The Barriers Holding Back Carbon Removal Investments

A significant gap has emerged in the carbon dioxide removal (CDR) sector between long-term demand and current procurement.

Although buyers recognise the need for CDR to meet net zero commitments, most are still withholding investment due to sector uncertainty.

Research commissioned by the Carbon Business Council found that sustainability and supply chain leaders across major sectors remain unsure about market gridlock, despite interest in it.

For uptake in CDR to grow, the Council’s survey found business leaders need clearer policy, verifiable climate impact and cost justification.

“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.”

Clearer policy to help understanding

Carbon removal credits compete for funding with other established investments, such as energy efficiency upgrades, fleet electrification, and renewable energy power purchase agreements (PPAs).

Unlike these markets, the CDR sector is currently fragmented. Procurement teams face conflicting registries, inconsistent methodologies and varying durability claims.

In a world of tight margins, making a business case for an expensive, unstandardised product is difficult for corporate purchasing teams.

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

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

Regional differences on regulatory landscape

The Council’s research also highlights a regional split in regulatory anxiety.

In the US, without clear federal policy, buyers are relying on voluntary frameworks such as the Science Based Targets initiative (SBTi) to reduce procurement risk.

In Europe, meanwhile, procurement teams face uncertainty around how CDR will be recognised under the Corporate Sustainability Reporting Directive (CSRD) and the Green Claims Directive.

Sustainability leaders won’t want to miss Sustainability LIVE: The Leadership Summit at London Climate Action Week, taking place at Code Node on 25 June 2026.

Register now for this exclusive invite-only event.

Purchasing offsets or removals before achieving significant reductions in Scope 1 and Scope 2 emissions is often seen as a reputational risk that could affect a company’s status as preferred vendors in sustainability-focused procurement tenders.

Ben believes, however, that could change as the CDR market strengthens its accountability.

“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,” Ben says.

A potential supply chain bottleneck

To manage these risks, most companies have adopted a sequential procurement timeline: optimise internal operations and supply chain emissions today, and defer the purchase of active carbon removal until the 2030–2040 window.

While this delayed approach may suit short-term budget forecasts, it creates significant long-term supply chain risks.

Industrial-scale CDR projects, such as engineered direct air capture or enhanced weathering, require long development cycles, significant upfront capital, infrastructure, and multi-year verification processes.

Getting to the bottom line

Cost considerations are closely linked to policy and standards, the survey finds.

When companies have clearer guidance on how carbon removal can be used and disclosed, they said it  becomes easier to build the internal case for investment.

“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,” says Nora.  

Early demand signals can also help projects scale, bringing costs down over time.

“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,” says Ben.

“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.

Market moves with Microsoft

Despite ongoing uncertainty, some large corporations continue to pursue CDR strategies.

In late May, Microsoft entered into an agreement with BioCirc to deliver 650,000 Carbon Removal Units over the next seven years, which equates to 650,000 tonnes of permanent CO₂ removal.

The CO₂ will be captured from BioCirc’s eight Danish biogas plants, and then subsequently transported to and stored in INEOS’ CO₂ storage in the North Sea.

"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.”