💱 Are carbon pricing systems ready for carbon removal?

💬 Barely a week passes in which I don't hear something along the lines of "CDR is about to take off, country X already integrated it".

❎ As I am sure you know, I also believe that compliance markets are the future for CDR. But I also think that looking at ELIGIBILITY is not sufficient.

💰 Eligibility is just the first gate. Whether any meaningful market for CDR will actually emerge depends on a second, arguably more important factor: PRICE.

👇 Here is what I did: below you can see the 15 carbon pricing systems that have already integrated carbon credits or are planning to. I've included two data points:

1. The average 2025 price for a ton of carbon in each.

2. The average 2025 price for a ton of CDR: nature-based, biochar carbon removal, BECCS, and DACCS.

🔎 The obvious takeaway? The gap between the cost of carbon in carbon pricing systems and the cost of CDR is massive (even with subsidies as is the case for BECCS here).

📉 Sure, costs for most CDR approaches will go down, and that will certainly help close the gap. 

⚠️ But unless the compliance costs go up significantly, CDR will simply be out of reach.

👀 Personally, that means I only really focus on the compliance markets that are already mature (CH, EU, CA) and big (EU, UK, CN) - more on the latter in my next post, watch this space.

🌬️ Finally, none of this will matter if the current political headwinds prevail: current attempts to weaken emission trading systems will prevent carbon costs from rising, which will maintain if not increase the gap for CDR.

🤔 What is your take on this? Anything I am missing in my analysis?

📩 Want to cut through the noise? Stay up to date with the top 10 CDR policy news with my monthly briefing, The GigaTen: https://lnkd.in/d2BKe7gr

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