The failure to finalise rules around Article 6.4 mechanism at COP28 demonstrates how carbon dioxide removal (CDR) policy has taken a back seat to a market-driven emphasis on the development and adaptation of removal technologies.
However, while methodologies are being developed by the commercial sector, the Supervisory Body (SB6.4) text’s explicit inclusion of removals signals growing recognition of CDR’s vital role in raising global climate ambition.
Here we explore five key themes shaping the development of CDR governance frameworks and how policy will potentially reclaim the driving seat with new additions to market structure.
While voluntary carbon markets (VCM) currently drive most investment into CDR with over $254 million raised in Q1 of 2024, compliance markets (CCM) represent a significant opportunity for further scaling up deployment – projected to reach $321.8 billion by 2032.
Integrating CDR credits into rapidly expanding compliance schemes like the EU ETS would incentivise investments in novel technologies, whilst aligning with stricter climate targets. Developments including the European Parliament’s provision agreement on the the EU’s proposed Carbon Removal Certification Framework (CRCF) regulation, the EU’s first regulatory framework for certifying EU-based removals, and Japan taking the step of being the first country to include durable CDR in its emissions trading scheme (GX-ETS) further highlight this trend.
However, technical hurdles around quantification, accounting, and market mechanisms need to be addressed to ensure seamless integration by 2026. By setting clear standards and facilitating market entry for verified CDR projects, policy can unlock the full potential of compliance markets for accelerating CDR deployment.
2. Robust MRV capacity building for CDR remains a policy challenge
Efforts for MRV capacity building have been implemented at different levels. To highlight some, these include the World Bank’s Forest Carbon Partnership Facility (FCPF) for forestry and land-use, the UK PACT program for nature-based solutions in developing countries, and NREL’s Biomass Carbon Removal and Storage (BiCRS) MRV development project.
However, gaps from the Kyoto Protocol’s Clean Development Mechanism (CDM) persist, with unresolved issues around non-additionality. This is due to the lack of scientific understanding for newer CDR methods, uneven distribution of existing protocols favouring established approaches, and a lack of interoperability between proprietary protocols.
Leading experts advocate for a unified approach with standardised yet flexible MRV protocols, collaborative R&D to address knowledge gaps, and the establishment of an independent oversight body.
In essence, robust MRV capacity building policies provide the foundation for a healthy CDR market driven by transparency, trust, and credibility. This ultimately positions policy as the driving force behind securing permanent carbon removals.
Fragmented policies for long-term carbon storage across different jurisdictions and CDR approaches hinder achieving durable removals. The focus on a few established technologies like DAC and BECCS creates a blind spot for newer methods with unique storage pathways.
Table 1: Summary of CDR Approaches
Source: Rhodium Group, Jones et al., 2024.
The varying degrees of carbon storage permanence across different CDR pathways pose challenges for developing standardised policies that can accurately account for and ensure the environmental integrity of removals, while also avoiding fragmentation of the carbon removal market.
Thus, comprehensive frameworks should guarantee permanent storage by addressing leakage, reversal risks, establishing clear liability structures, and implementing standardised monitoring mechanisms for storage.
International collaboration and regional harmonisation are equally important. This would help CDR policy overcome market fragmentation and create a more stable and attractive market for CDR technologies. This will ultimately strengthen policy’s role in driving the development of effective and scalable CDR solutions.
4. DAC & BECCS: Favoured technologies in current CDR policy
DAC and BECCS are currently favoured due to their perceived scalability and existing regulatory frameworks for monitoring. However, concerns exist about overreliance on technologies still under development and potential negative environmental impacts of BECCS, particularly around large-scale biomass cultivation.
A balanced approach that incentivises diverse CDR methods with different risk profiles and co-benefits is key. Policy plays a crucial role in fostering a diversified CDR portfolio by providing targeted incentives for emerging technologies alongside existing ones; ensuring the prioritisation of effective solutions.
4. The extent of public sector’s involvement remains a contentious issue
The extent to which the public sector should lead CDR development remains a contentious issue. While some advocate for a technology-neutral approach relying on market forces, others argue for proactive measures like increased RD&I investments, targeted deployment incentives, and direct procurement.
Table 2: Government Policy Initiatives for CDR by Country/Region
By actively engaging in funding, providing targeted incentives and strategically deploying public resources, governments can guide the market towards a diverse portfolio of effective CDR solutions, ultimately reclaiming the driving seat in the crucial journey towards a net-negative future.
While CDR gains prominence in climate plans, the policy landscape lacks robust governance frameworks, clear market drivers, and scalable deployment pathways - leaving optimal approaches uncertain.
As CDR advances, policymakers must navigate complex trade-offs between technology-neutral versus targeted policies, ensuring environmental integrity, and determining suitable public sector roles.
The Bonn Climate Change Conference in June and COP29 in November presents opportunities to solidify a collaborative path forward and driving seat for CDR policy.
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