Five Trends For Buyers In The Carbon Removal Market — Stay In The Know
Sustainability leadership is strategic, and great strategy is only possible with the right insights.
We’ve been deep in the carbon removal market for years. Here we share the latest trends we’re noticing to equip you in developing your own sustainability strategy.
{ 1 } Securing future access
Potential customers ask us to lock in the option to buy more carbon removal credits in the future.
These customers want to buy carbon removal credits today partly to secure future access. They, like us, expect that more and more companies will be buying larger and larger volumes of carbon removal credits, outpacing the available supply.
Why will we see this rise in demand for carbon removal credits?
After addressing easy-to-abate emissions through electrification, travel reduction, and more, the hard-to-abate emissions remain. Companies will need carbon removal credits to compensate for these remaining emissions to reach their climate targets.
The trend of both consumers and investors demanding more climate action from companies will continue, while regulation requires increased transparency on climate action from companies
More than five thousand companies have committed to action through the Science Based Targets initiative, while more than two thousand have committed to net zero targets. What will happen when these companies try to access carbon removal credits at the same time?
Because of the expected future scarcity of carbon removal credits, the first buyers aim to secure their own access to carbon removal credits already now.
{ 2 } Exploring new business opportunities
Carbon removal will be a very large market, with opportunities within brokerage, new insurance products, monitoring, verification, logistics, and more.
We’re talking to companies who seek to buy-to-learn, because they want to be the first ones to seize the emerging opportunities.
What opportunities might be available for your business?
{ 3 } Highly rigorous assessment criteria
As the carbon removal market matures, so does the definition of what quality looks like.
McKinsey, Microsoft, and Frontier have all developed rigorous criteria for what to look for when buying carbon removal solutions.
Frontier was founded by Stripe, Alphabet, McKinsey, and others to offer an advance market commitment to buy USD 1 billion of permanent carbon removal between 2022 and 2030. As professional buyers, they know how to compare different technologies.
We’ve summarized the extensive work by Frontier, McKinsey and Microsoft into four assessment criteria for carbon removal solutions.
{ 4 } Portfolios of carbon removal solutions
“Once companies have established what CDR [carbon dioxide removal] solutions qualify as high quality, they will still face a range of project types from which they can choose. At this point, company preferences, risk appetites, and strategic fit will shape the design of a CDR portfolio,” writes McKinsey & Company.
The biggest buyers create portfolios because different types of carbon removal give different benefits.
Some solutions give high permanence, others are a tighter strategic fit, and yet others are a better fit on cost.
{ 5 } Rising consumer awareness and demand
Consumers are “the next frontier” in carbon credits, says BCG after surveying 1,320 consumers.
BCG found that consumers are open to switching to brands that let buyers offset their footprint. The more the item costs, the more consumers are willing to pay to offset their emissions. For example, consumers are more willing to pay a few extra dollars on top of a $200 purchase than on top of a $5 purchase.
Consumers expectations to companies are also rising. About 40% of early purchasers believe that companies should absorb the full cost of their emissions. Many early purchasers also expect transparency about the emissions associated with a product. Furthermore, many want insight into the specific carbon removal projects their carbon credits would contribute to.
What are the quick takeaways for you?
Taking action to lowering net emissions helps attract sustainability-focused customers.
To more than half of the early purchasers, providing an opportunity to offset their emissions is attractive.
Transparency and quality is key. Choose high quality carbon credits and share the details with your customers.
