Carbon removal is at a critical inflection point. Achieving the goals of the Paris Agreement requires both rapid emissions reductions and large-scale carbon removals. By 2050, an estimated 5–10 billion tonnes of carbon dioxide need to be removed annually—even more will be required if emission reduction targets are not met. The voluntary carbon market serves as a vital vehicle for companies to address their residual and historical emissions while channeling finance into carbon removal solutions.
Despite significant growth in 2024, the carbon removal market remains small. Even with increased funding and ambitious scale-up plans, expected supply remains far below what is needed to stay on track to meet global climate targets. Buyers can play a key role in addressing these challenges through robust, quality-oriented procurement. At this critical juncture, here are 10 key insights for buyers from our 2024 State of the Voluntary Carbon Market report.
Read the full State of the Voluntary Carbon Market report ->
1. The voluntary carbon market needs to grow substantially
In aggregate, the voluntary carbon market grew by only 3% from 2022 to 2023. This contrasts with the much smaller market for carbon removal credits, which grew by 50%. The market’s total size remains around one tenth of projections for 2030, and much further from 2050 projections. If the market is going to contribute meaningfully to global climate goals, it must grow rapidly in the coming years. This requires immediate investment from the private sector.
2. Quality remains a core challenge in the voluntary carbon market
Quality issues continue to undermine credibility of the voluntary carbon market. Carbon Direct has found that fewer than 10% of all projects we assess meet or exceed our quality criteria with minimal reservations, a finding that is consistent with academic research. In response, some buyers have reduced purchases or are avoiding publicity to mitigate reputational risks. Conversely, a growing number of quality-focused buyers are demanding scientifically rigorous credits and supporting the creation of market structures that prioritize quality. This includes requiring project specific diligence and assurance, coordinating purchasing, and directing funds to maximize catalytic impact.
Explore the 2024 Criteria for High-Quality Carbon Dioxide Removal ->
3. Overall voluntary carbon market supply is bifurcated by quality
On average over the past four years, twice as many credits have been issued as have been retired. However, this oversupply masks the scarcity of high-quality credits, which are in high demand and often sell out quickly. This trend is particularly evident in carbon removal: removals typically command higher prices than emissions reduction credits, even within the same project. This bifurcation emphasizes the importance of securing high-quality tonnes today in order to meet long-term goals and accelerating the scaleup of high-quality projects.
4. Carbon removal demand is growing, but market share remains small
Over the last two years, the carbon removal market has grown quickly. Retirements of nature-based carbon removal, like reforestation, are on pace to increase by more than 50% in 2024. Retirements of high-durability carbon removal, like biochar, are expected to double. However, removals accounted for only 4% of issued credits during 2022–2024. Demand for carbon removal is rising rapidly, but it remains a small fraction of the overall market.
5. Nature-based credits continue to dominate existing carbon removal supply
Between 2022 and 2024, nature-based credits represented 98% of total CDR issuances. In addition, the market for nature-based carbon removal has become more forward-looking. Buyers like Microsoft and Meta have signed several large forward offtake agreements for nature-based credits to secure tonnes for their 2030 targets. With their high scalability, nature-based removals are critical for achieving climate targets.
6. Forward purchases make up the bulk of high-durability carbon removal contracting
In 2024, there were 40 times more high-durability tonnes contracted through forward offtake than retired, indicating a highly forward-looking market. Due to limited spot market availability, forward purchasing is a significant indicator of demand for high-durability CDR. Major companies like Microsoft and Equinor have signed substantial offtake agreements with projects expected to deliver credits starting before 2030.
7. Companies with public carbon removal commitments promise meaningful demand but more is needed
Looking toward 2030, Carbon Direct finds that companies with explicit high-quality CDR commitments sum up to 30–50 Mt per year. This demand represents meaningful growth, but it remains a tiny fraction (e.g., less than 5%) of new carbon removal needed in 2030 to meet IPCC 1.5°C-consistent scenarios. In addition, very few buyers are contracting at the level needed to meet their 2030 carbon removal goals.
8. Forward purchasing of CDR is highly concentrated
In 2024, 80% of all high-durability carbon removal pre-purchases and offtakes came from just one buyer—Microsoft. A similar pattern of market concentration is likely true for nature-based carbon removal as well. This concentration suggests that only a small number of buyers are executing contracts at the scale needed to meet climate commitments. Diversifying the buyer pool is essential to accelerate market growth and ensure the scalability of carbon removal solutions.
9. Nature-based carbon removal needs far more investment
We find that nature-based carbon removal is likely underfunded and undersupplied. About US$11 billion in funding for nature-based carbon removal has been announced since 2018. If these funds were invested immediately in high-quality removals, it would generate approximately 20 Mt of credits per year by 2030—only half of currently expressed demand for nature-based removals. Substantially more investment is needed to avoid a sustained scarcity of high-quality nature-based credits. Even more investment is needed to reach levels in line with global climate targets.
10. High-durability carbon removal requires bankable offtake to scale
Scale-up plans from high-durability CDR developers indicate potential supply of over 30 Mt per year by 2030. However, these projects will not be built without significant access to project finance and that finance is dependent on bankable offtake. Without higher buyer engagement, many of these projects will not break ground.
Conclusion
Achieving global climate targets hinges on deploying high-quality carbon removal at scale. While companies have made public pledges to purchase carbon removal, these must translate into tangible investments and bankable offtake agreements to address their emissions and help bring new projects online. Transforming technically-ready plans into operational projects—both nature-based and high-durability—requires actively maturing the market. By translating corporate commitments into concrete investments and offtake agreements, the voluntary carbon market can serve as a catalyst in scaling carbon removal to meet global climate targets.
Read the full State of the Voluntary Carbon Market report ->
