According to a report released by Carbon Direct, the voluntary carbon market is at a key inflection point: carbon dioxide removal (CDR) is growing rapidly, however it still only represents 4% of available carbon credits in today's US$1 billion market. Carbon Direct’s analysis found that while there is oversupply in the broader market, demand for high-quality CDR is outstripping the supply for these credits. At the same time, the majority of forward CDR offtakes in 2024 came from a very small cohort of first movers.

Global climate targets call for removing 5-10 billion tonnes of CO2 annually by 2050 – a transformation requiring trillions in capital investment. However, concentrated demand, the need for rapid scale, and the scarcity of quality projects all represent critical challenges in meeting these targets. Carbon Direct’s analyses suggest demand of ~50 million tonnes annually by 2030. There is currently project finance available for less than half of these volumes, and 50 million tonnes is less than 5% of the new CDR needed to align with scaleup trajectories in some 1.5°C scenarios.

"The CDR market is at a crucial inflection point," said Matthew Potts, Chief Science Officer at Carbon Direct. "While we're seeing ambitious scale-up plans from high-durability CDR projects and increased funding for nature-based solutions, the market urgently needs more buyers and investors to step forward to realize this potential."

>> Read the Report: 2024 State of the Voluntary Carbon Market

The 2024 State of the Voluntary Carbon Market report analyzes data from major carbon credit registries and Carbon Direct's extensive project evaluations. Key findings from this year's analysis include:

Nature-based CDR projects are positioned to deliver the majority of near-term credits at accessible prices, but they remain significantly underfunded relative to potential demand and climate need.

High-durability CDR projects have ambitious scale-up plans but require substantial forward offtake commitments to secure necessary project financing.

Forward offtake of CDR remains highly concentrated among a small number of high-profile buyers, particularly for high-durability CDR solutions.

The overall VCM remains small and only grew by about 3% in the last year, far from the 10x growth projected by 2030.

"To meet global climate goals, we need to see a significant acceleration in both investment in nature-based CDR and forward purchasing of high-durability CDR solutions," Potts continued, "The VCM serves as a critical vehicle for channeling finance to CDR projects."

The report emphasizes that reaching climate targets will require the development of mature market structures for project development and finance backed by bankable offtake agreements. Projects must also demonstrate high quality and transparency to address buyer concerns and reduce reputational risks. For more information, read the full report: The 2024 State of the Voluntary Carbon Market.

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Carbon Direct Releases 2024 State of the Voluntary Carbon Market Report

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