The Role of Improved Forest Management for Carbon Dioxide Removal

Key Takeaways

• Near-term role for carbon removals: The revised Science-Based Targets Initiative (SBTi) Corporate Net Zero Standard (CNZS) v2.0 proposes requiring or recognizing interim carbon dioxide removal (CDR) targets before companies reach net zero. This shift aims to scale up the CDR industry in line with climate science and ensure companies address residual emissions earlier rather than deferring action until their net-zero target year.‍
• Revised target frameworks and increased accountability: The draft standard introduces key changes, including separate targets for scope 1 and 2 emissions, enhanced scope 3 target-setting guidelines, and the recognition of market-based mechanisms for indirect mitigation of scope 3 emissions. It also requires companies to publicly disclose transition plans and assess implementation progress against targets.‍
• Potential for stronger action on removals: While the proposed updates are a step forward, the final standard should make near-term CDR targets mandatory rather than optional and should expand to include those for projected scope 3 residual emissions, not just scope 1. Without these stronger mandates, demand for early-stage CDR investments may remain limited, potentially slowing progress toward net-zero goals.‍
• Companies should prepare now: Businesses should start integrating CDR into their climate strategies now so they are equipped to navigate procurement of high-quality removal credits in the voluntary carbon market. Preparing ahead of the final CNZS v2.0 release will help companies align with science-based decarbonization pathways and demonstrate climate leadership.

What the Latest SBTi Update Means for Corporate Climate Action

On 18 March, 2025, the Science Based Targets Initiative (SBTi) released its draft Corporate Net Zero Standard (CNZS) v2.0, significantly updating its framework for corporate net-zero target setting for the first time since 2021. The draft proposes new approaches for companies to support carbon dioxide removal (CDR) in the transition to net-zero emissions, a move that could help scale the nascent CDR industry.

This release is part of a broader revision, with key proposed updates including:

• Requiring public disclosure of transition plans after companies set targets.
• Separating targets for scope 1 and 2 emissions.
• Enhancing the scope 3 target-setting framework using an impact-based prioritization process.
• Recognizing indirect mitigation (e.g., book-and-claim commodity certificates) for hard-to-trace scope 3 emissions.
• Defining a role for emissions removals in the transition to net zero.
• Providing options to recognize company leadership in beyond value chain mitigation (BVCM).
• Assessing corporate progress against targets to bolster accountability.

While formal recognition of removals in the transition to net zero is a positive step, stronger incentives will be needed in the final CNZS to ensure companies take meaningful early action on CDR. The draft standard is open for the first of two public consultations until 1 June, 2025, with a finalized version expected to launch in 2026.

What Remains the Same From the Current Standard?

SBTi’s framework remains focused on three core requirements for companies:

• Reducing emissions year-on-year to reach an approved science-based target (SBT) by 2050 or earlier.
• Investing in beyond value chain mitigation (BVCM) in the transition to net zero to support near-term global decarbonization efforts.
• Neutralizing remaining emissions from the net-zero year (achieved after at least 90% emissions reductions) and onwards with high-quality, permanent carbon removal.

Carbon credits representing emissions reductions and removals remain ineligible for meeting reduction targets within a company’s value chain (SBTs).

What’s New in CNZS v2.0 for Carbon Removals?

Until now, the SBTi encouraged companies to invest in CDR through mechanisms such as BVCM, but has not proposed requiring removal before their target net-zero year. As a result, organizations had little clarity or incentive to invest in CDR ahead of their net-zero target date, dampening near-term demand for carbon removal and delaying the industry's growth.

The new draft changes this by proposing three options for the V2.0 Standard that address the impact of residual emissions during the transition to net zero:

• Option 1 (requirement): Companies are required to set near- and long-term removal targets, including interim CDR milestones,¹ to address projected residual emissions.
• Option 2 (optional with recognition): Companies can set and receive recognition for removal targets to address projected residual emissions.
• Option 3 (flexibility of mechanism): Companies have the flexibility to address expected residual emissions either entirely through additional emissions reductions within their value chain, entirely through removals, or via a combination of both.

Notably, all three approaches apply only to residual scope 1 emissions.

On top of these approaches, SBTi has suggested two options for the minimum durability threshold of CDR purchases in their draft standard. Removals will either need to follow a ‘like for like’ approach,² where CDR storage must match the atmospheric lifetime of residual emissions, or a gradual transition approach, where carbon storage durability increases over time.

Why Mandating CDR Matters

Mandating near-term CDR reinforces the need for immediate climate action, ensuring that carbon removals complement emissions reductions rather than being deferred until the net-zero target year. The urgency of early CDR investment is clear:

• Limiting global warming to well below 2°C above pre-industrial levels requires removing billions of tonnes (gigatonnes) of carbon dioxide annually by mid-century.
• The CDR industry is in its early stages and requires sustained investment today to scale in time.
• If companies wait until their net-zero year to purchase CDR, the supply of high-quality removal credits is unlikely to be sufficient.

As part of the proposed removal targets in Option 1 (above), the CNZS v2.0 would require companies to gradually increase CDR purchases over time, ramping up to 100% of a company’s projected residual scope 1 emissions in the net-zero target year (<10% of baseline year emissions).³

What More Can Be Done?

The potential introduction of required removal targets would be a significant and welcomed step, reinforcing the importance of near-term CDR investment to support industry maturation and climate goals. However, mandatory near-term CDR targets represent only one of three potential pathways for the V2.0 standard. Moreover, neutralization of residual emissions on the path to net zero is only proposed for scope 1 emissions. While the SBTi provides clear rationale for this,⁴ SBTi should not let the complexity of projecting scope 3 emissions be a barrier to climate change mitigation. Scope 3 emissions represent the majority of emissions from SBTi-aligned companies. Furthermore, companies with high scope 3 emissions typically have a higher ability to pay compared to their industrial counterparts with high scope 1 emissions.

If interim removal targets are made optional, and scope 3 emissions remain excluded, the demand signal for near-term CDR will be limited. The public consultation (and advice of Expert Working Groups that SBTi is convening) will be essential in determining which proposed guidance matures into the final standard; consultation feedback can be provided here prior to June 1, 2025.

How Businesses Can Prepare for CNZS v2.0

Companies aligning with SBTi’s evolving guidance should begin to integrate CDR into their climate strategy now. This means:

• Understanding their residual emissions forecast and planning early investments.
• Developing a company-specific climate strategy to incorporate CDR into their sustainability roadmaps in tandem with plans to reduce value-chain emissions.
• Engaging early in the voluntary carbon market to implement these strategies and develop procurement processes to support high-quality removal projects.
• Ensuring credibility by selecting removal projects aligned with scientific best practices.

Conclusion: A Step in the Right Direction, But More Certainty Is Needed

The CNZS v2.0 draft represents a critical turning point for corporate climate action with options to formalize the role of early CDR investment through interim removal targets for signatories. However, SBTi must take a stronger stance in the final version of the revised standard by choosing to adopt requirements for near-term neutralization (rather than leaving this optional), including projected residual scope 3 emissions in near-term CDR targets, aligning durability requirements with climate science, and defining removal quality standards to ensure these efforts drive meaningful climate impact. Organizations seeking to align with this guidance should prepare by developing a comprehensive climate strategy that accounts for science-based decarbonization pathways and recognizes the role of early-stage investment in CDR solutions.

Key Takeaways

• Concrete and steel contribute 13% of global CO2 emissions. These materials represent substantial scope 3 emissions for companies that are building new infrastructure, including data centers.
• Low-emission alternatives and production technologies are nascent and not yet widely deployed.
• Environmental attribute certificates (EACs) are an innovative solution that can stimulate manufacturing of sustainable commodity materials and overcome market barriers to direct physical procurement.
• Relae (formerly Carbon Direct) and Microsoft developed criteria to guide Microsoft’s high-quality EAC procurement, accelerate decarbonization, and catalyze market expansion for decarbonized materials across supply chains. 
• These criteria cover seven key areas: qualifying conditions, social harms and benefits, environmental harms and benefits, additionality and baselines, catalytic impact, verifiability, and leakage.

A Vision for Low-Carbon Concrete and Steel

Concrete and steel are essential for modern construction, but are carbon-intensive. Combined, they account for approximately 13% of global carbon dioxide (CO2) emissions. ​As the demand for data centers and infrastructure development continues to grow, so do the embodied emissions from concrete and steel. There is an urgent need to decarbonize these sectors so that construction of new facilities remains consistent with climate commitments.​

However, the markets for low-carbon concrete and steel are still in their infancy. Market barriers such as low production volumes, contracting complexity, geographic concentration of supplies, and long-distance transportation limit buyers’ ability to directly procure low-carbon building materials. As buyers and sellers overcome these barriers, the market for low-carbon building materials will mature, giving producers the confidence to invest in new manufacturing facilities and giving buyers access to decarbonized materials directly in their supply chain.

Environmental attribute certificates (EACs) represent the sustainability attributes of a material commodity, unbundled and transacted separately from the physical commodity. EACs are transacted at a price that reflects the additional cost of sustainably producing the material. While barriers to direct procurement of low-carbon materials persist, EACs can serve as a powerful tool to signal demand for low-carbon concrete and steel, catalyze market expansion, and accelerate decarbonization.

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Microsoft’s Approach to Emissions from Building Materials ​

To address embodied emissions and help achieve its ambitious 2030 carbon-negative goal, Microsoft aims to deeply reduce its scope 3 emissions, including from building materials, by more than half compared to a 2020 baseline. In 2023, scope 3 emissions made up over 96% of Microsoft’s total greenhouse gas footprint. To meet its 2030 target, Microsoft is focusing on addressing supply-chain emissions related to data center construction and the embodied carbon of the commodity materials used to build them. Microsoft is already working to decarbonize its building material supply chain using the following three tactics:

• Reduce the need for concrete and steel through innovative building design or the use of lower-carbon alternatives, such as sustainably sourced mass timber.
• Directly engage with suppliers to procure low-carbon alternatives to conventional concrete and steel.‍
• Invest in and help pilot new low-carbon production pathways.

EACs represent a fourth approach to decarbonization that can both reduce emissions and catalyze industry growth. Taken together with Microsoft’s design, procurement, and investment tactics, these actions underpin a comprehensive strategy for long-term decarbonization of the built environment.

High-Quality EACs Support Decarbonization

EACs offer a virtual, market-driven solution to decarbonize the built environment by allowing companies to support low-carbon material production when physical supply chain barriers impede direct procurement. ​EACs for concrete and steel function similarly to other market-based decarbonization mechanisms such as sustainable aviation fuel (SAF) certificates in the aviation sector and renewable energy certificates (RECs) in the energy sector.

These mechanisms work by decoupling the environmental benefits of low-carbon production from the physical materials themselves. EACs allow companies to claim the environmental benefits of physical low-carbon concrete or steel production, even if they do not directly or physically source those materials. EACs provide a verified claim that a purchaser has procured a product with lower emissions, enabling companies to meet climate targets and demonstrate their commitment to sustainability.

Due to their virtual nature, which limits physical oversight of the supply chain, EACs also exacerbate risks such as double counting, greenwashing, fraud, social harms, and environmental harms. Therefore, adhering to transparent, rigorous criteria is foundational to mitigating these risks.

New Criteria to Guide Procurement of High-Quality EACs

To support the integrity and effectiveness of EACs in these sectors, Relae and Microsoft have co-developed Criteria for High-Quality Environmental Attribute Certificates in the Concrete and Steel Sectors. These robust criteria serve as a public resource for companies seeking credible and impactful EAC procurement pathways for low-carbon concrete and steel.

The criteria address seven key areas:

1. Qualifying conditions: EACs must complement, not displace, direct procurement and represent significant emissions reductions. ​
2. Social harms and benefits: EACs must not further social harms and should promote community engagement and social benefits such as meaningful workforce development opportunities and community climate resilience.
3. Environmental harms and benefits: EACs must not perpetuate environmental harm, but instead should mitigate risks and, ideally, provide additional environmental benefits.
4. Additionality and baselines: Projects funded by EACs must drive real, meaningful emissions reductions ​in terms of financial, regulatory, and common practice additionality.
5. Catalytic impact: Prioritize transformative technologies with sector-wide decarbonization potential. ​
6. Verifiability: Set a high bar for documentation, transparency, and independent auditing. ​
7. Leakage: Address risks of emissions displacement to support net-positive outcomes. ​

These criteria provide a robust framework for companies and stakeholders to evaluate and implement commodity EACs effectively, supporting impactful change. ​They balance rigor with flexibility and acknowledge the nascent state of the markets for low-carbon concrete and steel. Sectoral decarbonization will advance over time, shifting the thresholds for what is considered significant, additional, and catalytic in EAC transactions. This science-driven framework can adapt to advancements in policy, industry practices, and technological readiness, ensuring EACs remain a relevant and impactful tool for years to come. ​

Sector-Specific Insights

In addition to providing overarching criteria and guidance on procuring EACs for the built environment, Criteria for High-Quality Environmental Attribute Certificates in the Concrete and Steel Sectors also provides insights into the unique challenges and opportunities of decarbonizing concrete and steel.

Decarbonizing Concrete

EACs can support innovative decarbonization strategies for concrete, such as producing alternatives to clinker and cement, adopting supplementary cementitious materials (SCMs), and reducing emissions from cement kilns through electrification or integrating carbon capture and storage (CCS). ​Performance-based standards and evolving building codes may also unlock new opportunities for low-carbon concrete. ​

The Global Cement and Concrete Association (GCCA) publishes a rating system, Low Carbon Concrete (or Cement) Ratings, which defines eight separate low-carbon grades (AA through G). These grades correspond to the depth of decarbonization and are based on a sliding scale related to the material’s compressive strength. When developing these criteria, Microsoft considered grades AA through D to be eligible for consideration in its EAC procurements.

Decarbonizing Steel

EACs can support transformative technologies for decarbonizing steel, like direct reduced iron (DRI) with electric arc furnaces (EAF) powered by green or blue hydrogen. This support can enable the steel sector to move beyond incremental improvements and focus on capital-intensive solutions that have the potential to reshape the industry. ​

ResponsibleSteel, an independent standards and certification organization with membership that is broadly representative of the steel industry, publishes decarbonization progress levels, with four separate grades (PL1–PL4). These grades correspond to the depth of decarbonization and are based on a sliding scale related to the fraction of recycled scrap use in the steel manufacturing process. When developing these criteria, Microsoft included levels PL2 through PL4 for consideration in its EAC procurements.

A Blueprint for EAC Market Development ​

Relae and Microsoft crafted Criteria for High-Quality Environmental Attribute Certificates in the Concrete and Steel Sectors as a public resource that can help shape the future of the commodity EAC market. ​

These criteria are designed to:

• Communicate intent: Communicate Microsoft's intent to support the decarbonization and scaling of physical commodity supply chains where they have been previously limited.‍
• Guide decision-making: Serve as a public guide for Microsoft's decision-making process, explaining the rationale behind pursuing or declining specific EAC pathways.‍
• Set high-integrity standards: Maintain high integrity for EACs at an early stage, ensuring they are used to enable future physical procurement by supporting market development.‍
• Stimulate partnership opportunities: Encourage potential partnerships and purchasing pipelines by clearly describing criteria for high-quality EACs.‍
• Publicly share detailed thinking: Build on previous work and publicly share detailed thinking, aiming to stimulate market development and guide procurement decisions.

Practical Recommendations for Implementing EACs

Whether you are a supplier, buyer, policymaker, or sustainability advocate, these new criteria offer actionable insights to help you navigate the complexities of EACs in the built environment. ​From setting significance thresholds to ensuring verifiability to avoiding double counting, the criteria provide clear guidance to maximize the impact of EAC-supported projects.

Beyond the technical aspects of EACs, these criteria aim to address their broader social and environmental implications. The criteria focus on the importance of community engagement, transparency, and equitable distribution of benefits in EAC project planning, ensuring that decarbonization efforts contribute to a more sustainable and just economy. ​The criteria are backed by extensive research, stakeholder consultations, and industry expertise.

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Meera Atreya, John Dees, David Madrid Garcia, Katherine Gomes, Grant Gutierrez, and A.J. Simon authored the Criteria for High-Quality Environmental Attribute Certificates in the Concrete and Steel Sectors. We appreciate Julio Friedmann and Colin McCormick for their valuable technical insights. Adrianna Sutton, Molly Tucker, and Britt Warthen provided essential editorial and production support.

We are especially grateful to Julia Fidler and Brian Sifton, previously at Microsoft, for commissioning this report, providing detailed input, and engaging deeply with the Relae Science Team every step along the way. Special thanks to Katie Ross at Microsoft, whose leadership and coordination made the report possible.

We also extend our appreciation to the teams at RMI and Environmental Resources Management for their time, thoughtful feedback, and prior publications, which helped inform and complement this work.

Frequently Asked Questions

What is an environmental attribute certificate (EAC), and how does it differ from buying low-carbon concrete or steel directly? 

An environmental attribute certificate represents the sustainability attributes of a commodity material such as concrete or steel, unbundled from the physical material and transacted separately from it. Direct procurement means a buyer purchases low-carbon concrete or steel and takes physical delivery of it for a specific project. An EAC purchase instead allows a buyer to fund and claim the environmental benefit of sustainably produced materials that are sold as typical commodities, and apply that benefit against conventional commodities in their own supply chain. EACs are priced to reflect the additional cost of producing the material sustainably, which sends a demand signal to producers. This makes EACs useful where market barriers—limited production volumes, geographic concentration of supply, or long-distance transportation—prevent buyers from sourcing low-carbon materials directly.

How do EACs for concrete and steel compare to renewable energy certificates (RECs) or sustainable aviation fuel (SAF) certificates?

Environmental attribute certificates for concrete and steel share a structure with renewable energy certificates and sustainable aviation fuel certificates: each decouples the environmental benefit of low-carbon production from the physical product, letting a buyer fund and claim that benefit without taking physical delivery. There are two key differences. First, conventional RECs represent electricity with a zero-emissions footprint, while every tonne of concrete or steel behind an EAC still carries embodied emissions — the certificate demonstrates reduction against a baseline, not a zero-emission product. Second, REC and SAF markets are established, while EACs for concrete and steel are nascent. Both differences are why rigorous criteria matter: quantifying the reduction credibly is harder, and the virtual structure carries risks of double counting, greenwashing, and fraud.

Will EACs let companies claim emissions reductions without actually reducing their built environment climate footprint?

An EAC purchase does not change the materials in a buyer's own buildings; it funds lower-emission production elsewhere in the market. Credible EAC frameworks therefore require that certificates complement rather than displace direct procurement, that they represent significant reductions against a defensible baseline, and that the funded project would not have proceeded without EAC revenue. The criteria published by Relae and Microsoft enable buyers to address these requirements directly in their procurement processes - addressing the climate and reputational risks of low-quality certificates. Used this way, EACs become an additional tool to address emissions from the built environment, supplementing design changes, direct procurement, and investment in new production pathways.

Who should use these criteria?

Criteria for High-Quality Environmental Attribute Certificates in the Concrete and Steel Sectors, co-developed by Relae and Microsoft, is a public resource intended for four audiences. Buyers pursuing scope 3 reductions can use it to evaluate whether a given certificate represents a credible, additional emissions reduction. Suppliers and project developers can use it to understand what purchasers of high-quality certificates look for before bringing a project to market. Policymakers and standards bodies can draw on it while shaping rules for an emerging market. Sustainability practitioners and advocates can use it as a reference point for assessing claims made about low-carbon concrete and steel. The criteria are designed to evolve as these sectors decarbonize, and users may adapt them to meet their own levels of capability and ambition. 

Key Takeaways

• The UK's new biomass Contracts for Difference framework will cut industrial wood pellet imports by slightly more than half starting in April 2027. As a result, US producers will be left competing for only 1.6 million GST, an 80% reduction in US-addressable volume, with no successor market locked in.
• US wood pellet producers who move now to upgrade sustainability credentials and build relationships in emerging markets will be best positioned to capture the next generation of demand; those who wait may find the most attractive offtake opportunities already structured around someone else's supply.
• Four domestic markets now present producers with new demand opportunities: cofiring, sustainable aviation fuel (SAF), low-carbon steel, and bioenergy with carbon capture and storage (BECCS). Of these, BECCS for data centers is the strongest structural fit: hyperscalers need clean firm power, pellet mills need offtakers, and the feedstock infrastructure is already in place.

The Demand Cliff Is Real, and the Timeline Is Short

A pellet made in southern Mississippi this morning will be burned in a UK boiler about four weeks later. North America is on pace to ship more than 9 million green short tons (GST) of pellets to the UK each year—making the UK the world's largest consumer of wood pellets since 2018. The US Southeast is at the center of that supply chain: 28 large mills, 13.5 million GST of production capacity, rail spurs, export terminals, and bulk carriers, built almost entirely around UK demand.

However, the UK's new low-carbon Contracts for Difference (CfD) framework caps biomass power generators at a 27% annual capacity factor starting April 2027, down from roughly 64% today. When run hours fall by half, pellet demand follows. Existing subsidies expire in the first quarter of 2027, and the new CfD runs only to March 2031 with no commitment beyond that. Plant closures in Arkansas and Washington state, along with reduced output in Canada, are already early signals of supply chain contraction.

The Math of Who Gets Squeezed

The math is stark. By the second quarter of 2027, total annual UK pellet demand drops to 4.9 million GST. Of that:

• Approximately 2.3 million GST goes to captive, integrated UK supply chains.
• Approximately 1.0 million GST goes to Baltic suppliers, whose shipping times of one week or less become a decisive advantage as UK plants shift from baseload to dispatchable operation.

That leaves US producers competing for only 1.6 million GST. If Baltic suppliers capture more, US wood pellet exports to the UK could be effectively eliminated by 2031.

Sustainability qualification is also tightening. The new CfD cuts the supply-chain emissions ceiling from 55.6 grams of carbon dioxide equivalent per megajoule (gCO₂e/MJ) to 36.6 gCO₂e/MJ. The framework assesses compliance mill by mill, not on a portfolio average. A cleaner mill cannot carry a dirtier sibling through the door.

The producers who understand this math now have roughly 18 months to position themselves for what comes next.

From Stranded Supply to New Markets

The US Southeast's wood basket is robust: abundant inventory, strong growth-to-removal ratios, and more available residues than ever. The infrastructure is in place. The question is whether the next generation of markets can be developed quickly enough to redeploy this supply before the infrastructure sits idle.

Four pathways stand out as the strongest options for redeploying US pellet supply: BECCS for data centers, low-carbon steel, SAF, and domestic cofiring. We have rigorously assessed the logistics economics, sustainability cases, and project development for each.

BECCS for Data Centers: The Strongest Structural Fit

BECCS as a power source for data centers is the most compelling match for the situation pellet producers now face. The timing, feedstock requirements, and buyer characteristics align closely in a way that few other emerging markets can match.

Hyperscalers, the large data center operators driving an unprecedented surge in electricity demand, are signing deals for nuclear, geothermal, and small modular reactors alongside natural gas and renewables. They are doing this because annual Renewable Energy Certificates (RECs) are no longer sufficient to compensate for their scope 2 emissions, and they need clean, firm generation that can be matched to load on an hourly basis.

BECCS delivers exactly that. The Louisiana Green Fuels project—advanced by Strategic Biofuels and Relae (formerly Carbon Direct)—illustrates the model: regionally sourced forestry residues and sawmill waste generate 75 megawatts (MW) of firm electricity while sequestering over one million tonnes of CO₂ annually in deep saline formations. An ample supply of wood pellets creates a strategic opportunity for similar projects to move forward with certainty around feedstock processing, logistics, and costs.

The remaining commercial barrier is deal structure, not technology. No data center operator has yet signed an agreement to purchase both the electricity and carbon removal credits from a single BECCS plant. As scope 2 accounting tightens and domestic pellet supply becomes more readily available post-2027, the conditions for structuring the first such deal are improving fast.

"Pellet mills and data center developers have complementary problems: mills need offtakers, and data centers need local, dispatchable, clean power they can match to load on an hour-by-hour basis. BECCS is one of the few technologies that could solve both at once, and hyperscalers have shown they are willing to back early-stage clean firm power when the asset makes sense."

—Douglas Bryan, Senior Power and Energy Systems Modeler

Low-Carbon Steel: Certification Frameworks Are Arriving

Wood-derived biocarbon has a long-established niche in steelmaking. Brazil produces roughly 10% of its steel and 30% of its pig iron using charcoal from managed eucalyptus plantations—a proof of concept for biomass as a metallurgical input, if not a direct template for US producers. The plantations measurably lowered groundwater in producer regions of Minas Gerais, and charcoal's mechanical weakness relative to fossil coke has limited the model's reach beyond Brazil.

Current pilot projects use biomass in two roles. As a fuel, industrial trials have demonstrated 10% bio-coal co-injection without operational disruption, with reviews estimating that full replacement could cut blast-furnace CO₂ by around 27% per tonne of hot metal. As a reductant, biocoke is already being demonstrated at Outokumpu's pelletizing plant in Tornio, Finland. ArcelorMittal in Belgium and Tata Steel in India are running biomass pilots at tens of thousands of tonnes per year.

What makes this market worth serious attention now is the certification landscape. The Low Emission Steel Standard issued its first certifications in September 2025. The Global Steel Climate Council's Steel Climate Standard is under stakeholder review. In May 2025, Relae and Microsoft published Criteria for High-Quality Environmental Attribute Certificates in the Concrete and Steel Sectors. These frameworks allow producers to internalize carbon price and environmental attribute certificate (EAC) values, closing the cost gap against fossil coke that has historically constrained biocarbon demand.

Relae worked with Eramet, a global metals company pursuing biogenic materials as a substitute for fossil coke at its Norwegian smelters, to assess high-quality carbon dioxide removal methodologies and chart a path to generating and selling carbon credits from their decarbonization projects. Producers who align their sustainability credentials to these emerging standards now will be better positioned for offtake as commercial-scale demand grows.

"Steelmaker pilots and the first low-carbon steel certifications are opening green-steel offtake to wood pellets, though commercial-scale demand remains limited. The producers that thrive in this market will be those that reliably deliver pellets aligned with high-quality sustainability standards."

—Louisa Brotherson, Hybrid Decarbonization Scientist

Sustainable Aviation Fuel: Mandates Create a Durable Demand Signal

Wood-based SAF is technically feasible via gasification to syngas, followed by Fischer-Tropsch upgrading, a proven chemistry for converting syngas to liquid hydrocarbons. Yet, the commercial challenges are substantial: the International Civil Aviation Organization estimates capital costs exceeding US$1 billion for large facilities, and production costs of US$11–48 per gallon to distillate. 

The cautionary case is Fulcrum Bioenergy near Reno, Nevada, which attempted a Fischer-Tropsch process using municipal solid waste and appears to have failed due to a lack of rigorous pre-implementation testing and unrealistic timelines, a reminder that feedstock homogeneity matters enormously, and one area where pellets have a relative advantage.

Two structural dynamics make SAF worth serious attention despite those barriers. First, the European Union's (EU) SAF mandate, starting at 2% of jet fuel supply and ramping to 70% by 2050, carves out cellulosic biomass as the only qualifying feedstock once cooking oil supply is exhausted. The penalty structure in both the EU and UK creates strong demand regardless of SAF price: EU non-compliance penalties run roughly three times the price of SAF, and UK penalties can reach 13 times the cost of the fuel itself. Second, the alcohol-to-jet pathway offers a lower-capital entry point than Fischer-Tropsch, as demonstrated by Project Speedbird, a British Airways and LanzaJet collaboration targeting UK woody residues.

The near-term question is which routes have bankable offtake. Very few do yet, but the mandate structure suggests that window will shift rapidly.

"So far, facilities haven't scaled to the levels required to meet timeline demand. But the EU and UK mandate structures mean buyers are greatly incentivized to purchase SAF even at high prices, rather than pay non-compliance penalties."

—John Dees, Director, Fuels and Industrial Commodities

Domestic Cofiring: Achievable, but Not a Long-Term Anchor

Cofiring biomass with coal to produce electricity or heat is the most immediately achievable option. Most US coal-fired power plants could displace up to 10% of their input energy with raw or torrefied pellets, though plants would likely need fuel handling upgrades. Some state policies, such as Pennsylvania's Alternative Energy Portfolio Standards Act of 2004, support cofiring to meet renewable energy goals. However, there are no federal policies in the US that incentivize cofiring.

The case for cofiring as a long-term market is weak. The US coal fleet has contracted steadily for economic reasons—over 100 gigawatts (GW) of coal-fired capacity retired between 2015 and 2025—and biomass cofiring is unlikely to make a coal plant more cost-competitive. The Greenhouse Gas Protocol's scope 2 guidance does not permit buyers to procure a "strip" of electricity representing the biomass-fired fraction of output from a cofired plant; instead, buyers must accept the average total emissions from the plant in their scope 2 inventory, which limits the value proposition for corporate buyers seeking to demonstrate clean energy procurement.

The more interesting version of this pathway combines cofiring with carbon capture and storage (CCS), a combination that creates a deeper-abatement value proposition and the kind of firm, dispatchable power that corporate buyers increasingly need.

"Cofiring is a proven step toward modest emissions reductions from coal-fired electricity, but it's hard to make the economic case for it when compared to applications that command price premiums for deeper climate abatement."

—A.J. Simon, Director of Industrial Decarbonization

Sustainability Is Now the Qualification Gate

Each of these markets is more discerning about sustainable biomass sourcing than the UK power sector was a decade ago. That shift will not reverse.

US Southeast wood has real potential for high-integrity sustainability credentials, particularly in softwood residues. But it also carries downside risks when sourcing from natural stands. Through work with producers, buyers, and project developers across these markets, we have found that four questions now drive every serious procurement conversation:

1. Does the supply chain have verifiable governance and chain-of-custody transparency?
2. Does sourcing respect the rights of Indigenous Peoples and local communities?
3. Is the wood coming from regions where forest carbon stocks are stable or growing, and not from protected areas or primary forest?
4. Is sourced biomass a by-product of non-energy uses, and not the primary silviculture driver?

Producers who can answer yes to all four, and support those answers with data, are more likely to access these emerging markets. Those who cannot will find it harder to compete for offtake.

For a detailed framework on how these principles translate into contract language and certification requirements, see the 2025 Sustainable Forest Biomass Sourcing for CDR: A Buyer's Guide.

The Window Is Open, but Not Indefinitely

The US Southeast wood basket is well-positioned for the markets described here. The infrastructure is in place. What producers still need to build is the market positioning, sustainability documentation, and offtake relationships to go with it.

The producers who move now will have a meaningful head start. Those who wait for certainty may find that the most attractive offtake opportunities have already been structured around someone else's supply.

Learn more about Relae's work on SAF mandates, steel decarbonization, and sustainable biomass sourcing. 

Frequently Asked Questions

What happens to US wood pellet exports when the UK's new biomass rules take effect?

Starting April 2027, the UK's signed Contracts for Difference agreement caps subsidized biomass generation at a 27% capacity factor, roughly half of today's levels. That's expected to cut total UK pellet demand to about 4.9 million GST a year, leaving only around 1.6 million GST available to US exporters.

Is BECCS for data centers a proven market, or still emerging?

The underlying technology is credible, and the Louisiana Green Fuels project already demonstrates it at commercial scale. However, the deal structure isn't yet proven. No hyperscaler has signed a single contract for both electricity and carbon removal credits from one BECCS plant, so this market is emerging rather than established.

How does low-carbon steel demand compare to sustainable aviation fuel as a market for pellet producers?

Steel offers nearer-term certification frameworks (the Low Emission Steel Standard began issuing certifications in 2025) but limited commercial-scale volume so far. SAF has a stronger long-run demand signal thanks to EU and UK blending mandates and steep non-compliance penalties, but requires far higher capital investment to enter.

What should a wood pellet producer look for when evaluating a new market?

The four sourcing questions that now gate access across all these markets are: verifiable chain-of-custody, respect for Indigenous and local community rights, sourcing from stable or growing forest carbon stocks (not primary forest), and biomass that's a by-product of non-energy uses rather than the primary driver of harvest.

Key Takeaways

• What's happening: The voluntary carbon market (VCM) stalled in 2025, with carbon credit retirements falling 7% despite a 227% surge in corporate climate commitments.
• Why it matters: Over 80% of high-durability carbon removal capacity is at risk of not being realized without additional offtake.
• The implication: For corporate buyers with 2030 climate targets, early movers will define market standards and secure the supply they need, while those who wait risk volatility and constrained access to high-quality credits.

Why the Voluntary Carbon Market Needs Action Now

The voluntary carbon market stands at a crossroads. Credit retirements in 2025 fell far below the billion-tonne-scale projections from earlier in the decade. There is a widening gulf between climate ambition and market action.

The VCM transacts credits that avoid, reduce, or remove emissions. Carbon dioxide removal (CDR), the process of removing and durably storing atmospheric CO₂, remains a small but critical segment, accounting for 5% of credits retired. Limiting overshoot of 1.5°C requires a rapid scale-up of CDR.

However, most organizations with 2030 climate goals have yet to engage in CDR procurement. Without clear market signals today, CDR supply will falter. What's missing isn't capability or knowledge, but the commitment to act. Early movers will define the market in its early stages, while latecomers may face volatility and uncertain supply.

Our latest analysis reveals both troubling trends and clear pathways forward for CDR buyers ready to move from commitment to execution.

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Five Years of Stagnation: The VCM Falls Short of Projections

For five consecutive years, muted growth and persistent oversupply of poor-quality credits have defined the market. In 2025, credit retirements—a proxy for spot-market demand—reached 157 million metric tonnes (Mt), down 7% from 2024.

This incremental growth is far below what market analysts anticipated earlier in the decade, when several projections expected demand to exceed 1 billion tonnes by 2030. 

VCM Credit Trends: Concentrated in Avoidance and Reduction

The VCM has historically been concentrated in avoidance and reduction carbon projects,  largely dominated by REDD+, renewable energy,  and cookstove credits. 2025 marks the first year a new credit type has dominated, though: projects that reduce emissions of superpollutants now make up roughly 20% of all credits issued in the VCM. Superpollutant issuances increased by about 180% between 2020 and 2025, while retirements grew by roughly 150%.

CDR Remains a Small but Critical VCM Segment 

In 2025, CDR credits accounted for only 5% of 2025 retirements, but have a more active forward offtake market—where buyers commit today to purchase credits that will be delivered in the future, providing crucial early-stage financing for projects.

Within the CDR category, high-quality credits are still hard to find. Applying our Criteria for High-Quality Carbon Dioxide Removal, we find that less than 10% of the CDR projects we review meet our high-quality threshold with minimal reservations.

Nature-Based CDR Dominates the Spot Market

Of the all CDR credits issued in the VCM in 2025, 95% originated from nature-based CDR pathways, while 5% represented high-durability CDR pathways such as biochar or bioenergy with carbon capture and storage (BECCS). This distribution reflects the mature role that nature-based CDR projects continue to play in the market, alongside the early stage of durable CDR deployment.

Within nature-based credits, supply and demand dynamics differed significantly between afforestation, reforestation, and revegetation (ARR) and improved forest management (IFM). 

• For ARR credits, issuances and retirements have tracked closely at a roughly 1:1 ratio, with issuances remaining flat at around 7–8 Mt annually over the past four years, leaving little inventory available for spot purchasing. 
• IFM credits, by contrast, have grown 2.5-fold since 2023, making them one of the largest sources of growth within nature-based credits, though high-quality CDR credits from IFM are in much lower supply.

For buyers, this means ARR credits are increasingly difficult to source on the spot market, while IFM credits are more readily available—though careful diligence is needed to identify high-quality projects.

Nature-based offtakes and commitments have expanded in recent years, with more than 90 Mt of future delivery now contracted or committed. The vast majority of these commitments are concentrated in ARR projects, highlighting both the supply constraints facing ARR today and buyers' foresight in securing the supply they will need in the near future.

High-Durability CDR Is Almost Entirely Forward-Looking

The spot market for high-durability CDR credits represents only 0.3% of activity in the VCM, but important dynamics are beginning to emerge as more high-durability CDR technologies reach the market.

From 2021 to 2025, roughly 80% of high-durability issuances and retirements came from biochar and geologic storage. However, the emergence of large-scale geologic CDR projects is beginning to shift the balance, with individual projects capable of delivering hundreds of thousands of tonnes annually. Early-stage methodologies such as enhanced rock weathering (ERW) and ocean alkalinity enhancement (OAE) issued their first credits in 2025, totaling roughly 12,000 tonnes.

While the spot market for high-durability CDR is growing and diversifying, forward offtake agreements continue to define the landscape. The ratio of high-durability spot retirements to volumes committed through forward offtake is 1:70—meaning for every tonne retired today, 70 tonnes have been committed for future delivery.

Forward Offtake Commitments Are Rising Across CDR Pathways

To date, forward offtake agreements, advanced market commitments (AMC), and large contracted deals with intermediaries cover more than 40 Mt of high-durability CDR, in addition to over 90 Mt of nature-based CDR. These cumulative volumes highlight the increasingly central role of forward purchasing in shaping future supply, particularly for capital-intensive, high-durability pathways. 

However, the success of forward offtake strategies depends critically on careful due diligence. Without a rigorous assessment of technological readiness, project viability, and delivery risks, forward commitments risk financing projects that fail to deliver, undermining both individual investments and broader market confidence.

Market Concentration of Forward Offtake Remains High

A small group of companies continues to drive the majority of forward offtake activity. In 2025, Microsoft remained the clear market leader, accounting for roughly 60% of contracted nature-based CDR offtakes and more than 80% of high-durability offtakes with a named buyer announced to date. Other active buyers—including Google, JPMorgan Chase, Equinor, and Amazon—have expanded their commitments, but overall market concentration remains high.

This concentration reveals both opportunity and risk: while anchor buyers are proving the market model works, broader participation is needed to unlock the full scale of CDR deployment required.

Growing Gap Between Climate Ambition and Market Action

Corporate climate targets anchor most current VCM activity: All of the top-10 buyers in the market today participate based on either self-declared commitments or net-zero commitments aligned with the Science Based Targets initiative (SBTi).

Demand forecasts based on these future commitments project that total CDR demand could reach 46-110 Mt by 2030, a ~6-14x growth from today. Yet, how companies decide to implement their targets will ultimately affect the composition of CDR demand within the VCM.

Rather than relying solely on public commitments, we analyzed the behavior of companies that are actively purchasing CDR today. Should today's top buyers follow through on their stated CDR commitments, CDR demand could reach a minimum of 28 Mt by 2030, with 6.5 Mt of demand for high-durability CDR.

However, the discrepancy between observed demand and target-led scenarios shows a persistent gap between what companies say and what they do. SBTi reported a 227% surge in companies setting both near-term and net-zero targets in the 18 months leading up to mid-2025, while carbon credit retirements in the VCM fell 7% in 2025. 

Shifting from intention to execution will ultimately determine whether the VCM evolves into a durable, functioning marketplace or stalls short of the scale required for credible, net-zero pathways.

Rising Trends of Greenhushing and Anonymity Obscure CDR Demand

In the broader VCM, 55% of tonnes retired on the spot market over the past three years have been anonymous, and that fraction has been increasing. A similar trend is true of high-durability CDR: nearly 40% of all offtake transactions made in 2025 did not disclose the participating buyer. This buyer behaviour could reflect the often-discussed greenhushing phenomenon.

When anonymous actors dominate, it becomes harder to track demand signals, verify corporate progress, and establish clear integrity benchmarks. This opacity creates systemic risk for the entire market.

Market Growth Tipping Points on the Horizon

Several pivotal events on the horizon could mitigate risk and unlock project development, tipping buyers into action after half a decade of limited market growth:

• Voluntary demand: SBTi's  Corporate Net Zero Standard V2.0, published in June 2026, confirms credits still can’t count toward scope 1-3 targets, but introduces a voluntary recognition program starting in 2027 and mandatory removal purchasing for large companies from 2035, starting at 1% of footprint. 
• Compliance demand: The UK's Emissions Trading Scheme (ETS) Authority has already committed to integrating carbon removals into the UK ETS by 2028 via an auction model. This is the first confirmed large-scale compliance pathway for CDR credits, though credit-type eligibility is still being worked out.
• Regulatory support: Publication of Article 6.4 methodologies under the Paris Agreement and loosening of CORSIA credit supply bottlenecks could expand eligible supply and boost buyer confidence.

These tipping points in policies, standards, and market structures are advancing with clear timelines, creating conditions to move CDR procurement from hesitation to activation.

CDR Supply Faces Critical Challenges

While buyer inaction poses one threat to market growth, the supply side faces its own critical challenges.

30%–220% More Investment Is Needed in Nature-Based CDR Supply

Nature-based CDR would require a 30%–220% increase in finance to support current corporate targets. Relae (formerly Carbon Direct) has identified US$18 billion in publicly committed funds for nature-based CDR announced from 2018 to 2025. If deployed immediately to generate high-quality CDR, this level of funding could translate into up to 32 Mt per year by 2030 and 290 Mt cumulatively through 2040.

This is sufficient to meet the conservative 28 Mt demand floor from today's active buyers—but falls well short of what would be needed if even a fraction of companies with 2030 targets begin executing on their stated commitments.

80% of High-Durability CDR Projects Are at Risk

The situation is more acute for high-durability CDR. We estimate that over 80% of the total 2030 credit supply pipeline is at risk, due to insufficient project offtake and financing agreements.

Without increased offtake and financing support, we expect that the landscape for capital-intensive, high-durability CDR may consolidate

CDR Buyers Will Determine Which Projects Get Built

The supply-side ecosystem features a sufficient number of high-quality CDR suppliers with the potential to scale. These suppliers face purchasing behavior insufficient to meet buyers' own stated climate goals. In this environment, every CDR procurement decision matters. Companies that delay procurement risk missing their own climate targets while also ceding competitive advantage to early movers who secure the limited supply of high-quality credits. 

Five Actions to Strengthen the CDR Market

Buyers and investors can play a critical role in reducing project risk and strengthening the CDR market. Our full report details five essential actions:

1. Use purchasing power wisely
2. Prioritize project diligence
3. Construct bankable contracts
4. Support market data transparency and CDR goals
5. Undertake project assurance

Each action addresses specific market failures and, when implemented strategically, can significantly improve the likelihood that high-quality CDR projects reach operation and deliver credits as contracted.

With 2030 only four years away, the window for action is rapidly closing. Early movers will secure supply and define market standards, while those who wait risk entering a crowded market with limited access to high-quality credits and escalating prices.

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Frequently Asked Questions

Why did the voluntary carbon market stall in 2025 despite rising corporate climate commitments?

Retirements fell 7% even as SBTi reported a 227% surge in companies setting near-term and net-zero targets. The gap reflects that most companies with 2030 goals haven't yet moved from setting targets to actually procuring credits.

Is carbon dioxide removal a proven market today, or still emerging?

CDR remains a small segment—about 5% of 2025 retirements—but it has an unusually active forward market, with buyers committing today to volumes delivered years from now. High-durability pathways like biochar and geologic storage are still early-stage relative to nature-based credits.

How does the new SBTi Net-Zero Standard affect corporate carbon credit strategy?

Under the new SBTi Net-Zero Standard, credits still can't be counted toward scope 1, 2, or 3 targets. But it introduces a voluntary recognition program starting in 2027, and requires large companies to begin purchasing carbon removals from 2035, starting at 1% of their footprint.

What should CDR buyers prioritize given current market conditions?

Given how concentrated forward offtake activity is today, buyers should prioritize rigorous project diligence and bankable contract structures over simply committing volume—the 2026 State of the Voluntary Carbon Market report details five recommended actions in more depth.

Key Takeaways

• High-quality carbon dioxide removal (CDR) projects require robust project management and oversight to deliver credits on time and at the promised volume; delivery risk is a distinct concern that quality standards alone don't catch.
• The sixth edition of the Criteria for High-Quality Carbon Dioxide Removal is the first to provide an approach to evaluating both credit quality and delivery risk, adding a new delivery risk appendix built around the TECOP framework: technical, economic, commercial, organizational, and political risk.
• The 2026 Criteria provides a framework for developers, investors, and buyers to evaluate both project quality and delivery risk.
• This year's update draws on 170 new diligence reports from 2025 and the input of more than 60 subject matter experts, building on a foundation of six years of lessons from professional diligence across hundreds of real-world CDR projects.

The Criteria Create a Shared Standard for Credit Quality

Relae (formerly Carbon Direct) first launched the Criteria for High-Quality Carbon Dioxide Removal (the Criteria) in collaboration with Microsoft in 2021 to help rapidly and justly scale the development of high-quality carbon dioxide removal (CDR) credits. The market didn't yet have a shared definition of what "high-quality" meant, so we laid out transparent, science-based benchmarks that gave developers, investors, and buyers a common foundation to work from. Every year since, we have gone back and sharpened those benchmarks so that they keep pace with the quickly evolving industry.

But a shared definition of quality doesn't guarantee the delivery of credits as planned. The 2026 edition is the first to tackle that gap directly, pairing the Criteria's quality benchmarks with a new framework for evaluating delivery risk.

The Six Principles of High-Quality Carbon Removal

The Criteria defines six science-based principles that apply across engineered, hybrid, and nature-based CDR approaches:

• Social harms, benefits, and environmental justice: The extent to which the project prevents new social harms to people and communities, reduces existing harms, and provides meaningful benefits distribution.
• Environmental harms and benefits: The extent to which the project minimizes and mitigates environmental harms, as well as provides environmental benefits.
• Additionality and baselines: The evidence that the project’s carbon removal would not have occurred without carbon finance.
• Measurement, monitoring, reporting, and verification (MMRV): The ability to accurately quantify carbon removal in a repeatable and verifiable way, and to develop a plan for long-term monitoring of the project.
• Durability: The likelihood that removed carbon remains stored over time, with mechanisms in place to mitigate reversal risk.
• Leakage: The extent to which project activities cause increased emissions elsewhere.

These principles provide a consistent foundation for carbon removal procurement, evaluation, and project benchmarking.

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Supporting the Delivery of High-Quality CDR Credits

"Projects must work better operationally and be more commercial. Quality and delivery risk shape a project's risk profile at every point in its life, and this edition of the Criteria is the first to give buyers a way to judge both at once." Dr. Julio Friedmann, Chief Scientist, Relae

Designing projects to meet high-quality CDR criteria is only part of the challenge. Effective project planning, management, and execution are also essential to ensure that high-quality CDR tonnes successfully reach the market as planned. As discussed in CDR 2.0: Five Pillars of Successful Project Deployment and Delivery, managing delivery risk requires developers, investors, and buyers to understand the risks that can affect project success and align on how these risks are assessed and mitigated.

To support this alignment, the 2026 Criteria introduced a new Delivery Risk Appendix, which establishes a common framework and language for identifying and evaluating key delivery risks for the first time. Drawing on our broader observations of the carbon removal market and established approaches to project risk management, the appendix highlights common delivery risks across two broad CDR project types: open systems and closed systems. It organizes these risks into five categories: technical, economic, commercial, organizational, and political factors, also known as the TECOP framework. 

The TECOP Framework for CDR Delivery Risk

• Technical delivery risks are associated with the technical feasibility of the project design, implementation, and long-term operation of the project
• Economic delivery risks are associated with the project’s financing structure, financial modeling assumptions, and expenditure profile
• Commercial delivery risk reflects the extent to which a project's purchase agreements, supply arrangements, and key contractual relationships are secured or well-advanced. 
• Organizational delivery risks center on the project developer's capacity and capability to successfully plan, execute, and manage a project of the appropriate size and complexity.  
• Political delivery risks are associated with governance, policies, and potential changes in regulatory environments, as well as the local communities’ perception of and willingness to participate in projects.

New Additions to the 2026 Criteria

Since publishing the 2025 Criteria, Relae has conducted an additional 170 diligence reports across established and emerging CDR pathways, ranging from reforestation and enhanced rock weathering (ERW) to direct air capture (DAC). To date, less than 10% of all 900+ projects the team has reviewed have met the bar for high-quality. These diligence efforts, together with insights from market analysis and ongoing synthesis of the latest scientific and technical literature, have deepened our understanding of how CDR project quality has evolved over the past year. 

The 2026 Criteria leverage these insights and the expertise of more than 60 subject matter experts to reflect advances across the CDR industry and address key weaknesses that remain in the market across all pathways. 

A few of the most significant updates to the Criteria include:

Addition of Direct Counterparty Considerations: Direct counterparties are the organizations that developers partner with, and are structurally dependent on, to generate credits. This can include: 

• Primary feedstock providers (e.g., mines, biomass providers, tree nurseries)
• Major implementing partners (e.g., local implementation partners, base facilities, transportation and storage providers, major product offtakers)
• Land owners that make up a significant proportion of project land 

To reflect the key role that direct counterparties play in high-quality credit generation, developers must conduct diligence and disclose on their direct counterparties to demonstrate that they are not causing social or environmental harm.

Increased Rigor for Enhanced Rock Weathering Projects: Over the past year, ERW’s presence in the CDR market has grown substantially, and so too has the market’s understanding of the corresponding scientific and technical rigor required to deliver high-quality tonnes. The 2026 Criteria raised the bar for how ERW projects:

• Measure and prove their carbon removal claims
• Mitigate risks related to potentially toxic elements (PTEs)
• Incorporate more sophisticated farmer protections and benefits 

Projects now have to back up their numbers with multiple physical field measurements, not just computer models; and they must now track and account for every significant loss pathway, from plants taking up minerals to carbon escaping from rivers and oceans.

Use of Dynamic Baselines for ARR Projects: ARR projects are increasingly using dynamic baselines to provide a more accurate reflection of the counterfactual scenario (e.g., what would have happened in the absence of the project). This is reflected in the 2026 Criteria with a requirement that ARR projects, with the exception of agroforestry projects, use dynamic baselines with statistically matched controls.

What’s Next?

The 2026 Criteria create a clear, science-driven framework for both designing and delivering measurable, just, and durable carbon removal. However, the Criteria cannot ensure high-quality tonnes reach the market on its own; good criteria do not replace robust diligence. To put these criteria into practice, we encourage developers, standard-setting bodies, buyers, investors, and policymakers to consider how the Criteria can be used to inform their role in enabling the carbon market to deliver high-quality tonnes and to engage in deep diligence and ongoing monitoring over the life of a project.

This edition of the Criteria reflects what we have learned over the past year, but our work is not done. We will continue to update it so that it remains a living document that evolves with the science and the market. To do so effectively, it must be a collaborative effort; we welcome input from carbon market actors, academia, and communities.

Frequently Asked Questions

Who publishes the Criteria for High-Quality Carbon Dioxide Removal, and how often is it updated?

Relae (formerly Carbon Direct) first published the Criteria for High-Quality Carbon Dioxide Removal with Microsoft in 2021 and have updated it every year since. The 2026 edition reflects six years of lessons from real-world project diligence and advances in climate science.

What are the six principles of the Criteria for High-Quality Carbon Dioxide Removal?

The Criteria define six science-based principles that apply across all CDR pathways: social harms, benefits, and environmental justice; environmental harms and benefits; additionality and baselines; measurement, monitoring, reporting, and verification (MMRV); durability; and leakage.

What CDR pathways does the Criteria cover?

The Criteria include pathway-specific criteria across nine CDR pathways: afforestation, reforestation, and revegetation (ARR); mangrove forestation; improved forest management (IFM); soil carbon; enhanced rock weathering (ERW) in croplands; biomass carbon removal and storage (BiCRS); abiotic marine CDR; carbon mineralization; and direct air capture (DAC).

What is delivery risk in carbon removal?

Delivery risk is the likelihood that a project generates credits on the timeline and at the quantity committed to buyers. It's a distinct concern from credit quality: even a high-quality project can fail to deliver as planned because of technical, economic, commercial, organizational, or political risk, the five categories the Criteria's TECOP framework evaluates. The 2026 Criteria's new Delivery Risk Appendix gives developers, investors, and buyers a shared benchmark for identifying and managing these risks before they derail a project.

What's the relationship between carbon removal credit quality and delivery risk?

Credit quality and delivery risk are distinct but interrelated. A project that fails to deliver credits as planned reduces the availability of high-quality CDR tonnes in the market, and weaknesses in credit quality can themselves increase delivery risk by creating buyer uncertainty or limiting access to project financing. The 2026 Criteria provides a framework for evaluating both quality and delivery risk.

Key Takeaways

• Emissions cuts alone are not happening fast enough to meet global climate goals. Direct air capture (DAC) removes carbon dioxide (CO₂) that is already in the atmosphere. It has become one of the fastest-growing carbon removal approaches even as it stays capital-intensive.
• DAC's core advantage is flexibility. Because the atmosphere fully mixes within about two weeks, a DAC facility can be sited almost anywhere with clean power and CO₂ storage and still deliver the same climate benefit.
• DAC investment has grown to roughly US$2.2 billion across 37 specialized companies since 2021. Per-tonne costs (currently US$500–1,000 or more) remain the technology's central barrier to scale.
• US federal support for DAC is still unsettled. The US Department of Energy cut its regional DAC hub program from a planned US$3.5 billion to roughly US$1.2 billion between October 2025 and April 2026. This is a signal that deployment funding, not the underlying science, is DAC's biggest near-term risk.

What Is Direct Air Capture?

Direct air capture (DAC) works by sucking in air, filtering it to remove CO₂ that has built up over time and still sits in the atmosphere. To be effective, DAC must draw a lot of air into separating equipment like filter banks or cooling towers. This is similar to the small-scale systems that have scrubbed CO₂ from air in spacecraft and submarines for decades. From there, CO₂ filtering typically involves a chemical process that binds the CO₂ for release later. While the most commonly used chemical compounds in this process are liquid solvents or solid sorbents, other chemical, electrical, and physical processes could also work.

After the filtering process, the captured CO₂ is usually stored in one of two ways. The most important is geological storage, which keeps CO₂ out of the air and oceans indefinitely in deep geological formations (typically a mile down or more) and offers the clearest climate benefits. The second is storing the CO₂ in products like concrete, which offers clearer commercial benefits. A new generation of mineralization projects is expanding this second pathway, turning captured CO₂ into building materials rather than only storing it underground. In addition, CO₂ can be recycled into fuels and chemicals, which prevents net-new CO₂ from being released but does not count as a carbon removal solution since these materials are eventually used, releasing the captured CO₂ back to the atmosphere.

The Advantages of Direct Air Capture

DAC has many advantages as a CO₂ removal approach. First and foremost, it's scalable. In effect, there are no practical limits to our ability to scrub CO₂ from the sky or store it in deep geological formations around the world. This means scaling can be fast and removals profound.

It's straightforward. The devices remove CO₂ from the air, a meter measures it, and operators store and monitor that CO₂. It's clearly additional (meaning it only happens with financial and human intervention), easily verified, and durable (stored for many hundreds of years or more), meeting the bar set by our own Criteria for High-Quality Carbon Dioxide Removal.

It has a small physical footprint. Typical DACe systems do the carbon removal work of trees with 1,000–2,000 times less space. This leaves more room for conservation, agriculture, rewilding, and other important work.

It can be done anywhere with low-carbon energy and CO₂ storage options. Globally, our atmosphere mixes fully every two weeks, meaning that CO₂ released in China or Australia arrives over the US (and vice versa) in this amount of time. Because of this, DAC facilities can be sited anywhere and still have a climate benefit—as long as there is sufficient clean energy available and options for CO₂ storage or use are nearby. This reduces competition for land and provides opportunities for economic development in regions with the right resources.

Finally, and most critically, DAC is a backstop technology. While reducing emissions remains the top priority, there are certain types of emissions that are either very hard or very expensive to abate. The last fraction of hard-to-abate emissions can be managed through DAC, effectively capping global costs to reach net-zero emissions. In fact, the more rapidly DAC scales and deploys, the less total energy and cost are needed to achieve key climate goals.

Challenges and Concerns of Direct Air Capture

Like all climate mitigation approaches, DAC has challenges. The primary challenge today is cost. Today's large-scale systems cost roughly US$500–1,000 or more per tonne of CO₂ removed, depending on the technology and site, though several developers are targeting US$100–150 per tonne over the next 10 years. Although the costs will come down over time through deployment and wider adoption, today's high costs are a barrier to investment and deployment.

Another challenge is around the energy requirements associated with DAC. Pulling one million tonnes per year of CO₂ out of the air requires roughly 200–300 megawatts of zero-carbon energy (a combination of heat and electricity). Given the limited supply of zero-carbon energy available today, there is a valid question about whether this is the best use of that resource today.

Finally, there is the question of environmental risks and community burdens of DAC. Experience to date suggests that the total environmental burdens and consequences of this pathway are among the lowest of any clean energy and climate technology. But since DAC systems involve heavy equipment and chemicals, questions about the full environmental risks and burdens to communities remain, especially given its limited commercial deployment. Although most DAC systems will be sited in remote locations, not near communities, and pose no serious environmental risks, reasonable concerns must be addressed before permitting and building future DAC projects.

Why the Excitement Now?

Although current climate science and added urgency from organizations like the Intergovernmental Panel on Climate Change (IPCC) have driven interest in DAC, other important advances have fed broad interest and excitement about its potential. Since 2017, DAC technology has matured greatly, including the deployment and operation of many projects around the world. Costs have dropped, new pathways have opened, and private investment in DAC-specific companies has reached roughly US$2.2 billion across 37 companies since 2021. 

Two large facilities illustrate where deployment stands today. Climeworks' Mammoth plant in Iceland has been operating since May 2024, although not at full capacity. Occidental's Stratos plant in Texas remains delayed past its most recent 2026 second quarter target due to a component issue, with no confirmed new startup date as of this writing. Both facilities carry substantial commercial offtake agreements from aviation, energy, insurance, and tech companies, agreements that continue to hold even as construction timelines have slipped.

In part, interest results from new policy advancements. In the US, the Inflation Reduction Act's 45Q tax credit, maintained under the 2025 One Big Beautiful Bill Act, currently provides US$180 per tonne for DAC paired with dedicated geologic storage, with added parity for utilized CO₂. The Department of Energy's Regional Direct Air Capture Hubs program, originally planned at US$3.5 billion, was cut back sharply in an October 2025 review. It was then partially restored in April 2026 when the Department of Energy confirmed its two flagship projects, Project Cypress in Louisiana and the South Texas DAC Hub, would proceed. The program's total is now expected to be near US$1.2 billion. In addition, California has amended its Low-Carbon Fuel Standard to allow DAC as a compliance mechanism, and the US Department of Energy has explored a pilot program to purchase valid, durable carbon dioxide removal, including DAC. Recently, the Carbon Dioxide Removal Leadership Act was introduced to Congress, which would require the Secretary of Energy to remove CO₂ directly from ambient air or seawater.

Other programs around the world reflect this growing interest. In the UK and EU, governments have promised CO₂ removal purchases this decade, which will likely include DAC. Research programs have begun in Canada, the UK, Germany, Japan, and China. Developing nations increasingly see DAC as a potential new industry and hope to take advantage of their natural resources to expand energy access while being paid to remove CO₂ from the air and oceans.

The Future of Direct Air Capture

I'm pleased to have played a small role in DAC's new prominence. I've had the good fortune of being at DAC project groundbreakings and ribbon cuttings, led the first-ever government grants program for DAC, worked with scientists to develop new DAC technologies, published analysis over a decade ago on the need for DAC, and testified before the US Congress on the benefits and needs of DAC on three separate occasions. Based on my experience in DAC over the last 16 years, I believe that smart investment, policy, deployment, and community engagement will convert the promise of DAC into thousands of projects. These projects will help avoid the worst outcomes of climate change and restore some natural balance to the world. With federal support now concentrated on fewer, better-resourced flagship projects, rather than spread across two dozen early-stage hubs, the DAC field is being pushed toward fewer high-profile delays and more repeatable, bankable deployments.

Frequently Asked Questions

How does direct air capture differ from capturing carbon at an industrial site? 

Industrial, or point-source, capture removes CO₂ at a smokestack, where concentrations are high. Direct air capture removes CO₂ that is already spread throughout the open atmosphere. DAC facilities can operate almost anywhere with available clean power and storage, not only next to a specific emitter.

Is direct air capture actually operating today, or is it still experimental? 

Direct air capture is operating today; it is not just experimental. Climeworks' Mammoth plant in Iceland has been running since May 2024, and dozens of smaller facilities are active worldwide. However, the largest US projects, including Occidental's Stratos plant in Texas, are still working through startup delays. Once it begins operating, DAC will be fully commercial, although limited in deployment.

How much does it cost to remove one tonne of CO₂ with direct air capture? 

Current large-scale direct air capture systems cost roughly US$500–1,000 or more per tonne of CO₂ removed, depending on the technology and facility site. Several developers are targeting costs of US$100–150 per tonne later this decade, though that has not yet been demonstrated at commercial scale and is likely to take 10 years or more to achieve

Does using direct air capture reduce the need to cut emissions? 

No. Direct air capture is a backstop for emissions that are difficult or costly to eliminate outright, not a substitute for cutting emissions in the first place. Reducing emissions remains a priority; DAC addresses both what is left over (residual emissions) and what’s already in the air and oceans.