Introduction

Carbon dioxide removal (CDR) has evolved from an obscure concept to an established pillar of climate action since 2018, when the Intergovernmental Panel on Climate Change (IPCC) – the world’s authority on climate science – issued a wake-up call: large-scale CDR is necessary as a critical complement to rapid and deep emissions reductions to limit temperature rise to 1.5°C. The IPCC’s report stimulated research and spurred policy development towards a new global carbon removal industry.

Today, the U.S. and the European Union are leading the development of innovative and responsible policies to drive CDR forward. Other nations, like Canada and Japan, are beginning to follow suit. With the financial support of the Breakthrough Energy Foundation, Carbon Gap and the World Resources Institute performed a comparative assessment of the CDR policy approaches chosen by Europe and the U.S. Carbon Gap led on the assessment of EU CDR policy and WRI led on the assessment of U.S. CDR policy. This project focused on six different topics:

While the U.S. and the EU have so far pursued overall different approaches to CDR, they are complementary.

The U.S. moves first and asks questions later

Following the IPCC’s 2018 report, the U.S. National Academies of Sciences, Engineering, and Medicine published a 2019 report on CDR, laying out a federal research agenda to kick-start development on the topic. In 2020, Congress provided the first meaningful funding for CDR research, development and demonstration (RD&D) to the Department of Energy (DOE) to accelerate basic and applied research on the topic. In the following year, the Bipartisan Infrastructure Law was passed, providing billions in funding for CDR and its enabling infrastructure, while in 2022, the 45Q tax credit was expanded, more than tripling the credit provided for direct air capture (DAC).

Taken together, the U.S. has provided billions of dollars in incentives for research, development, demonstration and ultimately deployment of CDR, which has also spurred private investment.

While federal funding includes provisions around measurement, reporting, and verification (MRV) as well as reporting on governance parameters like equity, workforce development, and environmental justice, those areas have not been the main focus of federal funding. In 2023, DOE awarded funding to its National Labs to develop a unified approach to measure, report, and verify carbon removal indicating that attention to these details is beginning to grow.

The EU asks questions first before funding CDR

While the U.S. has spearheaded on funding, the European Union has taken a more pragmatic route. Before providing major financial support, the EU prioritised creating a solid framework to define, certify, and track CDR within its borders. The Carbon Removals and Carbon Farming Certification Framework (CRCF) reflects this thoughtful, methodical approach. So far, the EU has allocated only a fraction of the U.S.’s spending toward CDR research and innovation.

European countries are moving faster than the EU

Even as the EU sets the stage, several European countries have taken more immediate action. Sweden and Denmark, for example, already have deployment incentives CDR in place. The UK is following suit, working on its own CDR deployment incentives and maturing discussions on whether, and how, to integrate CDR into its Emissions Trading System (ETS). Meanwhile, countries like Switzerland and Germany are actively shaping their CDR strategies.

While the U.S. dives in headfirst and Europe lays a careful foundation, the differences in their approaches highlight complementary strengths. The U.S. focuses on rapid action to jumpstart the CDR market, while the EU is ensuring a robust, long-term framework. Both strategies are essential for advancing CDR on a global scale, offering a balanced model that combines urgency with precision. This dual approach not only reflects different policy styles but also provides key lessons for other countries looking to develop their own CDR strategies.

 Learnings from key initiatives 

Setting rules for quantification and quality of CDR before large-scale RD&I and deployment funding is provided can help lay the foundation for integration in long-term climate policies.

Regulation can take pressure off public funding through extended producer responsibility.

Dedicated funding is critical for scaling CDR, and it’s effective to support both pilot and demonstration projects.

Even starting with limited budget, procurement can have a catalysing effect for the industry.

Even starting with limited budget, procurement can have a catalysing effect for the industry.

Compliance systems in general are very efficient climate policy tools; need to carefully consider potential CDR integration into ETS.

Content of the report

This report contains a short overview of each topic (“in a nutshell”), a comparison between Europe’s and the U.S.’ approaches to each topic, and a summary with some reflections about each topic. Full versions of each of the six briefings are published on this Policy Tracker.

MRV and certification 

In a nutshell

MRV stands for monitoring and/or measurement, reporting and verification. In the context of carbon removal, MRV is the framework and set of rules by which carbon removal can be quantified, reported publicly to regulators or other parties, and then verified for accuracy. Over time, what was initially measured must be monitored to track any changes.

MRV is crucial to demonstrating the meaningful climate contribution of projects, enabling their transparency and accountability, and building trust around these and the carbon removal industry as a whole. MRV is done according to rules and principles established by the standard to which the project adheres. Standards, whether set by governments, standard-setting bodies or other entities, include protocols (also referred to as methodologies) that detail the quantification requirements and other rules for ensuring high integrity in how projects are to measure, monitor, report and verify their activities.

Once the carbon removal activity has been measured, reported and verified, and the monitoring process has been clearly defined, it can be certified. Certification involves assessing the effectiveness and environmental integrity of credits produced from CDR projects to provide the ‘stamp of approval’ for the quality of the removal. Once the activity is certified as a carbon removal credit, it can be sold within voluntary or compliance carbon markets.

Certification and MRV are strongly linked to each other. MRV protocols are specific to individual CDR pathways, while certification provides a common framework that cuts across various MRV systems with overarching rules and standards. In other words, certification determines what can count as carbon removal, while MRV describes how to account for a carbon removal activity.

The most notable policy in development in Europe that is relevant to MRV is the EU Carbon Removals and Carbon Farming Certification Framework (CRCF). The CRCF will create the first-ever government-led regulatory framework to monitor, verify and certify activities that remove CO₂ from the atmosphere.

There is less emphasis on government policy to guide MRV for CDR in the U.S. Currently, no comprehensive MRV standards or regulations for CDR have been introduced, although some MRV requirements for certain aspects of CDR do exist at both the federal and state level, and there are some federally funded initiatives to advance capabilities and best practices for carbon removal MRV.

Comparison

• MRV frameworks are emerging on both sides of the Atlantic, focused on multiple CDR pathways.

• Whereas the EU has prioritised the development of a certification framework, the U.S. has focused on incentivising the research, development and deployment of CDR technologies as a first step toward scaling the industry.
• For the US, defining MRV frameworks has followed investments in technology development and deployment, such as the 45Q Tax Credit and the DAC Hubs.

Europe

• In Europe, the main actor is the European Union (through the Commission, Parliament and Council).

The EU’s first step in scaling up CDR is building a certification scheme to set the ground rules of what a CDR unit is. The goal of the EU’s CRCF is to incentivise the uptake of high-quality CDR in the voluntary market. This framework will also lay the foundation for the potential future integration of CDR into the compliance market and the existing pillars of EU climate policy, namely the EU Emission Trading System, the Land-Use, Land-Use Change and Forestry Regulation and the Effort Sharing Regulation.

Summary and reflections

The EU CRCF is unique globally

The European Union’s Carbon Removal and Carbon Farming  Regulation (CRCF) is unique globally. When adopted, it would make the EU the first jurisdiction in the world with a government-led functional certification scheme for CDR in place, making it a frontrunner in the field. However, the final text leaves room for improvement, especially regarding how certified units can be used. Differentiating between different groups of CDR methods based on their permanence and durability and their application is a key positive element of the final text. It is of utmost importance that the CRCF be robust in order to set a high standard for the industry.

The U.S. is setting implicit MRV standards

In the U.S., federal-level CDR certification frameworks do not exist. However,  several policies, including 45Q, the CDR Purchase Pilot Prize, and the California Low Carbon Fuel Standard require operators to follow specific MRV requirements, which are primarily tied to DAC and the geological sequestration of CO₂.

Although no comprehensive MRV standards or regulations for CDR have yet been introduced, the U.S. Department of Energy (DOE) is funding projects at U.S. National Labs to advance best practices for CDR approaches and to develop an umbrella MRV framework that could enable further commercialisation. In addition, policies like the Purchase Pilot Prize will likely set an implicit standard on what the DOE considers to be robust and high-quality MRV through the intended prioritisation of those projects that have the most comprehensive MRV plans, alongside other criteria. The Purchase Pilot Prize is the only DOE funding for CDR that requires third-party scientific verification for MRV.

Keep an eye on Article 6 of the Paris Agreement

At the international level, the rules adopted under the Paris Agreement’s Article 6.4 Mechanism will likely set the bar for other standards and methodologies in development or already in place. Following COP28, there is currently a lack of certainty on when these rules will be adopted and in which form. These rules around MRV will be in place for the long term, laying the foundation at the international level for what is needed to ensure high-quality CDR.

 CO₂ transport & storage infrastructure

In a nutshell

CO₂ transport and storage infrastructure can be broadly defined as the infrastructure that moves CO₂ from where it is collected — which, in the case of carbon dioxide removal (CDR) is the atmosphere —  to a permanent storage reservoir. This type of infrastructure is needed for some technological CDR approaches where CO₂ capture and storage are separate steps, as opposed to natural CDR approaches, where capture and storage occur simultaneously.

Three steps are to be considered in the value chain of CDR approaches that involve sequestration as a separate step:

• Extraction from the air
• Conversion and transport, which can be done through pipelines, shipping, rail, or trucking and can be combined with liquefaction at conversion terminals (transport may be avoided if the site of extraction from the air and use or sequestration are co-located);
• Storage, also referred to as sequestration – often in suitable geological formations deep underground, but can also be done through underground mineralisation or used in long-lived products.

While CDR pathways such as afforestation or soil carbon sequestration do not require the construction of CO₂ infrastructure, several high-durability pathways do, such as bioenergy with carbon capture and storage (BECCS) and direct air carbon capture and storage (DACCS).  Importantly, CO₂ transport and storage is also integral to carbon capture, utilisation and storage (CCUS), which involves capture technology applied at emissions sources like cement plants. CCUS reduces emissions from a facility rather than removing carbon that has already accumulated in the atmosphere.

In Europe, a CO₂ storage hub is emerging in the North Sea region, where Norway and the United Kingdom are leading in terms of planned capacity. Norway is also home to the longest-running CO₂ storage site in the world in the Sleipner field, which has stored about 1 MtCO₂/year captured from natural gas plants since 1996. In an effort to scale storage capacity, the EU, through the Net Zero Industry Act, has set a target to develop an annual CO₂ storage capacity of 50 MtCO₂ by 2030. A target for 2040 will also be considered.

In the U.S., the Environmental Protection Agency is responsible for permitting underground wells for geologic sequestration of CO2, known as Class VI wells. States can also apply to permit Class VI wells themselves, through a process known as primacy. As of mid-2024, three states have primacy – North Dakota, Wyoming, and Louisiana – while others have expressed interest. Today, only two commercial-scale projects with dedicated underground storage of CO₂ are operational in the US: the Archer Daniels Midland facility in Illinois and the Red Trail Energy project in North Dakota, both ethanol facilities with CCS.

CO₂ transport in the U.S. mainly relies on pipelines, with around 8,000 km already in operation, although nearly 106,000 km are estimated to be needed to meet national climate goals. The transport of CO₂ via pipeline is however facing pushback in several U.S. states, especially after the Satartia pipeline rupture in 2020. In response to this incident, the Pipeline and Hazardous Materials Safety Administration (PHMSA) is expected to publish a notice of proposed rulemaking to update its CO₂ pipeline safety standards.

Comparison

• Both Europe and the United States are expanding their current CO₂ infrastructure.
• However, in both places, there are challenges associated with local engagement, public perception and public support related to CO₂ transport and sequestration infrastructure.

• In Europe, CO₂ will primarily be stored in offshore geologic reservoirs under the North Sea, whereas in the US, CO₂ is planned to be stored in underground saline formations onshore.
• Within the U.S., an extensive CO₂ pipeline network is already in place, whereas Europe is only starting to plan its CO₂ pipeline network. CO₂ transport by shipping is expected to play a significant role in Europe, whereas the U.S. mostly plans for CO₂ transport via pipelines.

Europe

• CO₂ storage: In the EU, the relevant actors responsible for permitting are defined in each member state’s transposition of the EU CCS Directive – in Norway, the Ministry of Petroleum and Energy – in the UK, the North Sea Transition Authority.
• CO₂ transport: In the EU, there are several different national actors along the transport value chain, which are usually specified in their transposition of the EU CCS Directive.

While CO₂ storage was first addressed by the EU CCS Directive in 2009, no commercial storage is yet operational within the Union. The legal framework around CO₂ transport and storage is scattered across several pieces of legislation, which sometimes conflict with each other. The Industrial Carbon Management Communication, published on 6 February 2024, will put measures in place to clarify some aspects of the legal framework, as well as increase support for CO₂ networks.

Norway is increasingly betting on developing CO₂ infrastructure as a new business opportunity. The UK is developing a national CO₂ network.

Summary and reflections

The EU is at risk of not delivering its CO₂ storage target

Even though there has been a surge in the number of projects recently announced, the development of CO₂ transport and storage is still in its early stages in Europe. Three bottlenecks could hinder the development of CO₂ infrastructure in the region. Firstly, among the projects announced in Europe, only three have reached the final investment decision stage as of September 2024 and most of them are pending permitting authorisations for the storage location. Therefore, the permitting and development of these projects must be followed through to reach the target of an injection capacity of 50 MtCO₂/year in 2030 tentatively set under the NZIA. Secondly, the majority of these projects are located in and around the North Sea, increasing the risk that southern and eastern Europe could lack access to sufficient CO₂ infrastructure. Finally, such projects are not well understood by the public for now; some countries, such as Germany and Austria, have made recent policy U-turns in terms of how they consider geological storage of CO₂. However, how the public will react to and be affected by these shifts needs to be better understood and addressed.

The U.S. faces regulatory and social challenges

In the United States, public perception and concern about CO₂ transport and sequestration as well as a regulatory regime that is improving but not quite fit-for-purpose are both hindering the development of projects – with the current regulatory environment likely contributing to public concerns. These challenges mean that the development of CO₂ transport and storage infrastructure can be a bottleneck for carbon removal project development due to the long permitting process, such that developers of DAC projects, for example, may need to turn to other sequestration options for captured carbon, like use in concrete. At the same time, recent developments (as of mid-2024) such as transparency around the status of Class VI permit applications and approvals of permits for a project in Indiana and draft permits for projects in California and Texas indicate progress in terms of accelerating the pace of Class VI permit issuances.

RD&I funding

In a nutshell

CDR methods differ in their technological readiness level (TRLs). Funding for research, development and innovation (RD&I) (often referred to as research, development, and demonstration, or RD&D in the United States) plays a key role in supporting the development of a wide variety of CDR methods across different TRLs, bringing them from concept to pilot (TRL 3) to first-of-a-kind demonstration commercial project (TRL 8).

While conventional CDR methods based on enhancing land carbon sinks are at higher TRLs on average, most novel CDR methods are still nascent, with generally lower TRLs overall. Several enabling factors for the successful deployment of CDR methods must be researched and developed, such as MRV methods and CO₂ transport and storage infrastructure.

Carbon removal includes development of novel technologies.  In early phases of development,governments often support basic and applied research for new technologies, as the private sector is often unwilling to take financial risks on such early-stage innovations. As such, government support for RD&I is critical to develop these technologies further in both the EU and the U.S.

In the European Union, RD&I funding for CDR is scattered across multiple funding sources. At the EU level, Horizon Europe and the Innovation Fund provide the bulk of the funding, while at the EU member state level, Germany has the most advanced CDR research programmes, with the Nordic countries in second place with some dedicated funding for specific CDR methods. However, other member states fall behind and will need to develop dedicated CDR RD&I programmes. Among other European countries, the UK boasts the most complete national RD&I programme fully dedicated to CDR, the CO₂RE Hub.

In the U.S., research, development, and demonstration (RD&D) funding mainly comes through annual budget appropriations for government agencies, as well as through other pieces of standalone legislation. In recent years, the Bipartisan Infrastructure Law (BIL) provided billions of dollars for demonstration funding for fiscal years 2022-2026. The CHIPS and Science Act also authorised (but did not yet appropriate) $1 billion in additional funding for RD&D for carbon dioxide removal technologies.

BIL provided USD 3.5 billion to fund the Regional Direct Air Capture Hub Program, which requires the construction of four DAC hubs that each must have the capacity to capture and sequester and/or utilise one million metric tons of CO₂ per year. An additional USD 115 million was provided in FY22 for a DAC Technology Prize Competition, with the funding divided among two pre-commercial prizes and one commercial prize. The Direct Air Capture Prize includes the commercial DAC Pilot Prize, for which a total of USD 52.5 million is available.

Amongst other efforts, DOE has also announced USD 100 million for pilot-scale testing of several CDR approaches including small-scale biomass carbon removal and storage pilots, small-scale mineralisation pilots and multi-pathways carbon dioxide removal testbed facilities.

Note: Funding for CO2 transport and storage infrastructure provided in Bipartisan Infrastructure Law is not included in this chart, but would support demonstration projects for some types of CDR (e.g., DAC) as well as CCS on emissions sources.

Comparison

• Both geographies provide funding across various TRLs and CDR methods
• Both regions make different kinds of funding available (research, innovation, demonstration, etc.)
• Among higher-durability removals, DACCS and BECCS are the main focus so far in Europe and the U.S.

• The U.S. has CDR-specific RD&I programmes, whereas the EU does not yet.
• The U.S. provided large-scale demonstration funding for higher-durability removals, DACCS more specifically.
• The U.S. also has several pre-commercial and commercial competitions/prizes to help fund innovative CDR projects.

Europe

• The European Climate, Infrastructure and Environment Executive Agency (CINEA) is in charge of administering the budget of most EU funding programmes (Horizon Europe, Innovation Fund)
• For Horizon Europe, DG RTD publishes the workplans, with significant inputs from DG ENV and DG CLIMA on the CDR-related parts.
• At the national level, the main actors are ministries of climate and energy and ministries related to RD&I.

At the EU level, RD&I funding for CDR has mostly been dispersed and unfocused. While there have been a few CDR-only projects, most calls for proposals are quite vague and open to other types of climate technologies as well. In April 2024, the Commission issued some CDR-focused calls, which is an improvement.

Summary and reflections

The EU needs to step up RD&I funding

The EU has yet to tackle several issues before being able to provide a robust RD&I funding environment:

• There are currently no dedicated RD&I funding programmes for CDR in Europe, and funding opportunities are scattered across many sources.
• CDR projects currently compete with other clean technologies in most funding programmes.
• There is a lack of coordination between the EU and member states, leaving some CDR methods little to no funding.
• No clear overview of available funding sources and little tracking of funding going to CDR.

To address these points, the European Commission should produce a CDR funding roadmap, as described in Carbon Gap’s Vision for an EU CDR Strategy. The calls for proposals for CDR issued in April 2024 under LIFE and the Soil Mission in Horizon Europe are good steps in the right direction. Furthermore, the evaluation process for projects applying to calls under the Innovation Fund has been changed since the last call, giving extra points to CDR projects.

The U.S. funding landscape is expanding in scale and scope

In the United States, RD&D funding for CDR has increased considerably over the past five years, both in annual appropriations funding and through other legislation. The majority of funding, particularly for demonstration projects, has been disproportionately oriented toward direct air capture (DAC) technology, yet much more basic research funding will be needed for approaches beyond DAC, along with research into improving measurement, reporting and verification of approaches and expanding social science around CDR, among other issues.

Current funding allocations are beginning to encompass other CDR methods such as enhanced rock weathering, marine carbon removal, and biomass with carbon removal and storage (BiCRS) approaches.  By one estimate, BiCRS specifically, is expected to provide an outsized amount of CDR through 2050 compared to other approaches. Yet given competing demand for biomass across sectors, BiCRS research should assess the opportunity cost of using biomass for different mitigation purposes with greater focus on the use of waste biomass.

 Deployment incentives

In a nutshell

Deployment incentives are a broad category of policies and financial instruments, such as feed-in-tariffs, procurement programmes and contracts for differences that are meant to reduce costs and increase the uptake of new technologies that benefit the climate. For example, deployment incentives have been instrumental in scaling up and reducing the costs of wind and solar power. While there is market demand for clean electricity, which has helped solar and wind scale up, deployment incentives were crucial to supporting and accelerating this process, reducing unit costs to below that of fossil fuel generation. For a deployment incentive to be effective, it should provide long-term, predictable, and credible support covering some or all of the cost of an activity.

Deployment incentives are particularly important for CDR methods since they are largely public goods; there is generally no intrinsic market value attributed to the benefit they provide, which is primarily atmospheric clean-up of CO₂. Accordingly, dedicated policies are needed to require or incentivise the purchase of removals, especially those that are costly today.

At the EU level, there are no dedicated deployment incentives for CDR in place. In the latest revision of the EU Innovation Fund, it became possible to introduce carbon contracts for difference (CCfDs) that use money from the Fund to bridge the price gap between the market price of CO₂ and the cost of production for CCS and CDR methods such as DACCS and BECCS.

At the country level, Denmark and Sweden are the only countries with an operational deployment incentive for CDR. However, the UK and Norway are at various stages of developing their own deployment incentives to support carbon removal. Other countries, such as the Netherlands, France and Germany are at various stages of developing deployment incentives for other climate technologies, such as CCS, that could become relevant to CDR.

In the United States, the 45Q tax credit is the main CDR deployment incentive and the only one at the federal level. It provides a credit for each tonne of CO₂ removed with direct air carbon capture and storage (DACCS) and bioenergy with carbon capture and storage (BECCS). A lower credit level is also available for DAC and BECC projects that capture CO₂ for utilisation.

There are a couple of state-level policies with deployment incentives for CDR, including California’s Low Carbon Fuel Standard, and Washington state and New Mexico’s Clean Fuel Standards. Most recently, the 4 Corners Carbon Coalition – a local government-funded initiative – has emerged at the county level to provide grants to support a range of different CDR approaches.

Comparison

• There is a focus on a narrow range of CDR methods (mostly DAC in the U.S., BECCS in Europe).
• Various types of deployment incentives are explored at different levels (EU, national, state-level).

• The U.S. is moving faster than the EU, putting the incentives in place and addressing governance and regulation questions concurrently or later.
• The EU emphasises building MRV rules first.

Europe

• At the EU level, the European Commission (DG CLIMA) and the European Climate, Infrastructure and Environment Executive Agency (CINEA) are the most relevant actors.
• At the country level, the main actors involved are the relevant departments at the ministry level.

So far, countries are ahead of the EU. The few deployment incentives that are operational or close to operational mostly pertain to BECCS. The Nordic countries are generally more advanced.

Summary and reflections

European countries fill up the gap left by the EU

In the European Union, member states are moving ahead faster than the EU: Denmark and Sweden have set up dedicated deployment incentives for CDR and the Netherlands is exploring the extension of an existing programme to support BECCS. Outside of the EU, the UK is developing one deployment incentive for BECCS and one for greenhouse gas removals in general.

The schemes in Europe focus mostly on BECCS, leaving out other permanent CDR methods. This approach could be explained by the fact that these countries have identified BECCS as the most cost-effective CDR method to reach their net zero targets, especially in the Nordic context. However, BECCS also raises concerns around biomass use and availability and should therefore not be the only CDR solution supported. Furthermore, there are also concerns around the emissions produced by the harvesting of biomass and the process of classifying biomass as waste.

Despite the current lack of deployment incentives on the European level, the EU is well-placed to introduce dedicated policies to support the early deployment of CDR. The EU has a comprehensive legal and policy framework that could easily be adapted to CDR. A notable source of inspiration for CDR deployment can be found in the EU Innovation Fund, which has already created the Hydrogen Bank, which provides deployment incentives for clean hydrogen. The Innovation Fund also has the structure to run pilot projects, under which a pilot procurement programme for CDR could be run.

The U.S. disproportionately supports DAC

In the United States, the 45Q tax credit is currently the only deployment incentive for carbon removal in place at the federal level. Like other investments, into CDR in the US, the 45Q tax credit disproportionately supports DAC (as well as BECCS) within the broad range of CDR approaches, although there have been calls for such deployment support to be more technology-neutral.

The California Low Carbon Fuel Standard (LCFS) is the best-known example of deployment incentives for CDR at the state level. DAC projects that utilise the captured CO₂ to produce synthetic fuels, or permanently sequester the captured CO₂ in geologic formations are eligible to receive credits under the standard. Similar policies exist both in Washington state and New Mexico. A more recent local government initiative is the 4 Corners Carbon Coalition, which provides more technologically neutral support to CDR approaches in the form of grants.

Government procurement

In a nutshell

Government procurement in the context of cCDR can be broadly defined as any instance in which a governmental entity purchases carbon removal, either directly or via an intermediary mechanism.

Alongside research and innovation funding and deployment incentives, government procurement is an important component of the various policy options available to support the development and deployment of a diverse portfolio of CDR pathways, as well as to promote competition within and across these pathways. Procurement allows suppliers of carbon removal to better anticipate future demand for CDR and can catalyse private investment by de-risking the high up-front investments required for most CDR technologies.

Through CDR procurement, governments can directly influence the volume or price of carbon removal over time and can choose to only purchase CDR credits that meet the highest standards, sending a strong signal to markets about the level of quality needed. Government procurement also allows for building trust in CDR as a relatively new industry, shaping best practices by incorporating principles around community engagement, environmental justice and workforce development as prerequisites for procurement.

While direct government procurement of CDR is still in its infancy on both sides of the Atlantic, several relevant initiatives are underway or proposed. In August 2023, the U.S. DOE launched a USD 35 million CDR procurement pilot programme, the first of its kind in the world. The DOE announced the 24 winners of Phase 1 of the programme in May 2024 and received an additional $20 million to continue the program in annual budget appropriations. Additionally, policies have been proposed at the federal and state level (New York and Massachusetts) to create procurement programmes, though have not yet been enacted. In Europe, the Swiss government has mandated that a foundation financed by motor fuel taxes will be tasked with purchasing CDR units on behalf of the government.

Even though there are U.S. efforts at both the federal and the state level, as of  September 2024 the only programme in operation is the federal-level procurement pilot. The U.S. also currently lacks agreed-upon federal standards or certification schemes for carbon removal, whereas the EU is working on a Union-wide Carbon Removal Certification Framework.

Comparison

• Both regions focus mostly on  BECCS, biochar and DACCS.
• Both are open to supporting diversified pathways without picking winners.
• Current programmes in both regions are small-scale.

• The U.S. Department of Energy’s CDR Purchase Pilot Prize can be seen as  a pilot to inform a potentially larger future procurement programme.
• In Europe, Switzerland is the only country with a CDR procurement programme in place.
• Differences between the U.S. and EU legal and constitutional frameworks affect the design and feasibility of government procurement programmes.

Europe

• Individual countries in Europe, for now Switzerland only
• The European Commission is also looking at procurement for CDR

At present, a procurement programme at the EU level is not officially on the table since the EU is currently focused on the development of the Carbon Removal Certification Framework. The EU Innovation Fund and other potential sources of funding for procurement already support a broad range of climate technologies and solutions and thus have a constrained budget for CDR-specific efforts. Individual countries are developing deployment incentive schemes rather than procurement programmes (for example, Sweden, Denmark, the UK and the Netherlands).

Summary and reflections

The U.S. is leading the way

Through its “Carbon Negative Shot”, the U.S. DOE has an overarching carbon removal technology development and cost goal, supporting the scale-up of a range of CDR approaches. The CDR procurement programme is part of a wider policy toolbox and works alongside other instruments, such as the DAC hubs funding, the 45Q tax credit (which was enhanced in 2022), and annual research and development funding. These instruments all support different development stages of carbon removal pathways and technologies with the end goal of developing pathways able to remove CO₂ at gigaton scales for less than 100 USD per net tonne of CO₂. The CDR Purchase Prize needs to focus on diverse pathways, since much of the U.S. government support so far has been aimed at DAC.

While these programmes are established as law in the US, changes in the Administration and Congress could lead to reduced funding levels and the repeal of programmes or changes in eligible technologies, possibly resulting in state governments becoming the main source of public funding for CDR. 

European procurement policies are lacking or insufficient

Europe is currently lagging behind the U.S., with a clear lack of government procurement for CDR at the European Union and country levels. Without rapid action, Europe risks missing the necessary CDR capacity to reach its 2040 and 2050 climate targets. At the European Union level, support is limited to R&D funding and grants through the Innovation Fund. At the country level, any state support scheme is subject to long administrative procedures. Depending on the final text of the NZIA, direct government procurement for CDR could be more easily enabled.

Ramping up support for CDR is necessary

Both the EU’s and the U.S.’ efforts to stimulate demand for CDR through government procurement policies are still in their early stages. IPCC estimates foresee a global contribution of 5 to 16 GtCO₂ removed per year by 2050 (across both natural approaches like tree restoration and engineered solutions like DACS). Such a global contribution will not only require a significant increase in funding for research and development for diversified CDR pathways but also direct support in the form of government procurement and deployment incentives, alongside other supportive efforts in the public and private sectors.

Compliance regimes

In a nutshell

CDR will be a necessary service to the global community but, unlike other types of clean technologies, does not have a ready market with built-in demand. It is a public good with dispersed benefits that does not have inherent monetary value and can therefore be compared to a waste disposal service. As such, voluntary markets will not be enough to drive sustained demand for CDR over the long term. Compliance regimes – government policies that set mandated emissions reductions and/or removal targets – will likely be needed to drive long-term demand by creating an obligation that creates demand and supply for such activities.

The most common example of a compliance regime is emissions trading, or cap-and-trade systems, such as the European Emissions Trading System (EU-ETS). These systems are regulated at the sub-national, national or international level and set an upper limit on emissions from certain sectors, which is reduced over time to reach zero eventually. These systems allow for the trading of emissions allowances or credits amongst the covered entities to achieve that goal. Since some activities are difficult to decarbonise fully, CDR will be needed to neutralise these remaining emissions, also known as residual emissions, either through some form of integration in an ETS or through other types of compliance regimes that directly mandate or incentivise the purchase of CDR. To avoid carbon removal being used to offset avoidable emissions, or to postpone necessary emissions reductions to the future, a compliance framework will need to carefully consider the risk of mitigation deterrence and design the policy to reduce this risk.

While ETSs are a common type of compliance regime today, they are just one example of a policy that could help ensure demand for CDR. Integrating CDR into existing compliance regimes or new, separate compliance policies, could be done in different ways. For instance, a carbon takeback obligation, which has been proposed but not yet enacted, would oblige fossil fuel importers/extractors to permanently sequester carbon dioxide equivalent to an increasing portion of the emissions generated by their products. Mandatory CDR targets could also be set at the national level, for instance through the EU’s Effort Sharing Regulation. Alternatively, targets could be set for companies, such as in an earlier iteration of California’s proposed SB308, where companies would have an increasing obligation to neutralise their remaining emissions with CDR. The way that CDR is scaled using compliance policies, be they existing or new, CDR-specific, compliance regimes, can vary depending on the political context, policy goals, and emissions profile, among other factors.

Comparison

• There is a growing recognition among policymakers and civil society groups in both the EU and the U.S. that creating long-term durable demand for carbon removal to reach the scale we expect to need to meet global climate targets will require CDR to be included in either existing or new, dedicated compliance mechanisms.

• The U.S. does not have a national-level emissions trading system like the EU does but does have state and regional-level emissions trading schemes.
• Politically, establishing CDR compliance regimes may be more difficult in the U.S., where incentives rather than mandates have so far been used to scale CDR.

Europe

• European Commission
• Norway and Iceland directly participate in the EU-ETS; the Swiss ETS is linked to the EU-ETS, therefore Switzerland follows the EU
• UK: UK ETS Authority

In the EU, integration of CDR into the ETS has been highlighted as one of the ways to both address very high EU Allowance prices following the cessation of issuance of new emissions allowances and create a long-term market for CDR. Other types of long-term compliance policy frameworks for CDR are also being explored in parallel.

The EU LULUCF Regulation provides some sort of land compliance policy by allowing limited trading between member states.

Summary and reflections

EU-ETS integration might not be the best option for CDR

With its Carbon Removal and Carbon Farming Framework (CRCF) in the final stages of development, the EU now has a union-wide mechanism in place to assess what activities are recognised as carbon removal. While it is not yet clear whether the CRCF will be used as the quality benchmark for determining the inclusion of CDR into EU compliance policies, it is very likely. On the one hand, the EU is aware that tightening the cap on EU-ETS allowances will likely result in very high prices once no new allowances are issued (current projections by 2038/2039). In that context, CDR integration in the EU-ETS could allow for an easier road towards this “ETS endgame”, by allowing polluters additional flexibility to neutralise the very last hard-to-abate emissions. The EU-ETS could, under certain strict conditions, be a suitable mechanism for providing a long-term market for CDR. However, the EU-ETS’ prime function is to bring covered emissions to zero, not to provide a stable, long-term market for CDR and could pose risks of mitigation deterrence if not done correctly. Consequently, the EU is also looking at other types of long-term CDR compliance integration, such as a potential RTS.

Compliance is not yet a priority in the U.S.

In general, the United States’ policies for carbon removal have been focused on providing incentives for scaling different technologies through support for research, development, demonstration and deployment. Politically, especially at the federal level, it is more difficult to enact mandatory or compliance regimes for climate mitigation activities in the United States. State-level compliance schemes are beginning to include carbon removal, particularly DAC, in ways that provide incentives for its scale-up, an example being the LCFS in California. Much more work is needed to lay the groundwork for compliance policy in the U.S. – including identifying policy options, understanding legal pathways, and shifting the political discourse on compliance options.

Final thoughts and the path ahead

This report has summarised the comparative analysis of European and U.S. CDR policy approaches conducted by Carbon Gap and the World Resources Institute. Throughout the analyses, a few common themes stuck out.

Divergent approaches to CDR in the EU and U.S.

Both the U.S. and Europe are pioneers in different aspects of CDR policy, with a shared understanding that carbon removal, alongside deep emissions cuts, is essential to achieving climate neutrality. Their approaches are divergent but arguably complementary. The U.S. has prioritised near-term investment in developing CDR technologies to build the market and is just beginning to fund efforts that could help lay the groundwork for developing governance frameworks. In contrast, the EU is focused on creating a long-term framework first, carefully laying the groundwork before scaling up deployment. Each approach reflects a distinct vision of how best to accelerate the path to a net zero future.

Funding and deployment should now be priorities for the EU and Europe

Now that a Union-wide certification framework has been put in place, the EU and Europe should unlock much more funding to research, develop and deploy CDR. It should also ensure that the CO₂ transport and storage infrastructure needed is built.

However, the biggest political debate in Europe currently is how to integrate CDR into compliance markets, be they emission trading systems or an alternative mechanism. While the need for more funding and storage capacity is a must, long-term compliance integration should be carefully considered.

Robust standards for measurement of removed carbon requires attention from U.S. policymakers

With extensive RD&D funding and deployment incentives in place, the U.S. must now focus on developing MRV standards, as well as ensuring a common certification framework nationally. In parallel, expanding the pilot purchase prize that is already in place will help drive demand. The U.S. government should also look into laying the foundation for future national compliance regimes.

While CDR is generally a uniquely bipartisan topic in the U.S., the current U.S. administration must ensure that deployment incentives and other types of CDR support are not discontinued or stalled by the new administration.

Going beyond the EU-U.S. comparison to accelerate CDR development and deployment

Other critical areas would benefit from a deeper comparison between the U.S. and the EU. For instance, examining how each geography integrates CDR into their climate targets, how CDR is accounted for in national greenhouse gas inventories, and how CDR credits are used in making climate claims. These nuances reveal important differences in approach, shedding light on how each region envisions the role of carbon removal in their journey toward net zero.

Other regions are also shaping their paths to CDR policymaking. Japan, has already integrated some CDR methods into its emissions trading system. Canada has introduced an investment tax credit for direct air capture with carbon storage (DACCS) and made CDR eligible under its low-carbon fuel procurement program. Emergent regional policy leaders like Kenya and India are beginning to explore the potential of CDR, recognising its importance in their climate strategies. As more nations develop tailored approaches, the global landscape for carbon removal continues to evolve and diversify.

Finally, the role of other jurisdictional levels, such as cities and regions, in scaling up national and supranational CDR capacities remains underexplored. Cities have massive untapped potential and could play several roles in scaling up CDR.

Transatlantic leadership will continue to shape CDR

CDR has seen a huge increase in support from policy and policymakers on both sides of the Atlantic, but to reach the scale we expect to need globally, more policy support will be needed across a diversity of CDR approaches and development stages. By leveraging the strengths of both regions and fostering transatlantic collaboration, the CDR sector could evolve rapidly over the next few years.

Contributors

Francesca Battersby, Policy Analyst, Carbon Gap

Alexis Dunand, Senior Policy Analyst, Carbon Gap

Katie Lebling, Associate II, Carbon Removal and Industrial Decarbonization, World Resource Institute

Danielle Riedl, Research Analyst II, Industrial Innovation & Carbon Removal, World Resource Institute

Valter Selén, Associate Policy Director, Carbon Gap