The Future of Carbon Dioxide Removal

CDR Introduction

What is it, what isn't it, and why do we need it?

Carbon Dioxide Removal (CDR) refers to methods that extract CO2 directly from the atmosphere to tackle emissions that cannot be avoided and cumulative anthropogenic GHG pollution to date. We have a fundamental societal need for 2.5-10 Gt (billions of tons) of CDR by mid-century. CDR differs from point-source carbon capture1, which focuses on preventing emissions at their industrial origin, by targeting carbon already in the atmosphere. Importantly, we must always prioritize reducing current emissions wherever feasible and use CDR only as a last resort and to the least extent necessary.

1Commonly referred to by the umbrella acronym CCUS (Carbon Capture, Utilization and Storage)

Source: UNEP

Selected Resources

• The State of CDR: longer form analysis of the current CDR landscape (oft quoted in this post)
• DOE FECM Primer: quick overview deck of many market- and technology-related topics
• CDR Primer: foundational guide to the science and implementation of CDR

Note: These foundational resources also apply broadly to the Market and Pathway overviews to follow.

Carbon Markets

Who is going to pay for this, and how?

CDR's scalability relies on evolving carbon markets and policy frameworks. These markets are divided into compliance markets (mandated by regulations, mostly focused on emission reductions) and voluntary carbon markets (VCM), which are critical to today's CDR efforts.

Terminology Primer

• Carbon credits are certificates representing one ton of avoided, reduced, or removed CO2 equivalent emissions. Credits refer to the unit, and offsets refer to the specific use of the credits to compensate for existing emissions. Allowances, issued by regulatory bodies, work like permission slips for emissions, but are distinct from credits.
  • Avoidance and reduction offsets prevent or minimize emissions (e.g., renewable energy projects).
  • Removal offsets extract carbon from the atmosphere (so, CDR).
• Conventional CDR encompasses well-established methods like reforestation, whereas novel CDR refers to newer, often technological methods which are currently deployed at smaller scales.

Carbon credits can be categorized by level of quality. Adherence to certain criteria outlined below separates "high-quality" and "low-quality" credits, which we'll explore more in our analysis to follow.

Source: White House, Terrapass, State of CDR, Carbon Direct + Microsoft

Regulation and Compliance Markets

• Government policies, international agreements, and NGO support programs encompass the evolving landscape with carrots and sticks for CDR. This includes overarching international climate agreements (including Article 6 of the Paris Agreement), emissions trading schemes and carbon taxes, country-specific incentives like IRA tax credits, direct CDR investments, and government/NGO engagement with and legitimization of voluntary carbon markets (e.g., White House, VCMI, CSIS, ICVCM).
  • Note: Paris Agreement Article 6.2 and 6.4 were recently authorized at COP29. In simple terms, these allow for inter-country credit trading for use toward Nationally Determined Contributions (NDCs), while aiming to ultimately include standardized credit guidelines including defined removals methodologies.
• Compliance markets - mostly emissions trading systems (ETSs) and some direct carbon taxes - covered about $1T in carbon emissions market value in 2023. These are predominantly not used to finance CDR at the moment (focusing instead on reduction and avoidance projects), but they should be recognized as the key regulatory drivers for emissions reduction, with the potential for future inclusion of CDR.

Voluntary Carbon Markets

• VCMs are the most active space for CDR, driven largely by corporate demand (e.g., large companies buying credits to meet sustainability goals).
• The value chain for VCM transactions is multi-faceted: technology and project developers create supply, while numerous players are involved in credit registration, validation (rating, monitoring), transaction (brokers, marketplaces, advisory services), and more.
• At present, there is a notable supply shortage for novel CDR, with challenges including cost and measurability of project efficacy. Conventional CDR purchases still outpace those of novel CDR, but notable shifts are taking place with reputational headwinds stymieing the former while the latter continues to grow rapidly.
• As a teaser, expert forecast consensus points toward a potential $1T market for CDR by mid-century, largely driven by rapid growth of novel method deployment.

Selected Resources

• Carbon Direct + Microsoft: detailed discussion of CDR credit quality criteria
  • See also: BeZero Removals Methodology
• World Bank Group: carbon pricing and compliance markets
• Allied Offsets: VCM stakeholder and value chain analysis
• BCG: demand drivers and trajectory analysis
• CDR.fyi: aggregator of CDR transaction history
• The State of CDR (Chapter 4)

CDR Pathways

What are our options to get carbon out of the air?

CDR methods can be categorized into nature-based removals, engineered or technology-based removals, and hybrid approaches. Nature-based and hybrid methods rely on photosynthesis to sequester CO2 (hybrid methods further manipulate the process using technology), while technology-based methods utilize certain accelerated geochemical reactions, of which some are also naturally occurring. Each method has varying potential scale and cost, among other differentiating attributes.

Source: Minx et.al. 2018

Taxonomy of CDR Pathways

1. Nature-Based Removals (NBR)

• Afforestation and Reforestation (AFR): Planting trees in deforested areas is low-cost with ecosystem co-benefits but suffers from low permanence (e.g., fire, harvesting) and high land demands.
• Soil Carbon Sequestration (SCS): Enhancing soil carbon storage through agricultural practices improves soil health but faces issues with permanence, measurability, and land-use trade-offs.
• Blue Carbon: Coastal ecosystems like mangroves efficiently sequester carbon while supporting biodiversity, yet they are vulnerable to environmental changes and require ongoing management.

(AFR)

2. Hybrid Removals

• Bioenergy with Carbon Removal and Storage (BiCRS/BECCS): Converts biomass into energy while storing emissions permanently; scalability is constrained by biomass supply and process energy needs.
• Biochar: Pyrolyzing organic material produces soil-enhancing biochar with moderate permanence, but resource availability and process efficiency limit large-scale deployment.
• Marine Biomass Sinking: Cultivating and sinking macroalgae (e.g., kelp) leverages the ocean's carbon sink capacity but raises concerns about durability and ecosystem impacts.

(Biochar)

3. Technology-Based Removals (TBR)

• Direct Air Capture (DAC): Captures CO2 directly from ambient air using chemical or physical processes, offering scalable and highly durable storage when paired with geological sequestration. However, DAC remains energy-intensive and costly, relying on advances in renewable energy infrastructure to improve feasibility.
• Mineralization Techniques: Accelerating CO2 storage in minerals is highly permanent and scalable, though limited by reaction speed, mineral sourcing, and especially measurability challenges.
  • Enhanced Rock Weathering (ERW): Crushed reactive minerals are spread over large areas of land (e.g. agricultural fields), after which dissolved cations and bicarbonate are transported to the ocean via rivers and groundwater.
  • Ocean Alkalinity Enhancement (OAE): Minerals are to introduced directly to water, reacting with CO2 to permanently store it in a dissolved or inert form and/or impact the CO2 flux between the water and atmosphere.
• Direct Ocean Capture (DOC): Extraction of CO2 directly from seawater, often involving chemical solvents or electrochemical techniques (also includes electrochemical OAE, whereby electrolysis-separated alkalinity is added directly back to water). High energy requirements and measurability concerns (eOAE) persist for these novel techniques.

(DAC)

Each pathway is a thread in the tapestry of climate action. Some are robust; others, fragile. The trick is knowing which ones will hold when the future pulls hard. Comparison and analysis should touch on metrics like durability and measurability - typically referred to as measurement, reporting, and verification (MRV) - as mentioned in the carbon credit criteria overview. Additional considerations include: capacity (removal potential), cost, technological maturity, process requirements (like energy, land, or material feedstock), efficiency and speed of sequestration, ancillary value chains, and specific policy support.

To note, current levels of CDR across pathways are weighted heavily in favor of Nature-Based Removals (NBR), and far behind that the more commercially ready hybrid methods are outpacing Technology-Based Removals (TBR). This point-in-time snapshot, however, does not account for some of the deployment dynamics we are seeing that should shift the balance significantly in coming years. We will address these trends in Part 2, but we generally believe that TBR, and mineralization techniques in particular, will capture outsized portions of deployment and credit sales volumes in coming years as technologies and markets mature.

Source: State of CDR

CDR Value Chain and Related Items

• Carbon dioxide, once captured, must be stored in as permanent a way as possible to truly impact near-term warming trends. This can happen post-capture, or as a direct result of the approach in the case of e.g., mineralization methods. Common techniques include injection of "supercritical" CO2 in existing underground reservoirs, burial or sinking of biomass, or reaction with alkalinity to create stable minerals.
• In our analysis to follow, we will also touch on carbon utilization - also known as carbon-to-value (C2V). Depending on the usage of the captured carbon, this may or may not contribute to actual CDR, but it does merge existing markets for products like building materials and fuels with the removals approaches we've introduced.
• Carbon capture and storage (CCS) traditionally describes processes that capture CO2 directly from point sources like power plants and industrial facilities, storing it underground or using it in products. While CCS helps avoid emissions, it doesn't directly remove CO2 from the atmosphere, and we will not make it a focus of this CDR investigation. That said, the CCS technologies carry significant overlap with e.g., DAC innovations, and the value chain components like storage and CO2 transport infrastructure can serve both of these complementary segments, so it is important to acknowledge its role in the overall carbon removal ecosystem.
• In general, all removals projects should be evaluated for net carbon removals using Life Cycle Analyses (LCA), as well as for financial feasibility and comparison using Technoeconomic Analyses (TEA). Upstream and downstream items denoted above and including supply chain integration, geographic suitability, permitting, and monitoring activities are also important considerations by which to evaluate CDR deployments.

Selected Resources

• Reports with useful comparisons of CDR approaches:
  • Energy Transitions Commission
  • RMI + Third Derivative
  • Rhodium Group
  • The State of CDR (Chapter 1)

Recap and Future Additions

This article introduced the essential concepts of CDR and its significance in addressing climate challenges. Next, we'll shift focus to the rapidly evolving CDR markets, emerging investment trends, and the critical role of innovation in shaping the future of carbon removal. Stay tuned for actionable insights into the economic and technological dynamics driving this field forward.

Introduction

Welcome back! Please see Part 1 for an overview of this series and an outline of topics to be familiar with when evaluating prospects for CDR as an industry. Now, we'll get a bit more analytical and focus on investment-relevant takeaways from the wall of information in the preceding post. We'll continue to separate our discussions of carbon market (this post) and CDR pathways Part 3 analyses, and then we'll bring the conclusions together in [Part 4 as we examine the array of companies in this ecosystem.

TL:DR

Market Heavyweights: Project developers dominate the carbon removal value chain, while market facilitators remain fragmented and ripe for consolidation.

Corporate Push: Companies demand high-quality carbon credits, ditching low-quality options plagued by credibility issues.

Pricey Innovations: Novel CDR credits cost 10x+ more than conventional ones but this should drop with innovations and economies of scale.

Big Potential, Big Risks: VCM could hit $1T+ by 2050 (from current $4.7B market cap), but uncertainty around demand and policy clouds the horizon.

Where's the Money? Bet on cost-efficient, high-quality credit suppliers; steer clear of risky nature-based solutions for growth-focused investment strategies.

Value Chain Insights

There are a host of stakeholders along the value chain of the VCM responsible for supply, demand, and transaction facilitation. In the carbon world, suppliers hold the treasure chest, while everyone else scrambles to polish the coins. Published estimates allude to a market share well north of 70% for project developers who supply the physical removals and associated credits, with the balance split amongst the numerous market-making activities. Those few suppliers that can successfully scale should thus claim vast swaths of CDR-related revenues.

The market-makers - including registries, ratings agencies, brokers, and carbon accounting platforms - are at present quite fragmented, and are likely to consolidate as more universal standards and purchase processes for credits are solidified by economic and/or governmental forces. While there exists a substantial value proposition for software-enabled credit verification and transaction, the uncertainty around ecosystem evolution is a notable deterrent to investment in this space. The best suppliers will always be in demand, but facilitators are inherently less differentiated and may even be relegated to niche operations pending Article 6 implementation.

One area of note involves measurability, reporting, and verification (MRV). This topic dominates discussions of credit quality and certification, and it represents a significant portion of CDR project opex. Companies may improve internal processes over time, but there exists space for data-driven MRV solutions that can be applied broadly to projects within or amongst approach categories; in other words, technologies or processes that can reduce costs and operational constraints for market-trusted MRV in a project-agnostic fashion.

VCM Demand Trends

As we know, corporate demand drives the VCM, with companies increasingly purchasing carbon removal credits to meet internal emissions targets. Many are adopting Science-Based Targets (SBTi), aligning corporate pathways with Paris Agreement goals. While Scope 3 emissions accountability remains challenging, firms on this list are a good proxy for overall corporate commitment to self-regulation of GHG emissions. Where decarbonization strategies fail to cover all emissions, companies will increasingly look to carbon credits to satisfy net-zero or similar goals.

Source: Allied Offsets

Encouragingly, overall corporate target-setting and activity on the VCM are increasing in relative lock-step. Certain buyers have also indicated a direct intention to scale technological CDR development, in concert with their own reduction pledges. Indeed, the increase in CDR credit pre-purchases for novel methods, where delivery remains years in the future, is itself a signal in this regard. Large, aggregated purchases and offtake guarantees carried out by Frontier, for example, are directly enabling CDR technologies to carry out capital-intensive FOAK projects. These programs are reshaping the VCM by making long-term bets on promising but unproven technologies.

A clear shift toward higher-quality credits has emerged, with buyers prioritizing more expensive innovative methods over traditional ones. "The number of credits issued for conventional CDR fell in 2023 from approximately 20.4 million to 13.3 million, while purchases of future novel CDR credits grew sevenfold from 600,000 to 4.6 million." Greenwashing concerns and flawed carbon accounting plague conventional projects like poorly governed forestry initiatives, where issuance and sales are declining. In contrast, high-quality removals projects, characterized by durability and additionality, are seeing rapid credit sales growth, signaling stronger demand that should be expected to continue in this undersupplied sector. The shift toward high-quality credits isn't just a trend, it's an inevitability. In a world increasingly allergic to greenwashing, companies are learning that credibility is as valuable as the carbon they remove.

Efforts to standardize what constitutes a "quality" carbon credit (see: ICVCM, White House, Carbon Direct + Microsoft, Oxford) are reinforcing buyer confidence. Yet, uncertainty persists around universal credit standards and corporate eligibility, which could constrain demand growth. We see tech giants, as early CDR purchasers, dominate today's market. However, their eventual demand saturation raises questions about whether other corporate entities (as well as governments, individuals, and philanthropies) can take up the baton and sustain gigaton-scale markets.

CDR Credit Pricing

The pricing data splits by CDR method indicate a stark contrast in willingness-to-pay for various methods of removal. Prices paid for credits to be generated by novel methods exceed those for conventional CDR by 1-2 orders of magnitude, while the latter in turn exceeds prices for reduction and avoidance credits by about three times (not shown in table). To be clear, exceedingly high prices for e.g. DAC project credits are due in large part to the limited current supply and buyer willingness to pay catalytic premiums in the short term; these should come down and stabilize as supply-side competition matures and economies of scale are realized.

Longer term, industry observers commonly quote $100/ton as a market-making price point for high-quality CDR at scale. Though merely an arbitrary and directional figure, it is useful to demonstrate the extent to which various technologies will need to descend the cost curve to remain competitive as novel CDR evolves from kilo- to mega- to giga-ton scale.

Market Forecast

Market sizing and forecasting for a nascent industry like CDR is significantly more art than science. Nothing presented here should be mistaken for a confident projection, rather it should be interpreted as a showcase of both the massive uncertainty of future market development, as well as the notable (and perhaps still understated) potential of the bull case. Thus, the section is intentionally coarse and brief.

To start, the current market capitalization of the VCM is approximately $4.7B. An aggregation of various industry projections suggests that this will increase to between $5B and $50B by 2030, $100B by 2035, and somewhere in the range of $35B to $1.2T by 2050 (McKinsey, BCG, BloombergNEF, Oliver Wyman). The curves charted here crudely indicate some of the potential paths to maturation.

If we sanity-check with a bottom-up calculation, an absolute minimum of 2.5Gtpa removals at $100/ton equates to a $250B market in 2050, and 10Gtpa (what may actually be needed to prevent climate catastrophe, given decarbonization progress to date) points to a $1T market. We will touch on current and future breakdown by CDR method later on, but generally we should see novel CDR and its technology-based methods take on increasing market share in the VCM at large.

Although policy and investment efforts are gaining traction, technological CDR currently fulfills far less than 1% of the anticipated demand, creating a significant gap to achieve global net-zero emissions. As novel CDR becomes capable of addressing the undersupply (technically and commercially), exponential growth should come as no surprise. Though not directly considered by most VCM forecasters, it is worth noting that potential future inclusion of CDR in compliance markets (e.g. through Article 6 implementation) could open doors to what is already a $949B global carbon trade, quelling long-term demand concerns alluded to in a previous sub-section.

Investment Takeaways

Investing in CDR is like betting on an unbuilt bridge: it promises a clear path forward, but only if the foundation holds. Tailwinds include a vast potential addressable market expected to grow rapidly, driven by increasing private-sector demand for high-quality, verified credits on the VCM as well as the potential integration of CDR into international compliance frameworks. Early movers benefit from short-term undersupply and the competitive advantage of quality removals, with reinforcing growth loops poised to accelerate.

However, headwinds persist, including notable uncertainties around market size projections, the scalability of supply chains, and voluntary demand's ability to sustain development. Policy outcomes and reputational concerns - such as greenwashing and questions about the efficacy of offsetting projects - add further short-term complexity.

Investment focus should target suppliers of scalable, cost-effective, high-quality removal credits, representing the most promising segment of the value chain with strong demand and policy support. Conversely, market makers, including registries and trading platforms, face intense competition and regulatory uncertainty, while businesses reliant on low-quality credits, particularly nature-based solutions, are risky due to evolving standards and scrutiny.

Introduction

Welcome back! Please see Part 1 for an overview of this series and an outline of topics to be familiar with when evaluating prospects for CDR as an industry. Now, we'll get a bit more analytical and focus on investment-relevant takeaways from the wall of information in the preceding post. We'll continue to separate our discussions of carbon market Part 2 and CDR pathways (this post) analyses, and then we'll bring the conclusions together in Part 4 as we examine the array of companies in this ecosystem.

TL;DR

• Nature's Quick Fix: Low-cost, short-term gains (e.g., forests, soil), but shaky permanence and tough verification.

• ⚙️ Tech for the Win: Durable solutions like DAC and mineralization shine long-term but need cost drops and infrastructure boosts.

• Hybrid Hope: Blending tech and nature offers promise, but land and energy needs are barriers.

• Store It Right: From underground to mineralized rocks, scalable storage solutions are key to making it stick.

• Chemistry Counts: Carbon utilization (e.g., building materials, alternative fuels) offers niche removal potential and broader emissions reductions.

• ️ Invest Smart: Scale, innovation, and durability = winners.

Approach Comparison

Our approximate rating of major pathways across selected criteria elucidates the challenges and potential of different approaches. Some criteria e.g. MRV can be feasibly solved for with scientific and technological innovation, whereas others suffer from fundamental limitations like land and energy requirements. These are rather coarse ratings to be used as a reference point, with qualitative investment discussion to follow.

Deployment Outlook

In the short term, perhaps the next decade or so, nature-based solutions like improved soil and forest management show significant promise. They're low-cost and grounded in established practices, which could allow rapid adoption with the right incentives. However, scaling these methods is challenging due to issues with verification, permanence, and potential environmental and social impacts, limiting their viability for long-term use. Recent developments, like the Nori marketplace shutdown due to low demand for regenerative agriculture credits, highlight these obstacles. While companies like Microsoft are currently leaning on nature-based CDR, we expect them to shift the balance of their removals portfolio toward engineered solutions as those become more feasible at scale.

Looking further ahead, the balance of deployment volume is likely to move toward technological and hybrid CDR approaches. Although these face short-term barriers like high costs and trust in the market, they offer greater scalability and permanence for long-term carbon capture.

Open-system pathways like ERW and OAE hold particularly high potential due to the vast size of their carbon sinks and long-term sequestration stability, but they are currently limited most by measurability and feedstock concerns, as well as targeted policy support. Economic potential should track technological potential in the long term - market share will mirror cost and scalability factors - but short-term idiosyncratic risks (e.g., market trust of measurability and commercial readiness) and incentives (e.g., 45Q) will overweight certain methods like BECCS and DAC. Though projections are just that, we feel that relevant technological and economic studies can define an approximate bounding box of deployment breakdown.

Source: RMI

Source: BCG

CO2 Storage

For permanent carbon removal, the CO2 must be stored in a stable form or location where it cannot reemerge into the atmosphere on human-relevant timescales. Each storage method has tradeoffs and varying levels of commercial readiness, requiring a portfolio approach to meet the necessary scale. Factors like geographical suitability, CO2 sources, and transport infrastructure are critical.

Most storage currently involves underground injection into saline reservoirs, often linked, controversially, to Enhanced Oil Recovery (EOR). While industry familiarity makes this scalable, risks like leakage, seismic activity, and groundwater contamination demand rigorous monitoring and permitting. Purifying CO2 adds cost and complexity upstream.

Mineralization, both in- and ex-situ, offers durable and simple storage but faces challenges like slow reaction rates, measurement issues, and geographic constraints. Some approaches directly store CO2 as carbonates or bicarbonates, mimicking the natural carbon cycle, while others inject captured CO2 into porous formations or mineralize it in specialized facilities. Controlled ocean alkalinity enhancement (OAE) also shows promise for vast, inert mineral storage in water.

Biomass storage is gaining attention for converting unstable plant-stored CO2 into long-term sequestration. Techniques include underground injection of bio-oil or waste and sinking macroalgae to the ocean floor. However, these methods require further validation to assess durability, leakage risks, and ecosystem impacts. The graphic below neatly depicts some of these CO2 storage options.

Carbon to Value (C2V)

Carbon can also be converted into useful forms to supplement or replace existing products and value chains. Depending on application, this can lead to permanent removal or simply emissions mitigation from superseding typical production methods. Existing markets and non-credit revenue streams incentivize utilization technology development, but overall capacity for CDR contribution is limited by the scale of demand for these ancillary products, and most CO2-neutral/negative technologies have struggled to reach cost parity with incumbent commodity production processes.

Source: CO2 Value EU

• Mineralization in Building Materials: Mineralized carbon can be incorporated into durable building products, such as concrete aggregates or through carbon-embedding curing processes. Some approaches even leverage recycled materials like demolition waste, supporting partial circular material economies. The high durability and measurable removal potential may be held in check, however, by limited market adoption for alternative (e.g., non-Ordinary Portland Cement) materials, cost competition with legacy options, and energy variability based on reaction methods and accelerants.
• Chemicals and Alternative Fuels: Captured CO2 can be transformed into chemical building blocks or alternative fuels, such as sustainable aviation fuel (SAF) and green hydrogen. These technologies hold potential for diversifying fuel sources and reducing emissions in hard-to-abate sectors. However, production costs remain higher than those of legacy fuels and competing emerging technologies, and the energy-intensive nature of these processes limits scalability without sufficient renewable energy integration.
• High-Value End Products: Carbon nanofibers, graphite, and other advanced materials can be produced using captured CO2, offering opportunities for sequestration alongside commercial applications. Despite their promise, these markets are niche, and production costs often outstrip those of conventional manufacturing methods, posing barriers to widespread adoption and scalability.

Investment Takeaways

Investment strategies should focus on CDR pathways and companies that promise scalability and the ability to capture significant market share.

• Scalability is influenced by physical constraints, such as land availability for photosynthesis-based approaches or competition for renewables in energy-intensive processes.
• Market forces also play a role; while early willingness-to-pay for high-cost or low-quality credits exists, competitive price pressure will increasingly favor cost-effective solutions as the market matures and supply proliferates.

Given what we know about the CDR approaches, where might scalability be best potentiated by technological advancements? Conversely, where are the barriers to scale most enduring?

Pathways offering durable sequestration, technological innovation potential, and minimal physical or market barriers are the most promising.

• Mineralization pathways, in particular, stand out due to their scalability, resilience to market and physical constraints, and potential for disruptive advancements.
• Hybrid methods also hold potential but face land-use and efficiency limitations. (To extrapolate on land-use concerns, climate change will place increasing value on arable land for e.g., food, and sustainable biomass and waste to be used for energy production and CDR will be harder to rely on at the necessary scale.)
• Conversely, pathways like DAC face challenges from high energy costs, reliance on policy incentives, and crowded supply landscapes. In addition, clean energy developments should first be used to decarbonize the grid and existing emissions (and the market may prioritize secondary uses like datacenter power), placing constraints on how much will be feasibly available for CDR projects. Nature-based removals and enablers, with their minimally durable sequestration and credit demand concerns, are particularly risky investments.

Other opportunities include storage solutions that are cost-competitive, leakage-resistant, and politically viable, as well as utilization pathways with large end-product markets and focus on carbon removal rather than avoidance. Digital monitoring, reporting, and verification (dMRV) systems also present a significant opportunity, especially those that defensibly enhance project quality and integrate with evolving registry standards. Overall, the CDR investment landscape favors approaches that combine scalability, cost-efficiency, and innovation to address market and physical deployment barriers effectively.

Solutions Landscape

We've introduced several CDR methods in previous sections, so let's continue by giving some faces to names for innovators in the various sector buckets. Below you'll find a representative (certainly not exhaustive) CDR supplier market map.

To recap our investment takeaways from Part 2 and 3, the CDR market offers substantial growth opportunities, driven by rising private-sector demand for high-quality credits and the integration of removals into compliance frameworks. Early movers are positioned to benefit from short-term undersupply and competitive advantages, while long-term success will depend on scaling solutions that overcome physical, market, and policy barriers. Pathways like mineralization and durable technological approaches stand out for their scalability and resilience, while others face enduring challenges, such as energy intensity, land use constraints, or reliance on policy incentives. Investors should prioritize innovative, cost-effective, and durable solutions, while avoiding pathways vulnerable to evolving standards and scrutiny.

Incorporating these high-level market and pathway takeaways, we see open-system mineralization CDR suppliers emerge as top candidates. These pathways provide both physical scalability through abundant reactive minerals and simple processes leveraging existing infrastructure, as well as market scalability, with the potential for low-cost, durable removal solutions at the gigaton scale. Innovations in MRV, cost reduction, and material access, supported by ancillary revenue and value chain services, can further enhance scalability and competitive advantages in this category. From NVP's perspective, these pathways also align with our strategic expertise in mineral extraction and processing, offering opportunities for synergies in sourcing relationships, operational partnerships, or eventual acquisitions.

Partnership and Fundraising Spotlight

• To highlight examples of recent strategic partnerships and diverse capital sourcing in this space, we can look at Travertine, a company pioneering a waste recycling method to turn hazardous mine tailings into critical materials and mineral alkalinity for stable CDR and storage. In 2024, they partnered with Sabin Metal Corp to demonstrate their technology stack in support of Sabin's mineral recovery, recycling, and reclamation efforts at shuttered mine sites. Project financing includes $3.2M of State-level grant funding (New York State Energy Research & Development Authority), $7.5M of venture debt (Builders Vision), and $8.5M of recent equity fundraising.
• In general, partnerships focused on material availability and technology prove-out, supported by carbon credit revenue-share or licensing agreements, are mutually beneficial to the startups working to de-risk processes and the material owners who can explore additional, and potentially lucrative, revenue streams. We also recognize the potential for long-term involvement by mining and industrial companies who might license or directly deploy CDR technologies given their material pipelines, operational expertise, and net-zero commitments.
• On the fundraising side, technology developers should look to capitalize on the variety of government and private financing opportunities. Federal programs through BIL/IRA, like the $3.5B earmarked for DAC hubs, along with State-level incentives and the maturing climate equity and debt capital stack offer an attractive menu of options for those looking to build out FOAK projects and integrate into carbon infrastructure development.

When analyzing companies within targeted investment subsectors, several key parameters should guide evaluation.

• Cost remains critical, given market price sensitivity and the current scarcity of affordable, high-quality removals, alongside conservative TEA projections for scaling production.
• Commercial traction, including offtake demand and supply chain integration, is essential for advancing technologies, while input material availability is particularly vital for mineralization solutions.
• Strong defensibility, through intellectual property and first-mover advantages (including mineral supply security), helps build technological and commercial moats.
• Finally, team expertise - spanning technical insight and company-building experience - is crucial for long-term success. The smartest bets in this space aren't just on technology, they're on teams that can navigate policy and scale infrastructure partnerships.
• We must also acknowledge challenges affecting all solutions in these sub-sectors, including the need for market-trusted MRV (for open-system project designs, in particular), feedstock requirements of millions of tons of crushed rock, and mitigation of any adverse ecosystem effects through mineral addition to fields or oceans.

Sub-Sectors of Interest to NVP

1. OAE: Water-Based Mineralization

A company who can deliver safe, effective, low-cost, measurable and verified CDR using OAE mineralization principles can potentially capture a much larger portion of the market than sector projections imply, given the inherent permanence and scalability of the method. Company differentiation might occur by minimizing cost/capex, employing leading MRV, advancing reaction speed and efficacy, and/or business model innovation to capture maximum value of credits or commercial partnerships at scale.

Companies like Scape Carbon, Vycarb, and Planetary are pioneering solutions that overcome existing hurdles by employing, among them, innovative reactor designs, flexible feedstock use, integration with existing infrastructure, and a mix of storage services and full-chain CDR.

(Vycarb)

2. ERW: Terrestrial Mineralization

ERW is a relatively simple operation to scale cost-effectively given existing infrastructure, and although physical space requirements are massive, increasing buy-in from agricultural landowners due to co-benefits points to an ability to share large swaths of these spaces. Technological differentiation is limited, but feedstock material and project design can certainly impact efficacy and thus cost and value considerations. Project development in this area will likely commoditize over time given process simplicity, which will then favor those who can best extract and deliver alkaline materials. The leading developers will likely integrate with existing materials experts (e.g., large mining companies) and secure long-term offtake partnerships. Measurement solutions are still needed to unlock markets whose demand is restrained by credit uncertainty, and they could represent a more direct path to value creation in this segment.

Firms like Lithos and Mati focus on regional agricultural partnerships to co-locate ERW projects and maximize co-benefits. Meanwhile, companies like Everest Carbon address the critical gap in measurement technology, enabling credit-worthiness for ERW solutions.

(Lithos)

3. Waste to Value: Carbonation (Surficial Mineralization)

Turning mining waste into carbon storage isn't just recycling - it's alchemy for the climate era. Existing and future industrial or mining waste sites offer CDR companies access to pre-extracted and pre-ground materials with varying suitability for enhanced mineralization processes. A measurable, on-site method to sequester carbon in large portions of these waste piles offers a path to durable mineralization removals with significantly reduced supply chain complexity. Though a ceiling of removals exists based on material availability, there is already giga-ton scale CDR potential in waste sites today. As before, cost and energy minimization, overall reaction efficacy (alkalinity selection, acceleration factors), and valuable supply partnerships are notable differentiators.

Leading players like Karbonetiq, Arca Climate, and Blue Skies Minerals exemplify innovative approaches, from passive carbonation to robotic agitation of mine tailings to blending captured carbon into cementitious materials, achieving measurable and durable CDR while reducing contamination of local ecosystems by reactive waste.

(Arca)

4. Waste to Value: Material Extraction and Alkalinity Production

Innovative methods to process waste can enable concurrent minerals extraction and production of alkalinity that can then be used for mineralization in reactors or ERW-type applications. Typically driven by electrochemical processes, these approaches are more energy-intensive but can offer significant ancillary commodity sales as well as remediation benefits to waste owners. Businesses of interest must have processes that compete economically with other extraction methods to thrive in those smaller materials markets while ensuring carbon credit value chain involvement at sufficient scale.

Companies such as Exterra Carbon, Travertine, and EDAC Labs stand out for their ability to combine economic process competitiveness with carbon credit value capture. By producing reactive alkalinity and recovering saleable minerals, these firms provide a model for sustainable scalability.

(Exterra)

The Investment Landscape: Balancing Opportunity and Risk

While the CDR market is ripe with promise, it remains nascent, characterized by limited funding events and operational precedents. Notable trends include:

• Valuations: Unicorn-level valuations (e.g., Climeworks and Carbon Engineering) indicate investor confidence but highlight discrepancies between market expectations and realized CO2 removals.
• Exits: To date, predominantly tied to CCUS rather than pure CDR, with acquisitions (e.g., Aker) driven by strategic decarbonization goals.

However, the sector faces layered risks, including:

• Market Uncertainty: Demand and pricing remain speculative in this early growth phase.
• Technical Feasibility: Many solutions are at pilot stages with unproven scalability.
• Infrastructure Dependence: Ecosystem reliance on other startups and unbuilt physical infrastructure adds complexity.
• Exit Challenges: Few realistic models exist for successful exits in CDR.

At NVP, we're excited to continue identifying and tracking opportunities in the evolving CDR market, especially given its outsized importance to the climate crisis at large. The additive hazards above, however, combined with typical idiosyncratic uncertainties of early-stage company dynamics, lead us to continue monitoring this sector until the overall risk profile aligns with internal appetite and overall fund strategy.

We would love to connect and collaborate with innovators and investors in this space! Please reach out to [email protected].