The report focuses on laying out the limits and opportunities facing the carbon removal space. It describes the most common methods of removing carbon dioxide from the atmosphere and analyzes their potential as seen through the eyes of a climate venture capital fund.
The exclusive research from World Fund indicates a critical finding that only 5-10% of carbon removal credits are actually removing carbon from the atmosphere. The remaining 90-95% are the so-called avoidance credits – the carbon credits from projects and initiatives that implement strategies to avoid or reduce carbon emissions.
The report from World Fund states that currently, carbon credits are experiencing a supply crunch, due to the recent explosion in demand from companies looking to offset their emissions. There is a risk stemming from the demand growth that the quality of available carbon credits over time may worsen.
There is also a climate VC opportunity for carbon removals – in particular, for startups that increase the accuracy, scalability and defensibility of a credit program.
The report highlights that it is also critical for climate investors to understand the limitations of the carbon removal space, so that they can deploy their capital into the companies generating the maximum emissions reductions.
Marketplaces with a built-in traceability and a focus on high-quality credits that can secure additional supply could be promising enablers of the carbon removal market. Innovative financing for carbon removal projects is also very impactful, along with independent verifiers of carbon credits, rating agencies and independent providers of traceability and monitoring of emissions reductions.
The market for carbon removal is growing fast as it is expected to reach from 0 to gigatons per year of CO2e removal. There are tangible opportunities for improved removal technologies to make an impact and achieve those ambitions. The MRV space, whilst rapidly becoming crowded, is also an opportunity for startups that can demonstrate accuracy, credibility and reliability.