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The Role of the VCM in Scaling CDR: Trends and Opportunities
What is the Current State of the VCM?
The VCM has grown significantly over the past decade, with buyers increasingly shifting from avoidance to removal credits. CDR purchases are trending up—Q2 2025 saw more tonnes contracted (15.48 million) than all prior quarters combined (13.6 million). Companies setting voluntary net zero targets, which require some CDR to achieve targets, nearly tripled (from 417 to 1,245) in the last year, demonstrating sustained ambition despite talk of a "net-zero recession".
The IPCC estimates 6 to 16 gigatonnes of removals are needed annually by mid-century; the market today delivers only a fraction of that. Scaling to this level would potentially create a $7-35 billion industry by 2030, a 3-15x multiple in the next 5 years, and a $1.2 trillion industry by 2050.
Despite significant growth, the reality drawn from the recent body of research is:
- Most companies have not set net-zero targets (although many have)
- There are growing concerns that companies with net zero targets are not on track to meet both near- and long-term targets
- Delivery of scope three targets is particularly challenging.
Barriers remain to widespread company buy-in. High prices, limited expertise, and a lack of standardised methodologies for assessing credit quality hinder widespread adoption of high-quality removal credits.
Buyer motivations and purchasing trends
Corporate participation in VCM is driven by various factors, primarily 1) making progress towards internal or externally committed climate goals or 2) demonstrating action across broader social and nature goals, linked to stakeholder pressure and brand value. These factors shape credit selection, pricing, and prioritisation of methods, but can also constrain how and when companies use carbon credits.
Most voluntary frameworks confine the use case of carbon credits to two areas: compensating for residual emissions (10%) with permanent removals, or beyond the value chain (BVCM) in the form of contributions that occur outside emissions accounting books. Neutralising residual emissions is likely to yield only 0.1-1.3 GtCO2e per year, yet it is the only case mandated by standards. BVCM could unlock millions in climate finance, but lacks the leverage to be a priority for many companies. While this doesn't reflect the entire picture of the VCM, without clear and significant incentives, current buyer behaviour is likely to be insufficient to scale CDR to be ready for future net zero.
Today’s corporate frameworks for net zero require two things: deep emission cuts (60-90%) and compensating residual emissions with CDR. However, no framework requires that companies scale the CDR sector in the near-term to meet 2050 needs, though SBTi is considering near-term scope 1 removal targets and has proposed a 'gold star' program for BVCM participants.
While frameworks recognise CDR as essential to net-zero, none incentivise building the sector now. This gap limits corporate climate finance and puts all target-setters at risk of missing their stated goal: limiting warming to 1.5-2°C.
Strategic opportunity: How the VCM can play a larger role in scaling CDR
The VCM is already playing a critical role in creating early demand for CDR. But, without near-term development of the market, net-zero progress is stalled. This is true for a broad spectrum of decarbonisation technologies and infrastructure beyond CDR. As mitigation outcomes stall, corporate climate leaders–and the standards that guide their actions–must incentivise scaling CDR in the near-term or risk missing net zero targets on a global and individual scale.
Further strategic buying behaviours can drive economies of scale and make CDR more affordable. This type of action not only scales CDR but actually helps companies meet interim climate targets, ensures companies stay on track while working to reduce their own emissions, and decarbonises in a cost-effective way in the long-run.
We’ll dive into these strategic CDR use-cases below, all of which have potential to create meaningful net-zero progress in the coming years 5, 10, or 15 years before residual emission compensation at 2050.
1. Closing the gap
Rather than and end-stage activity, CDR offers unique opportunities for companies to close the emissions gap between their internal reduction efforts and the necessary emissions removals. Many buyers have yet to fully leverage credits to fill near-term shortfalls in their decarbonisation path. Instead of considering CDR as a ‘maintenance’ activity at net zero, companies can create real decarbonisation progress, presenting strategic opportunity for participation in the VCM.
Using CDR to catch-up to commitments or statutory net zero targets would unlock massive financial potential for the market, and generate up to 5.9 GtCO2e of removals per year. More than unlocking finance, this effort would provide crucial, timely, climate mitigation to account for how internal decarbonisation has fallen short, noted in the significant gap between the dotted line and black line at the bottom of block 1.
2. Set & hit interim removal targets
Setting interim reduction and removal targets is a pragmatic approach to getting back on track to net-zero commitments. As noted above, an overly cautious approach to the sequence of reductions and then removals can result in stagnant years where no action happens at all. Setting, achieving, and clearly communicating interim targets every 5-10 years highlights ambition and accelerates global decarbonisation.
For example, let’s look at Company A’s journey to a 2050 net-zero target. Beginning in 2025, they measure a baseline of 100,000 tonnes CO2e annual emissions. A 2030 interim target could reduce emissions to 70,000 tonnes (a 30% reduction) and remove 5,000 tonnes through CDR credits. By 2035, they reduce emissions by 50% and remove 10,000 tonnes. This continues until 2050, when their reduction target equals their removal target—allowing them to neutralise remaining emissions with permanent removals. Setting these 5–10 year checkpoints keeps the company accountable, demonstrates continuous progress, and scales CDR purchasing gradually, giving the company experience with budgeting for carbon and effectively pricing their emissions.
3. Addressing ongoing emissions
A significant opportunity lies in addressing unabated emissions from sectors that continue to produce high carbon outputs despite best efforts at decarbonisation. For example, industries such as professional services, technology, and manufacturing are seeing large volumes of emissions in their Scope 3 categories. Taking responsibility for these is currently termed BVCM, or climate contribution, occurring outside emissions accounting.
Companies can address ongoing emissions by investing in contribution or removal credits that align with the yearly emission outputs–either with a 1 to 1 ratio, or a so-called money-for-tonne approach that covers a significant amount of a given company’s total tonnes while also directing finance into most critical areas. If companies quickly get back on track with their intended reductions, this lowers the cost of taking responsibility.
Depending on how quickly companies get back on track with their reduction targets, using credits to address ongoing emissions could unlock 0.27 to 3.2 GtCO2e of additional mitigation. But if corporate emissions reductions continue to lag, this figure could be much more. By deploying removal credits strategically in these sectors, companies can smooth the transition to net-zero while maintaining progress on their climate commitments.
4. Decarbonise within the value chain
Insetting is regarded as interventions within the value chain that result in a removal or permanent reduction. Methodologies and accounting for insetting programs are in development and vary across sector. However, this path offers an obvious win-win for decarbonisation and removal sector financing. Value chain removals could take the form of a grocery story investing in regenerative agriculture credits at one of their produce farms, or a construction company investing in and using mineralised concrete in a new build. By investing in credits or technologies that remove or permanently reduce the emissions of their own value chain, they can reduce their operational emissions, getting one step closer to net zero.
Tools, guardrails, and regulations
Beyond specific purchasing strategies, new procurement pathways are necessary to scale the VCM and make credits more accessible. Some examples include pooling smaller buyer demand, which can generate the volume needed to bring costs down, and bundling portfolios of credits to mitigate costs across different types of removals. Blended finance and other hybrid public-private mechanisms can reduce risks for emerging removal technologies. These tools improve affordability, enable portfolio diversification, and broaden market impact.
Linking voluntary credits to compliance systems, such as regulatory carve-outs for specific credit types, could make the market more liquid. Dual incentives for compliance and voluntary targets would amplify the VCM's role in global emissions reductions. Through a strengthened regulatory environment, standardised national approaches, and improved infrastructure, we build confidence in the market and remove barriers to exponential growth.
Ensuring a stronger role for the VCM in the future
The Voluntary Carbon Market is uniquely positioned to drive the scaling of CDR in the coming years. The voluntary market can catalyse removal scale not only by providing financial support, but also by deploying more sophisticated procurement tools, price signals, and buyer behaviours that strengthen market dynamics and reduce risk. If we wait for mandatory frameworks alone (e.g., compliance markets), we risk both missing key scaling opportunities for CDR and climate mitigation outcomes. This creates an interesting relationship: the VCM is important to help decarbonising technologies scale, but also these technologies in turn help VCM actors achieve cost-effective net zero.
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Building carbon removal portfolios and managing risk
Portfolios have been central to Klimate's advisory services from the beginning. In line with our mission to support the scaling and development of carbon removal projects and technologies, portfolios offer key benefits: They diversify impact, manage risk, and tailor investments to meet organisational goals. In a relatively young industry like CDR, new projects and technologies emerge constantly. So, it makes sense that climate leaders would "travel every road possible" to support climate solutions in our fight against climate change.
How does a CDR portfolio benefit your company's climate goals?
When approaching CDR investment, portfolios attract buyers for several reasons. Instead of picking one project, where buyers often need to sign long-term and large-scale agreements, portfolios offer a more flexible approach. Companies interested in CDR investment can also maximise impact, tailor their spending to meet specific goals, and balance risk. Ultimately, portfolios ensure that companies actually achieve their intended climate goals. Here's how:
1. Maximise and diversify impact
Most investment portfolios encourage diversification. In the case of CDR portfolios, diversification enables buyers to maximise their investment and provides a crucial balance between technologies and credit delivery timelines.
Carbon removal methods vary significantly in price, from €30 to €1,000 per tonne. And, ex-post credits, representing a tonne of already-removed carbon, are typically more costly than future deliveries from the same method or project. In terms of risk, some nascent technologies or up-and-coming projects—although essential to support—may not be a good fit for companies prioritising the certainty of delivery. This balancing act enables buyers to access projects they wouldn't otherwise be able to invest in, so that budget doesn't limit ambition.
2. Align with your organisation
Investing via a portfolio allows companies to make specific, tailored choices, regardless of their company size or budget. Deciding your own priorities and investing accordingly is a great way to boost the resonance of a CDR strategy in your organisation.
Some priorities may include how durably carbon is stored, catalysing nascent tech, or boosting specific co-benefits such as biodiversity. Companies can also consider the other vital areas beyond just 'carbon' to decide what makes a project 'good'.
Furthermore, some projects or locations may align perfectly with a company's story or industry. For example, Real Estate Company A is drawn to credits from a carbon mineralisation project where the carbon is actually injected into cement. Company A can support the development of an early-stage project that may benefit the carbon management of their industry in the long run, and at the same time, engage with nature-based solutions that contribute to biodiversity, another key metric of their ESG agenda. This choice balances cost, certainty, and impact.
3. Effectively manage risk and balance trade-offs
The CDR space is full of proven, scalable solutions and in this early stage of developing carbon markets, no single solution has emerged as the 'winner'. As new approaches and projects continue to emerge, there can be risks ranging from technological delays to failure to secure the necessary finance for business operations. The portfolio approach mitigates this risk, as it's easier to replace a portion of the investment, as opposed to the entire investment.
Additionally, all projects have strengths and weaknesses. A rigorous due diligence process is an essential step to gain awareness of both delivery risk and a given project’s trade-offs. Balancing a given solution’s trade-offs through a diverse portfolio further secures the positive impacts your investment can have.
The numerous impactful projects that exist are indeed worth supporting in their early stages, and they are all a part of the climate toolkit necessary for achieving net zero.
Portfolios designed to best-fit client needs
Part of CDR strategy 101 is understanding what motivates the purchase, so you can align a procurement pathway that looks and feels like your organisation. These questions can help determine the composition of the portfolio and where the decision-making process will go:
- Are you looking for a specific number of tonnes or need a particular delivery timeline to meet your net zero commitments?
- Are you interested in specific impacts (permanence, co-benefits like biodiversity, jobs), locations, or SDGs?
- To what degree would you like to support nascent technologies versus established NBS/hybrids?
Any given strategy can and should evolve. As buyers become more knowledgeable or find their organisational goals shift with changing goalposts, portfolio distributions can easily adjust along with them. By starting with and well-balanced portfolio, companies can effectively price their residual carbon emissions and prepare for a net-zero future.
How portfolios help meet climate goals and create a functioning, mature CDR market
By developing a global marketplace that balances established projects and emerging technologies, we can scale important climate pathways and build the necessary market infrastructure. In the end, the climate doesn’t care where in the world a tonne of carbon is removed. Exploring and supporting diverse locations opens up the possibility of creating greater impacts. Looking beyond carbon helps address the multiple interconnected environmental crises, while the portfolio approach lowers barriers to entry, ultimately contributing to creating the robust market we need to achieve net zero goals. Supporting a diverse portfolio of projects with balanced costs and co-benefits across the globe is the most effective way to reach our shared climate goals.
Scaling carbon dioxide removal now to meet future net-zero targets
The 2030 and 2050 milestones outlined by the Intergovernmental Panel on Climate Change (IPCC) are fast approaching: a 45% emissions reduction by 2030 and net zero by 2050. Today, almost no country is on track to meet them. To stay within 1.5°C warming and avoid the most severe impacts of climate change, we must accelerate emissions reductions and the deployment of CDR. Estimates suggest that we will need between 6 and 16 gigatonnes of removals annually by mid-century; yet, the market today delivers only a fraction of that capacity. Bridging this gap requires urgent investment and deployment now.
Why is CDR an essential, near-term, climate solution?
Decarbonisation, or the reduction and eventual elimination of fossil-fuel-based emissions, is essential to fighting climate change. The science is clear—reductions alone cannot deliver a 1.5°C future. To some degree, on the order of a few to ten billion tonnes each year, negative emission technologies will be necessary to bring climate mitigation back on track and reach a final state of net zero. CDR directly addresses both historical and residual emissions: those already in the atmosphere and those that are extremely difficult or costly to reduce in sectors like heavy industry. Governments, companies, and organisations of all types must take ambitious action to reduce and remove in tandem.
Most net zero frameworks have treated CDR as a final-stage activity, reserved for hard-to-abate emissions closer to 2050. Delayed CDR deployment is ill-advised for climate mitigation and overlooks its immediate value. Scaling removals today achieves three things:
- Climate imperative: The pace of warming is accelerating, and mitigation pathways already assume large volumes of removals. Deploying CDR now helps close the gap between current trajectories and the 1.5°C goal.
- Lower long-term costs: Early investment sends market signals. By growing supply chains, infrastructure, and financing mechanisms today, we avoid the cost spikes that would come from a last-minute scramble in the 2040s.
- Climate credibility: Companies and governments are under pressure to deliver on climate promises. Integrating CDR now strengthens the credibility of net-zero pathways, backing ambitions with action.
We'll dive into each pillar below.
Why we can't wait: the climate imperative
CDR can close the near-term emissions gap and help address ongoing emissions. The 'emissions gap' is a term that notes the disparity between climate pledges and actual emissions levels. While emissions rise, the ambition and actual implementation of net-zero strategies lag. Paris Agreement signatories need to cut an astounding 42% of emissions by 2030 to get back on track with 1.5°C.
Deploying the entire suite of CDR pathways can play a significant role in helping to close this gap and get back on track with net-zero goals before it's too late.
Investing today lowers long-term costs.
Like renewable energy, the cost of CDR will fall as deployment scales. Projects today receive investment from diverse sources, primarily credit sales in the voluntary carbon market (VCM). Early demand signals, even from smaller investments today, contribute to broader market-building and boost trust in the viability of the CDR ecosystem. Building long-term offtake agreements now also de-risks technology growth and signals seriousness to stakeholders.
These are important mechanisms to help projects secure pre-finance, covering costs of operations and ultimately lowering the long-term purchasing price. On the individual buyer level, companies that commit early can secure access to scarce supply at predictable prices, rather than facing inflated costs in the 2040s. And those that price emissions today are more likely to decarbonise faster, saving money in the long-run.
Upholding climate credibility
In an era of widespread net-zero targets, stated climate ambitions often differ from expected or actual implementation. With climate credibility in question, organisations can leverage CDR to take responsibility for any ongoing emissions and offer tangible proof that their goals are more than hot air.
Stakeholders, from regulators to customers, want proof that pledges translate into measurable action. Companies that incorporate removals today demonstrate leadership, safeguard their brand reputation, and build trust by showing they are not waiting until the last minute.
Aligning internally to take action now
It is essential to build a strong internal business case for immediate CDR engagement. The strategic opportunity for CDR today lies in anticipating future risks and fostering genuine climate leadership. Here's why:
- Manage future risks. Supply is scarce today and will only continue to crunch as the thousands of net-zero target setters approach their target years and need to purchase offsets.
- Get in line with upcoming regulations. Whether voluntary or codified, climate legislation is around the corner, and ESG agendas are here to stay.
- Social license to operate. Taking action today boosts brand reputation and trust. Climate leadership is essential for stakeholder and employee satisfaction, and can even impact a company's valuation.
How we stay on track for our common climate goals
The role of CDR in 2030 is about scaling up: proving pathways, establishing standards, and building the infrastructure that enables exponential growth. By 2050, it must be delivering gigatonnes annually. That trajectory cannot be achieved without today's corporate and policy leadership.
For companies, the question is no longer whether to include removals, but when to do so. Early movers will secure lower costs, influence market design, and establish climate credibility. Governments, investors, and corporations all share responsibility, but businesses in particular have the chance to shape the market through procurement, partnerships, and long-term commitments. Net zero is not possible without CDR—and the time to scale it is now.