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 carbon dioxide removal (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 will also allow 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 US Department of Energy (DOE) launched a USD 35 million CDR procurement pilot programme, the first of its kind in the world. Additionally, policies have been proposed at the federal and state level (New York and Massachusetts) to create procurement programmes. In Europe, the Swiss government has mandated that a foundation financed by motor fuel taxes will be tasked with purchasing CDR and carbon capture and storage (CCS) units on behalf of the government. 

Even though there are US efforts at both the federal and the state level, as of November 2023 the only programme in operation is the federal-level procurement pilot. The US 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.

The CDR Purchase Pilot Prize is an initiative to directly purchase carbon removal from domestic providers, with a total budget of USD 35 million over three years. The prize is open to four CDR pathways: DAC, biomass carbon removal and storage, enhanced geological weathering and enhanced mineralisation, and planned or managed carbon removal activities. The prize has three phases: drafting a CDR purchase proposal, drafting sample purchase contracts, and awards for successfully delivered and verified carbon removal. The official rules of the prize detail how the winning projects will be selected, as well as the timeline and the guidelines for submission. Key requirements include a clear description of the CDR activities and MRV process, including a whole life cycle assessment, forecasted costs, an overview of the anticipated durability and permanence, but also the ability to prove that non-federal entities have made a binding commitment to purchase CDR credits to the participant.  

Indirect government procurement programme – Switzerland

The Climate Cent Foundation was funded by a levying of 1.5 CHF cents per litre on petrol and diesel imports between 2005 and 2012 and was replaced in 2013 by the KliK Foundation. Its purpose is to invest its funds in carbon offsetting projects in Switzerland and abroad. These carbon credits are then surrendered to the Swiss Confederation and used as part of national emissions reduction accounting. To support the scaling up of national CDR and CCUS capacities, the foundation’s remaining assets (about EUR 58 million) must be invested in the purchase of carbon credits resulting from CDR and CCUS activities. Most recently, five projects were selected in August 2023 adding up to 84,300 tonnes of CO2 to be captured and stored. All the resulting credits will accrue to the Swiss Confederation.

The EU Net Zero Industry Act (NZIA) shows potential

While no CDR government procurement programme exists within EU member states today, the NZIA could make it easier for governments to roll out such programmes, depending on the technology readiness level. Effectively, state aid is heavily regulated within the European Union and the EU Commission Competition Authority needs to grant individual approval. However, with the passing of the NZIA, technologies recognised as net zero technologies under the act could be granted an easier path to approval and greater support at both member state and EU levels. While the legislative process is ongoing, it remains to be seen whether CDR will be included in the final text. CDR methods that share similarities with CCS, such as BECCS and DACCS, have more chances of benefiting from the NZIA.

Other policy initiatives in the United States

Three Carbon Dioxide Removal Leadership Acts (CDRLA) have been proposed at the federal level and in Massachusetts and New York state, with state-level proposals modelled on the one at the federal level. All three proposals would function through a reverse auction mechanism; the Federal CDRLA would require the Department of Energy to purchase an increasing amount of removals at a decreasing price from a varied range of pathways over ten years. The Massachusetts and New York CDRLAs would create a similar obligation for state entities. The three pieces of legislation present relatively similar features, namely supporting a variety of pathways, an obligation to purchase an increasing amount of CDR each year, and an obligation to purchase removals presenting different durability thresholds. 

Finally, the Carbon Removal and Emissions Storage Technologies Act (CREST Act), which has also not yet been adopted, includes funding for research and development, along with a CDR purchasing pilot programme over five years. At the federal level, the CREST Act is bipartisan (while the Federal CDRLA only has democratic sponsors), making CREST more likely to pass.

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 US, 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 US’ 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.