Creating Demand Signals: What Policymakers Can Do to Scale Carbon Removals
By Lambrini Margariti and Attila Yucel
Carbon dioxide removal (CDR) is no longer an optional add-on to climate policy—it’s a necessity. Permanent CDR includes a variety of technologies, such as Direct Air Capture and Storage (DACCS), Bioenergy with Carbon Capture and Storage (BECCS), biochar carbon removal, enhanced rock weathering, and marine CDR, that remove CO₂ from the atmosphere and store it for centuries to millennia in geological, terrestrial, or ocean reservoirs, or in products.
By 2050, the world will need to remove up to 10 gigatonnes of CO₂ each year. Today, we’re at just 2 gigatonnes—and less than one percent of that comes from durable methods. Rapidly scaling up permanent carbon removal is essential if we’re to have any chance of meeting net-zero targets. This gap also represents an economic opportunity: CDR could grow into a trillion-dollar industry by mid-century, creating 670 thousand jobs in Europe alone.
What’s holding things back? To a great extent, a lack of predictable demand. Without clear policy signals, investors hesitate, projects stall, and technology costs stay high. Governments can change that. By creating reliable markets and reducing risk, public policy can accelerate CDR just as it did for other clean-tech sectors.
Below are examples of how various policy tools could help create durable demand signals for the carbon removal industry —and the lessons they offer for other jurisdictions.
Targets: Understanding the “Net” in Net-Zero
While the role of carbon removals is implicitly acknowledged in countries' climate neutrality—and in some cases net-negativity—targets, the volumes of CDR actually needed are buried in abstract “net” figures. If governments want to unlock private investment in high-durability CDR and accelerate deployment, they need to go further by breaking down the “net” targets and specifying the contributions of gross emissions reductions, removals from the Land Use, Land-Use Change, and Forestry (LULUCF) sector, and permanent removals.
Doing so serves several purposes at once. It prevents mitigation deterrence by making sure removals complement, rather than substitute for, deep emissions cuts. It also gives developers and investors a predictable market to plan for, reducing risk and speeding up deployment. And it provides a solid foundation for other policy tools, from integrating removals into emissions trading systems to designing procurement programmes.
The approach of setting separate targets is widely supported by the scientific community — for example by the European Scientific Advisory Board on Climate Change — as well as by NGOs and industry. And a few governments are beginning to put it into practice. The Netherlands’ CDR Roadmap sets indicative annual removal volumes between 2040 and 2050 and calls for EU-level sub-targets for emissions reductions, temporary removals and permanent removals. Austria’s Carbon Management Strategy signals plans to introduce a national CO₂ removal target for technical sinks. Germany’s forthcoming Long-Term Negative Emissions Strategy is expected to include separate targets for land-based and high-durability removals. Even where such targets are not yet legally binding, they provide a clear direction of travel and a strong signal to investors and project developers.
Compliance Mechanisms: Integrating Removals into Emissions Trading
Integrating permanent removals into cap-and-trade systems is one of the most powerful ways governments can create predictable demand. By allowing regulated entities to use verified removals to meet part of their obligations, compliance markets can spur private investment while maintaining high standards for monitoring, reporting and verification.
The United Kingdom is moving in this direction. The government aims to legislate for the integration of removals into the UK Emissions Trading Scheme (ETS) by the end of 2028, aiming for integration to be operational by the end of 2029. For this initial phase, it plans to maintain the gross cap on total allowances while allowing removal units to be used in a restricted way. UK removal allowances will be awarded to greenhouse gas removal (GGR) operators only ex post—once carbon sequestration has been verified—giving investors certainty that credits represent real, permanent storage. Projects will also need to demonstrate a minimum storage period of 200 years before they can participate, aligning with the EU’s current definition of permanence under the Carbon Removal and Carbon Farming (CRCF) Regulation. Only removals taking place within the UK will be eligible for UK ETS allowances during the initial integration. Standards and monitoring, reporting and verification requirements will be aligned with the UK Greenhouse Gas Removal Standard now in development.
A similar conversation is unfolding at the EU level. The European Commission has signalled its intention to integrate domestic permanent carbon removals into the EU ETS to help compensate for residual emissions from hard-to-abate sectors and is expected to table a legislative proposal by summer 2026.
Although both initiatives are still at an early stage, they show how embedding removals in compliance markets could give the sector a long-term, predictable source of demand while maintaining high environmental standards. Done well, this approach can help scale durable carbon removal without undermining the integrity of emissions caps or public trust.
Purchase Programmes: Governments as Early Customers
Permanent carbon removal is still at the very beginning of its deployment curve. Purchases made by a handful of companies to meet voluntary corporate targets send useful signals but are nowhere near the scale needed to build a functioning market. Without predictable demand, developers can’t finance large-scale projects, costs stay high, and progress slows. Public purchase programmes can bridge this early-market gap, giving CDR developers predictable revenues while private demand ramps up and helping technologies move down the cost curve.
Committed to testing this model, the European Commission is currently exploring options for an EU-wide Purchase programme for permanent carbon removals certified under the CRCF Regulation. Designed to accelerate the deployment of high-durability CDR methods, such a programme would strategically buy a portfolio of removal credits to drive near-term demand, attract private investment to the sector and help build up supply.
Designed well, public purchase programmes don’t just fill an early-stage market gap; they can boost market confidence and attract private buyers, drive down costs through learning curves, help build up supply, and develop the durable CDR market.
Beyond Single Measures: Building a Portfolio Approach
The three policy tools above—clear targets, integration into compliance markets, and public purchase programmes—are already shaping the contours of the carbon removal market. But none of them is a silver bullet. Scaling durable CDR will require a coherent policy package of instruments that pull both the supply and demand levers at once.
A portfolio approach spreads risk, accelerates learning, and sends a powerful signal that governments are in it for the long haul. Just as with renewable energy, predictable multi-year commitments can help technologies move down the cost curve, give investors confidence, and create stable markets. Countries that align their CDR strategies with other climate and industrial policies will be best placed to attract private capital, unlock co-benefits and future-proof their economies.
A Practical Guide for Policymakers
For governments ready to take the next step, the Policy Toolkit for Scaling Carbon Dioxide Removal offers practical guidance on how to choose and sequence the right policy instruments. Designed to be universally applicable, it helps decision-makers adapt policy choices to their national context. Given the diversity of permanent carbon removal pathways, every country has the potential to develop a domestic CDR sector.
The bottom line: Scaling carbon removal is essential—and it won’t happen without clear demand signals. Governments that move first to create them will not only advance climate goals but also reap the benefits of a new clean-tech industry.
