{"id":39199,"date":"2026-05-12T18:22:16","date_gmt":"2026-05-12T16:22:16","guid":{"rendered":"https:\/\/www.co2news.sk\/?p=39199"},"modified":"2026-05-12T18:23:29","modified_gmt":"2026-05-12T16:23:29","slug":"why-permanently-removing-co2-from-the-cdr-requires-a-completely-new-financing-model","status":"publish","type":"post","link":"https:\/\/www.co2news.sk\/en\/2026\/05\/12\/why-permanently-removing-co2-from-the-cdr-requires-a-completely-new-financing-model\/","title":{"rendered":"Why permanent carbon removal (CDR) requires a completely new financing model"},"content":{"rendered":"

Achieving so-called geological carbon neutrality requires not only reducing current emissions, but also offsetting residual emissions from fossil fuels through permanent carbon dioxide removal (CDR). Although carbon credit mechanisms (carbon-crediting) were supposed to play a key role in this effort, there is growing evidence that many projects lack real environmental integrity. Recent comprehensive evaluation<\/span><\/a> showed that up to 84 % carbon credits across six main project types did not represent actual emissions reductions.<\/p>\n

Most of the carbon credits currently on the market come from activities aimed at temporarily avoiding emissions, such as forest protection (37 %) or renewable energy projects (32 %). However, emissions from fossil fuels remain in the atmosphere for hundreds to thousands of years, which inevitably requires a real offset capable of guaranteeing carbon removal for the same period. In practice, this means the need to return carbon to the geological cycle through modern approaches such as direct carbon capture and storage (DACCS). However, new technologies for permanent CO2 removal today account for less than 1 % of credits issued.<\/p>\n

Why do current carbon markets fail to foster innovation?<\/strong><\/p>\n

Permanent carbon removal projects are fundamentally different from conventional offset projects. They require very high initial investments (high capital intensity) and face significant technical and implementation risks due to their technological novelty. In a system that is constantly looking for the cheapest options for climate change mitigation, the market logically favors unrealistically optimistic projects that produce cheap but low-quality credits.<\/p>\n

The current financing model relies on a voluntary market with low prices per tonne of CO2 and extremely high price volatility, even exceeding that of common stock indices. New technologies such as DACCS are around 100 times more expensive than standard carbon credits. Extreme volatility in income makes bank debt financing almost impossible, driving up the cost of capital massively. Moreover, current demand is extremely concentrated; for example, Microsoft purchased over 90% of all permanent carbon removals on the market in 2025. Venture capital alone cannot ensure the development of the industry on a large enough scale. Moreover, carbon removals essentially create a public good that has no direct utility value for the buyer without the existence of regulatory frameworks.<\/p>\n

A new financial model: Inspiration from renewables and reverse auctions<\/strong><\/p>\n

A fundamental expansion of permanent carbon removal requires a change in approach. Experts suggest taking inspiration from the financing of renewable energy technologies (RES), where revenue risks were completely removed from the outset by guaranteeing long-term fixed feed-in prices. A multi-tiered auction framework is proposed with the following elements:<\/p>\n

    \n
  1. Setting separate goals:<\/strong> Governments should have clearly separated targets for gross emission reductions, temporary CO2 removal, and permanent removal.<\/li>\n
  2. Minimum standards:<\/strong> Technological quality standards must be ensured and strictly enforced.<\/li>\n
  3. Reverse auctions:<\/strong> The central element is reverse auctions, in which governments competitively procure volumes of CDR. Contracts for capital-intensive technologies (e.g. DACCS) should be long-term (around 15 years), while for technologies such as biochar or rock weathering, 8 to 10 years will suffice.<\/li>\n<\/ol>\n

    Three phases of transition and risk mitigation<\/strong><\/p>\n

    Successful market implementation will require a gradual shift of the financial burden:<\/p>\n

      \n
    • Phase 1 (2025 \u2013 2035):<\/strong> Governments will bear the main financial responsibility, using budgets or carbon taxes.<\/li>\n
    • Phase 2 (2035 \u2013 2045):<\/strong> The obligation to pay for removal will be shifted to regulated issuers.<\/li>\n
    • Phase 3 (from 2045):<\/strong> The market will be sufficiently mature, driven by private regulations, and the government will act only as a regulator.<\/li>\n<\/ul>\n

      This system should be complemented by public development banks that will provide financing for so-called first-of-its-kind (FOAK) facilities for the most capital-intensive CDR startups. Technological risks should be borne by developers, while uncertainties associated with the accuracy of carbon removal measurements (for example, in rock weathering) can initially be addressed by buffer pools and burden-sharing on the state until the science is sufficiently advanced.<\/p>\n

      Building a functioning market for permanent CO2 removal will be a challenging task, requiring strong political will and temporary high subsidies. The alternative, however, is to leave the system in its current chaotic state of voluntary market, which would definitively undermine public trust and make it impossible to meaningfully combat climate change.<\/p>","protected":false},"excerpt":{"rendered":"

      Achieving so-called geological carbon neutrality requires not only reducing current emissions, but also offsetting residual emissions from fossil fuels through permanent carbon dioxide removal (CDR). Although carbon credit mechanisms (carbon<\/p>","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[26],"tags":[],"class_list":["post-39199","post","type-post","status-publish","format-standard","hentry","category-uhlikove-kredity"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.co2news.sk\/en\/wp-json\/wp\/v2\/posts\/39199","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.co2news.sk\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.co2news.sk\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.co2news.sk\/en\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.co2news.sk\/en\/wp-json\/wp\/v2\/comments?post=39199"}],"version-history":[{"count":2,"href":"https:\/\/www.co2news.sk\/en\/wp-json\/wp\/v2\/posts\/39199\/revisions"}],"predecessor-version":[{"id":39201,"href":"https:\/\/www.co2news.sk\/en\/wp-json\/wp\/v2\/posts\/39199\/revisions\/39201"}],"wp:attachment":[{"href":"https:\/\/www.co2news.sk\/en\/wp-json\/wp\/v2\/media?parent=39199"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.co2news.sk\/en\/wp-json\/wp\/v2\/categories?post=39199"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.co2news.sk\/en\/wp-json\/wp\/v2\/tags?post=39199"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}