In a new carbon dioxide removal (CDR) market analysis, AlliedOffsets notes a maturing sector that is witnessing companies exiting this space, new strategic partnerships being formed, and industry players that are resorting to consolidation as a moving forward strategy.
The analysis notes that between 2020 and 2025, the CDR market grew from 40 thousand to 43 million credits purchased, experiencing a 1,000x explosion in demand, and while there are roughly 1,000 companies globally claiming to offer CDR, only around 250 of them have actually secured offtake agreements or have spot carbon removal sales.
Over the past five years, CDR supply has diversified across pathways and geographies, while on the demand side, buyer scrutiny is on the rise as the market continues to be dominated by a few major buyers.
Amid an evident lack of new buyers, the majority of developers have managed to stay afloat through a project lifecycle that includes moving from pilots to securing long-term offtake agreements and then raising development capital. Still, in the past couple of years, 30 CDR companies have left the market, which the analysis sees as a sign of a gradual transition towards a more mature and disciplined CDR ecosystem.
Looking at the evidence for the withdrawals, the analysis points to underestimated capital needs, longer-than-anticipated lead times, and the inability to secure bankable offtake agreements as the reasons behind the majority of these market exits.
The overview also highlights a growing consolidation trend, mentioning some of the largest cases of this kind so far, such as Terradot’s purchase of enhanced rock weathering company Eion and Oxy Low Carbon Ventures’s acquisition of DAC startup Holocene, to name a couple.
Another market trend that can help scale CDR is the emergence of strategic partnerships with or between established industry players, such as Deep Sky’s collaboration with Airhive, Phlair, Mission Zero, Skytree, CarbonCapture Inc., and Equatic. The analysis also notes a growing bias toward biomass-based removal pathways, with increased activity toward BECCS, bio-other, and biochar.
Relevant: Massive Investments Needed To Scale Carbon Removal: AlliedOffsets Report
In the following 4-5 years, the AlliedOffsets report notes, it will become evident if Microsoft’s mission of catalyzing CDR investments will come to fruition, with new buyers boldly backing these technologies.
Additionally, considering the current exits, consolidations, and strategic partnerships, what will be crucially important in the near future is to see if the offtakes of the remaining active CDR market players can successfully reach issuance by 2030, which would trigger a new chapter in offtake activity.
