Now that 2025 is over, retrospective market reviews are painting the past year as one marked by carbon dioxide removal (CDR) growth driven by a limited number of stakeholders.
A newly released CDR.fyi report analyzing durable carbon removal investments in the past 5 years shows that while deals experienced accelerated growth in 2021 and 2022 that peaked in 2023, the years 2024 and 2025 brought a period of slowed-down, gradual normalization.
Carbon removal buyers are still mostly a concentrated group of deep-pocketed corporate players that navigate the CDR landscape with dedicated teams, while first-time purchasers remain fairly scarce.
A spike in new buyers from Asia and parts of Europe noted in a recent AlliedOffsets report signals hope for more potential newcomers in 2026, yet currently, the market is in dire need of bolder interest that would supercharge the developmental pace in time to meet 2030 and 2050 climate goals. In terms of corporate demantd, the new year might bring positive updates from the SBTi, which is expected to officially inlcude CDR in its Corporate Net-Zero Standard V2 once the public feedback on its draft version is reviewed.
Many in the sector believe that governmental support and regulations are the missing piece of the puzzle that would establish the foundation for stronger and continuous CDR demand, and 2026 is expected to bring constructive developments in this direction.
Regions like Europe, Canada, Asia, and the UK seem to acknowledge the climate relevance of CDR, working on policies in an attempt to stimulate its proliferation within their borders, while the United States under President Trump’s leadership has been directing federal support away from climate technologies.
The past few years saw the establishment of many innovative CDR startups across a number of different pathways.
A chart by the International Energy Agency, displaying the number of CDR startups founded in specific pathways between 2019-2024. Image source:iea.org
The aforementioned CDR.fyi report also notes that a lot of the companies that managed to secure funding for their operations between 2020 and 2025 have achieved initial commercial traction, but a limited number of them actually progressed to carbon removal delivery and retirement.
Even as the sector started transitioning from a pilots and tests phase into a real-world deployment era, presently, many CDR companies find themselves fueled with growth ambition but challenged by limited corporate interest and governmental support and lacking flexible financial solutions that would match the specific carbon removal needs and timelines.
In this standby situation, the term “consolidation” began echoing across industry talks, suggesting that for many companies, the best survival plan in the arid funding landscape could be joining forces with those more advanced and financially secure for the journey ahead.
As the industry gears up for another exciting year of opportunities and challenges, we take a look at what might be in store for CDR in 2026.
CDR Prospects In The United States
In the U.S., climate support is migrating from the federal level down to the state and municipal levels. The country enters 2026 with a preserved 45Q tax credit, no definitive cancellation decision on the two largest DAC Hubs—Project Cypress and South Texas DAC Hub, promising corporate demand, and developers that are busy at work despite the challenging political environment.
Giana Amador, executive director of the U.S.-based nonprofit Carbon Removal Alliance (CRA), notes that states like California, Colorado, Massachusetts, Texas, Oregon, and Washington are stepping up and working on including CDR in their future roadmaps, a trend that she expects to see grow in 2026, as these states transition from a roadmap stage into actual implementation.
She believes 2026 will be a boots-on-the-ground year, where companies deploy technologies at the 10,000-to-hundreds-of-thousands-of-tons scale, learning what works and what doesn’t and gaining valuable technical knowledge that can unlock gigaton-scale removals.
Roadblocks will likely come from permitting, according to her, as trailblazing, outside-of-the-box innovations will require creative thinking around rules and regulations.
In her opinion, in 2026, companies will be working on CDR integrations with existing industries like mining and wastewater treatment as a way to create operational efficiencies, and greater demand can be expected as energy and resource consumption puts further pressure on AI and data centers.
Policy advocates such as the CRA will need to act and make sure companies can build and learn through regulatory solutions that also protect communities and provide them with transparency around CDR projects.
Amador shares that policy-wise, a number of motions could catalyze demand in 2026, such as California’s cap and reinvest program, or regulations within the context of carbon border adjustment mechanisms, like the Foreign Pollution Fee Act of 2025, or additional tax policy, like the 45Q tax credit, which provides a $180 per ton incentive for DACCS, if they’re extended to the full suite of carbon removal solutions.
The Carbon Dioxide Removal Investment Act, Amador notes, is also a vital near-term motion that would ensure CDR solutions can compete on a level playing field, driving a more widespread CO2 removal demand.
Relevant: Carbon Removal Alliance Publishes New Policy Roadmap For Scaling CDR In The US
Looking ahead, Amador and the Carbon Removal Alliance team will continue bringing policymakers and sector stakeholders together, and in 2026, she is excited to see more real operational projects deployed in the United States. “There’s a lot of work to be done, but still there’s progress that we’re witnessing. So, I think the industry is on a good path,“ she adds.
Canada Shines Brighter On The Global CDR Map
Canada is another high-potential CDR region that is leveraging a set of natural resources, innovative technologies, and a climate-aware government to accelerate its advancement.
The country is making progress towards becoming one of the leading global CDR hubs, hosting the issuance of the first-ever independently verified ocean alkalinity enhancement (OAE) credits by Planetary, and preparing to inaugurate one of the world’s largest CDR facilities, which is slated to launch construction in Manitoba during 2026 under DeepSky’s portfolio of projects.
A mid-2025 CDR.fyi report indicated that Canada is home to 40 different organizations active across 18 separate CDR initiatives.
Through a set of specific recommendations and guidance provided in a Canada-tailored Policy Primer publication, the Carbon Business Council advocates that in the following years, the country could tap into the CDR economic opportunity by introducing mechanisms for stable and reliable demand, deploying public capital to support innovations, and crafting a reliable policy framework coupled with more efficient project permitting.
CDR In EU Countries and the United Kingdom
On the old continent, national and EU-level initiatives are paving the way for broader CDR adoption. Both companies and governments are making positive strides, signaling strong potential for what could come in 2026.
A November 2025 analysis published by Sightline Climate found that Europe and other emerging markets outpace the U.S. in climate tech deployments.
Norway, Sweden, Finland, Denmark, and Iceland fortified CO2 removal collaboration with the launch of the Nordic Carbon Removal Association (NCRA), Germany earmarked millions for CDR in its 2026 federal budget, while the EU-neighboring United Kingdom announced plans to legislate the inclusion of CDR in its ETS by 2028.
In 2025, EU policymakers made the first motions towards the operationalization of the Carbon Removals and Carbon Farming (CRCF) Regulation, while 2026 is expected to bring further discussions and progress around the potential inclusion of CDR in the EU ETS and the Article 6 of the Paris Agreement framework implementation.
On the ground, the EU’s CDR potential currently seems restrained. Stefano Cappello, the CEO of Italy-based Limenet, shares that, in his experience, the carbon removal market witnessed a strong pushback and shrinkage in the past two years, mostly triggered by President Trump’s disengagement with the climate sector that also impacted the storytelling around this industry.
Even with true needle movers like Microsoft and Frontier actively purchasing CDR, and many substantial deals now in the books, CDR has retreated even in Europe, and especially in Italy, where Stefano’s company Limenet is producing carbon-free lime and delivering high-quality CDR.
This shrinking is what is now forcing CDR companies to come up with alternative business models to weather the financial stalemate until innovative financing and demand can improve the situation.
For Cappello, it’s unusual to talk about climate leadership in a market that is not fully developed yet. One thing that he believes will move the market forward is the EU CRCF regulation. “As soon as CRCF is in place, it will make things easier for both companies and clients, who will then be obliged to compensate with CRCF, and this is the moment when we will be able to say there is a real market,” he says.
The CDR priorities for 2026, in Cappello’s perspective, should be stronger legislative support and clear rules around more CDR pathways along with national policies that would incentivize businesses to adopt CO2 removal.
He explains that for Limenet, the focus is not 100% on CDR, as the company is exploring alternative business models to continue operating during the years of uncertainty.
With that in mind, in 2026, Limenet will continue working on decarbonizing the lime industry by electrifying the system, and it will continue investing in CDR while advocating for the permitting and governmental recognition of its bicarbonates-centered CDR pathway in front of the Italian Minister of Environment, hoping to pave the way for this technology in the country.
Cappello shares that, in his opinion, the next CDR growth wave will be delivered by entrepreneurs only once governments have set the groundwork.
Read more: Limenet To Scale Operations With New $8.2 Million Funding
Asia’s Growing CDR Potential
Asia has been gaining momentum as a fertile ground for CDR projects, especially for initiatives based around biochar. India is home to Varaha’s operations, which has managed to position itself as the largest carbon removal project developer in the Asian region, ranking among the top 5 durable CDR suppliers on the CDR.fyi leaderboard.
Besides biochar, this global region is also tapping into other CDR pathways like regenerative agriculture, reforestation, enhanced rock weathering, and direct air capture (DAC), among others. In Japan, Sumitomo Mitsui Banking Corporation is partnering with DAC trailblazer Deep Sky, aiming to convert the country into a home of a robust DAC and high-integrity CDR market.
A 2025 World Economic Forum report noted that Asia-Pacific countries face an $800 billion climate finance shortfall each year, and, according to the analysis, properly designed carbon markets in this region can help close this gap by directing funding towards developing economies.
In that regard, countries across Asia like China, South Korea, Japan, and Singapore have been actively towards an integrity-led voluntary carbon market, while collaborations like the one between Japan and Singapore with a MENA country like Saudi Arabia signal that emerging markets are gearing up for progress in 2026.
EnterpriseSG is working with major Asian corporations to form a carbon buyers’ coalition in 2026, and the work of Asian CDR suppliers has already attracted major purchasers, including Microsoft, Google, Altitude, and Mitsui O.S.K. Lines, validating the region’s rising relevance for corporate buyers.
CDR-focused accelerator program remove is one of the organizations backing the sector’s development in India, providing guidance and resources to startups working on promising science-based solutions.
Commenting on the CDR ecosystem in this region, remove Co-Founder & Managing Director Hans Westerhof tells us:
“The Global South is teeming with potential for CDR, and we, at remove, are very excited to be supporting the growing wave of startup teams there in 2026 and beyond. That being said, the market remains concentrated around a few prominent buyers. Until CDR becomes more ‘mainstream’, teams can set themselves up for success through finding alternative business models, solidifying their operations and productions and resisting the urge to overextend themselves on future commitments. Our report on diverse business models for CDR startups goes deeper into this concept for those who’d like to learn more.”
remove’s other Co-founder & Managing Director Marian Krueger, adds:
“In 2026, a large share of carbon removal will increasingly move inside global supply chains that are already deeply rooted in the Global South. CDR pathways like enhanced rock weathering and biochar are particularly well suited for insetting—where companies decarbonize agriculture, mining, and materials at the source, rather than treating carbon removal as something external to their operations. That’s when CDR becomes operational, not just reputational.”
The CDR Challenges And Opportunities Ahead
As we ease into 2026, the carbon removal field still needs reliable demand and new buyers that will enable further growth.
Suppliers require clearer rules and stronger governmental support, while also struggling to secure financing solutions compatible with CDR dynamics and brainstorming ways to lower the costs of their services.
Many pathways need further scientific and real-world proof of the efficiency and safety of their approach, and community engagement efforts are needed to raise the awareness and understanding around CDR technologies.
Going forward, governments and countries have the chance to lay the groundwork for a booming global carbon market, and frameworks like the EU’s CRCF can drive a change that would officially put CDR on the radar of corporate stakeholders, who would be obliged by these regulations to include removals in their sustainability plans.
