We’ve only started to unlock the carbon removal market

Is Microsoft abandoning its commitment to carbon removal? What’s going on with the DAC Hubs? The news recently has been full of headlines about the industry’s future, and it’s hard to tell where things are headed. I see the past few weeks as a sign that carbon removal is moving out of the early hype phase and into the far more complex work of building a multi-gigaton-scale industry.

As I write this, companies are already removing tons of carbon from the atmosphere. But getting to the scale we need will require moving beyond a handful of early adopters to a much wider pool of corporate buyers, alongside durable policy frameworks and consistent government backing. The challenges making headlines are not a sign of decline, but instead are representative of the very real financial, market, and infrastructure requirements of scaling a new major global industry.

Carbon removal can’t rely on the voluntary market alone

After years of being the single largest purchaser of carbon removal by far, Microsoft is pausing new purchases. This pause appears to be part of a broader reevaluation across all of Microsoft’s climate and sustainability strategy as they navigate the surging energy and capital requirements of the AI boom. Whether it’s a temporary or more permanent pause still remains to be seen. This came as a shock to many, but focusing too much on the decisions of one or two large corporations misses the structural reality of the field. There was always going to be a limit to how much any single corporation, no matter how deep its pockets or good its will, could do to subsidize an entire industry. The news isn’t that Microsoft is exiting the space, rather, it's that the market now must mature and expand. Evidence of this is everywhere, with multi-million dollar deals from Google, Frontier, and JPMorgan in just the last few months. The demand is diversifying, not disappearing.

And while that diversification is a cause for optimism in the near-term, we have to be realistic about the inherent limits of the voluntary market. It is naturally tied to the balance sheets and shifting priorities of individual companies, which can change from one quarter to the next. While early buyers like Microsoft have done some heavy lifting to jumpstart the industry, we cannot rely on them to carry it forever. For carbon removal to function at a global scale, we need demand that is predictable and decoupled from corporate budget fluctuations and industry trends.

Policy as a necessary stabilizer

As the voluntary market helps companies navigate these early stages, government action needs to help provide the long-term demand and other enabling policy support the industry needs.

Carbon removal remains a rare area of bipartisan consensus in Washington, a fact reinforced by the $140 million in for research, development, and demonstration funding in the latest appropriations billopens in a new tab. We were also heartened to learn that the Department of Energy is continuing to back a wide range of projects, including both major DAC Hubs in Louisiana and Texas alongside technologies from companies like Ebb, Captura, and Holocene. Seeing this funding retained is a step in the right direction. These projects, if fulfilled, will demonstrate that carbon removal can work at a meaningful scale — helping drive down costs and providing the commercial foundation the industry needs to eventually attract further investment.

We’re also seeing a shift toward a more formal market. We are moving away from a marketplace based on one-off deals between individual companies and toward one based on official rules, regulations and standards. Policies like Canada’s procurement program and California’s SB 905 are starting to turn carbon removal into a standard part of doing business and a regulatory requirement, rather than just something companies do to meet their own goals. This transition from voluntary to compliance, from corporate goodwill to government-backed carrots and sticks, is what will ultimately provide the operational clarity and demand certainty the industry needs to mature.

Building the market, not just the technology

The last few weeks reinforced that the job of the carbon removal field is twofold. We aren’t just trying to get individual carbon removal startups off the ground. We’re also trying to build the system that allows them to function. 

The next phase of the carbon removal industry requires the market to move from a small, concentrated group of buyers to a broader system supported by national governments and corporate players who must manage their own footprints. This transition will require an immense amount of political will and industrial coordination to bridge the gap between where we are and where we need to be. There’s a lot of work in front of us, but the direction we're headed in has never been more clear.

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