees on land that was never a forest (afforestation) or replanting trees on land that was previously a forest (reforestation). Pros include improved biodiversity and employment opportunities for local communities, renewable wood products, and better soil. Cons include the risk of reversal through wildfires, disease, pests, and reaching a saturation point for carbon sequestration. Trees for Global Benefits is an example of this type of project.
  • Direct Air Carbon Capture and Storage (DACCS): These systems use chemical processes to capture CO2 directly from the air. They typically consist of large fans that pull air in and pass it through a series of filters that remove the CO2. The captured CO2 is then compressed and stored underground or in products such as concrete. Project Bison is an example of this type of project. A pro is that this method is viewed as the ultimate stopgap – if all else fails, we can build a lot of these systems to hit decarbonization targets. However, a con is that it’s very energy intensive, so it can lead to additional GHG emissions if renewable energy isn’t used.
  • Bioenergy with Carbon Capture and Storage (BECCS): This method uses biomass such as wood chips or agricultural waste to generate energy, while capturing and storing the CO2 emissions. The biomass is burned to generate energy and various techniques such as mineralization or geologic storage can be used to capture and store the CO2 emitted during the burning process. CarbonCure’s project to mineralize waste CO2 into concrete is an example of how this can work. One of the biggest pros for BECCS is that it can decrease the reliance on fossil fuels for energy, while a con is that it requires land and water resources.
  • Enhanced rock weathering: This method accelerates the natural process by which rocks react with CO2 in the atmosphere to form stable minerals. Crushing rocks and spreading them on farmland or coastal areas increases the surface area for them to bind more CO2 out of the atmosphere to form carbonates. Pros include reduced soil acidity and increased nutrients. Cons include mining impacts and heavy metal contamination from some rock types.
  • Biochar: This method burns biomass to a state of char or biochar, a stable form that will not emit CO2 back into the atmosphere. This is currently getting a lot of attention in the VCM because numerous projects are already up and running and delivering carbon removal credits, as compared to some of the other methods. Biochar can be used as soil amendment, animal feed, or in other ways such as biogas decarbonization. PyrocalPremier Forest, and Lucrat are examples of this type of project. Pros include increased crop yields, reduced CO2 emissions from soil, and improved resilience to drought. Cons include particulate matter and emissions from the production of biochar and unsustainable biomass sourcing. 

While several of the engineered solutions have the potential to remove significant amounts of CO2 from the atmosphere, they are still in the early stages of development. That means they need to overcome a number of technical, economic, and regulatory challenges before they can truly be scaled up.

The role of voluntary carbon markets in scaling carbon removal

How carbon removal credits work 

Carbon removal credits are transferable financial instruments that represent the removal of a specific amount of CO2 from the atmosphere. Also known as carbon offsets or carbon credits, they provide a mechanism for organizations and individuals to invest in carbon removal projects. When a project successfully removes carbon dioxide from the atmosphere, it can generate carbon removal credits equal to the amount of CO2 removed. These carbon credits can then be bought and sold in carbon markets. Organizations can purchase these credits to mitigate emissions beyond their value chain or balance their residual emissions, while contributing toward global climate goals. Carbon removal projects in the voluntary carbon market undergo third-party verification to ensure that the issued carbon removal credits are accurate and additional to what would have happened without the project. The verification process evaluates whether the project follows established standards and methodologies to ensure the project’s legitimacy and effectiveness. 

Why the voluntary carbon market is essential for expanding carbon removals

While considerably smaller than compliance carbon markets ($2 billion vs $927 billion), the VCM is more agile and flexible, allowing for quicker adaption and innovation. This makes it an ideal platform for scaling novel carbon removal methods, which are still in early stages of development. Traditional methods such as afforestation/reforestation are available in compliance markets and have well-established standards and methodologies. However, new approaches to durable carbon removal such as DACCS or enhanced rock weathering currently only participate in the VCM. Integrating these projects into compliance markets will take years as supporting standards, methodologies, and regulations are developed and established. 

Key opportunities and challenges for carbon removal in the VCM

Using the voluntary carbon market to scale carbon removal presents both opportunities and challenges such as:

  • Primary catalyst: The VCM is the primary financing mechanism for scaling innovative CDR solutions that aren’t yet available in compliance markets.
  • New approaches: The VCM is more flexible and can fund innovative projects, fostering the development of new CDR methods.
  • Market infrastructure: The VCM is paving the way for future carbon markets focused on carbon removal.
  • Standards development: Standards and methodologies for CDR projects need to be developed and widely accepted by market participants. This will help companies seeking certification of their carbon removal activities, as well as those looking to buy credible carbon removal credits. While some standards, including Puro.earth, have been trailblazers in this space, the global market is still in the early stages. For example, the Integrity Council for the Voluntary Carbon Market (ICVCM) is working on core carbon principles, but it hasn’t been finalized yet.
  • Market fragmentation: Various standards, methodologies, registries and marketplaces for carbon credits are necessary to build market transparency and trust. However, this is also leading to fragmentation in the market that can be confusing for new participants seeking to enter the market.
  • Reductions vs removals: Distinguishing reductions from carbon removals is critical because they serve different roles in decarbonization. Major voluntary market standards such as Verra have recently taken steps to address this concern. While steep emission cuts will remain a priority, removals will have an increasingly important role for mitigating residual emissions that can’t be further reduced.
  • Early-stage cost: Most durable CDR methods, other than traditional nature-based solutions, are still in early stages and need more investment to continue development and drive down the cost. As a result, pricing of these carbon credits can be higher than other types available in the VCM today.

Despite these opportunities and challenges, the VCM is playing a vital role in driving the growth of innovative CDR methods. And, as standards and policies are developed, these projects will become an integral part of larger compliance markets over time. Some governments are already exploring specific policies, such as tax credits and direct purchasing programs, targeting a narrow set of CDR methods.

What companies need to know about carbon removal credits

 Companies must first take steps to cut emissions by 90+% according to the Corporate Net-Zero Standard set by the Science Based Targets initiative (SBTi). Once this is achieved, investing in carbon removal credits is a great way for businesses to compensate for the final <10% of residual emissions to hit their net-zero targets. However, it’s important to plan ahead and invest now because CDR projects take time to develop and implement. 

The top four questions companies ask

The questions we hear most often from businesses about carbon removal credits are:

  1. 1. Do we need them at all? The short answer is yes. If your company has taken the right steps to calculate your carbon footprint and set a net zero target, you’ll need a way to compensate for residual emissions. That’s where removal credits will come into play.
  2. 2. Do we need them now? Some companies want to focus on emissions reduction first and removals later down the road. While it’s critical to prioritize reduction, you’ll also want to start investing in a pipeline of CDR projects sooner rather than later because they take time to implement. Not only will you be helping scale up carbon removal, but you’ll also have access to the credits when you need them.
  3. 3. How much do they cost, and can we get them cheaper? Durable carbon removal credits can be expensive because the technology is still in the early stages of development and there aren’t a lot of these credits available yet. Once more of these projects are deployed, the price should come down.
  4. 4. How can we choose the right credits? Similar to any market, buying carbon credits entails both benefits and risks. A few considerations for purchasing high-quality carbon credits include additionality, permanence, avoidance of leakage and double counting, and demonstration of real, measurable, permanent CO2 removal. These projects should also consider environmental and social principles to minimize negative externalities. And, like any investment strategy, building a balanced, diversified portfolio can help mitigate against risk. Look for trusted standards and marketplaces and do research to understand your options. For more guidance, refer to insights from leading market players such as:

a.    The ICVCM Core Carbon Principles
b.    The State of Carbon Dioxide Removal report
c.    A Beginner’s Guide to Carbon Credits
d.    The Ultimate Guide to Building a Carbon Credit Portfolio

Examples of companies using CDR credits successfully

In terms of real-life case studies, the cdr.fyi website is good reference source. It’s compiling purchases of all durable carbon removal credits and updating it daily. Here you can see which companies are purchasing what types of CDR credits, along with the delivery status. For example, the top five buyers are Microsoft, Airbus, NextGen, Frontier, and JPMorgan Chase, and you can click to see what their current portfolio looks like. However, it’s important to keep in mind that it’s still a very small portion of the overall carbon market. While Microsoft has purchased over 2.8 million metric tons, other companies in the top ten have purchased less than 15,000 metric tons to date, which is not a significant amount. 

How carbon credit marketplaces like Cloverly can help


One of the key advantages the VCM has in scaling carbon removal is connecting buyers with net-zero targets to available CDR carbon credits. Carbon marketplaces like Cloverly help to streamline this process by providing an easy, transparent way for companies to purchase high-quality carbon removal credits. By uniquely combining trust, ease, and access into a single solution, Cloverly enables companies to quickly scale their climate action with projects that meet their specific goals. Because the CDR space is so new, businesses can rely on Cloverly’s climate science expertise for quality curation or construct their own portfolio. Companies can view quality markers for each project, its social impact, and independent ratings before investing.

Key takeaways and looking ahead


As the global community continues to grapple with the escalating climate crisis, it’s clear that reducing GHG emissions alone won’t limit the global temperature increase to 1.5°C. Carbon removal is an indispensable component, and the voluntary carbon market has emerged as a vital catalyst for pioneering innovative CDR methods. It provides a flexible, agile platform for financing and incentivizing promising carbon removal projects that aren’t yet covered under the compliance markets. Moving forward, key priorities for CDR include the development of robust standards and methodologies, the expansion of projects and buyers, and eventually integration into compliance markets. Additionally, embracing complementary tools and approaches will be essential for ensuring comprehensive and effective carbon removal takes place at the necessary scale. Examples include government tax credits, public procurement, reverse auctions, advanced market commitments, loans and loan guarantees, and support for CO2 transport and storage infrastructure. 

“Substantial negative emissions (carbon removals) are needed with emission reductions to avert catastrophic climate change. Analysis shows that negative emissions can be deployed at the required scale.” 

McKinsey

To learn more about including high-quality carbon removal credits in your portfolio, download the Ultimate Guide to Building a Carbon Credit Portfolio.


About the authors:

Eve Tamme is the Founder and Managing Director at Climate Principles, a climate policy advisory. She is also the Chair of the Zero Emissions Platform (ZEP) and serves on the Board of Directors at Puro.earth, and on the Advisory Board at Carbon Gap. Working on climate policy since 2004, her expertise covers a broad range of climate policy tools and processes. In prior roles, she led the climate department of a national government, advised the European Commission on climate policy, and shaped climate policy engagement for a global nonprofit. Today, she works with private and public sector clients, providing strategic advice on climate policy, focusing on carbon markets, carbon removal and carbon capture. She has a Master of Science in Environmental Engineering from TalTech University.

Julie Yamamoto is the Content Manager at Cloverly. She has over 20 years of global experience spanning multiple sectors. Her work has been featured in several enterprise and nonprofit digital channels, as well as Forbes, TechTarget, GreenBiz, and American Forests. In previous roles, she led content marketing for the OneTrust ESG & Sustainability Cloud and the IBM Center for Applied Insights. She is also a trained Climate Reality leader and has led sustainability initiatives such as IBM AI for Social Good (Environment), Watson Green Advisor, Forests for the Earth, and conservation data science. She has a Master of Science in Marketing Management from Nanzan University and a Bachelor’s in Business Administration from Oglethorpe University.

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