It’s not about Microsoft. Voluntary carbon markets alone can’t scale carbon removal.

Microsoft’s pause on pursuing carbon removal credits has set off concerns among climate advocates and market watchers. But the real issue isn’t one company’s procurement decisions. Voluntary purchases, even from high-integrity and deep-pocketed buyers, were never going to be enough to scale durable carbon removal to climate-relevant levels. For carbon removal to scale to a multibillion-ton industry, advocates, corporate executives, and project developers need to devote far more time and attention to advancing public policy to support long-term deployment and market certainty.

The scale of the challenge demands more than corporate goodwill

Even in the most ambitious climate scenarios, removing carbon dioxide from the atmosphere will be needed to counterbalance ongoing emissions for decades to come. While estimates vary on just how much carbon dioxide removal (CDR) is needed, there is broad consensus that we’ll need a lot – up to 10 billion metric tons each year to achieve global climate goals. That need could grow even further if the AI boom, and the massive increase in energy demand expected to come with it, materializes as projected.  The question isn’t whether voluntary purchases through buyers like Microsoft have an important role in getting a nascent industry moving. They do. The real question is whether voluntary markets can be the primary engine for scaling carbon removal to gigaton levels.  They can’t.

Voluntary markets were never intended for this job

The voluntary carbon market (VCM) was never designed to scale durable CDR to climate-relevant levels. While it attracts a lot of time and attention, the VCM remains a relatively small and fragmented network of transactions between corporate buyers and project developers, not a global economic force capable of driving deployment at the scale the climate challenge demands.  At its peak in 2021, the VCM hit roughly $2 billion, an impressive quadrupling of its value just a year earlier in 2020. But that’s just 2% of the $100 billion annual climate finance pledge, a government-led commitment that countries still missed on time. If this is the scale climate action requires, governments have to lead. While voluntary demand for durable CDR has indeed been growing over the last five years with over $10 billion in forward contracts announced, only a fraction of that money has actually been spent. And almost all of it has come from Microsoft.

Corporate purchases of CDR credits can be instrumental in testing technologies, creating early markets, and accelerating initial deployment.  We’ve seen enormous energy channeled into improving the VCM but the Microsoft moment is a reminder that at least as much if not more energy needs to be invested in public policy. Scaling durable CDR will require governments to do the heavy lifting and support the full innovation pipeline of research through commercialization. The good news: the building blocks are already there, at both the federal and state levels.

The policy building blocks for CDR already exist — we need to build on and use them

In the U.S., federal investments in CDR research, development, standard-setting and deployment have so far been modest and funneled through the Department of Energy in coordination with other agencies. Increasing and expanding those investments across biomass, geological, aquatic, and atmospheric pathways can accelerate innovation and improve public understanding of the opportunities and risks of various approaches.

The next step is building durable pathways to commercialization and scale. Existing programs like the Carbon Removal Purchase Prize and production incentives like the 45Q tax credit offer a foundation. Broadening tax incentives to cover more CDR pathways will help ensure a diverse portfolio of CDR approaches are supported. Infrastructure policy is just as important. The Direct Air Capture Hubs program, if fully funded and supported, illustrates how governments can develop the shared transport, storage, and utilization infrastructure that large-scale deployment will require.

And while CDR is increasingly recognized as crucial, it remains an intangible public good with no natural existing market demand. Policy can help set the table for long-term demand, even in the absence of a carbon tax or an economy-wide carbon standard. In California, explicit CDR targets are built into the state’s legally mandated decarbonization strategy, and procurement ideas like the Carbon Dioxide Removal Purchase Program would provide a demand signal. Targeted enabling infrastructure, such as the Biomass Innovation Parks bill in California would also open pathway-specific opportunities through investments in infrastructure and supply chains. In Colorado, ensuring that CDR projects qualify under existing grant programs aimed at air pollution is a template for catalytic public financing. Consistent and streamlined permitting requirements for carbon storage can also ease barriers to scaling CDR.

 There is also promise in embedding incentives for CDR in policy driven by other public priorities; wildfire risk reduction, industrial decarbonization, rural economic development, low carbon fuels, and workforce development are areas where CDR may find durable policy support at both state and federal levels. Finally, government support requires credible standards. Today’s fragmented private CDR standards make quality hard to compare. Government-defined frameworks, like public procurement standards, can drive towards greater consistency. The EU’s Carbon Removals and Carbon Farming Framework may offer a possible model.

The path forward for CDR is a strong policy portfolio

Microsoft’s pause is just one signal that voluntary markets are not enough to deliver carbon removal at scale.  Given the many forms of CDR and their various stages of development, the path forward to meaningful deployment is a connected policy portfolio — including RD&D for earlier stage approaches, tailored infrastructure and supply chain building, production incentives applicable as CDR approaches mature, binding state CDR targets, public procurement — that creates the long-term supply, built infrastructure, and large-scale demand that the VCM was never intended to provide.

Advocates, corporate executives, and project developers have spent the last several years building an industry on the foundation of voluntary commitments. We need to spend the next several years building on the nascent policy foundation to drive CDR innovation and scale. The building blocks are there. Now we need to expand, coordinate, and sustain them.