Is CDR on the rocks?

It’s been a turbulent few years for the carbon dioxide removal (CDR) sector. While momentum for CDR surged in recent years—driven by escalating climate urgency, new technologies, and a groundswell of scientific consensus—recent developments have cast a long shadow over this progress.

As of mid-2026, the CDR sector stands at a precarious crossroads. Political will is fraying, public investment is weakening, and markets are stalling. Companies on the frontier of carbon removal innovation now find themselves scrambling to survive, and despite growing scientific clarity that CDR is essential to achieving net zero and ultimately reversing climate damage, the world’s response remains timid, fragmented, and under-resourced. Meanwhile, global emissions remain near record highs, the Paris Agreement’s temperature goals continue to drift further out of reach, and the gap between climate ambition and implementation continues to widen.

Here are four troubling signs:

1. US climate funding collapses, taking CDR with it: In its zeal to reduce the role of government, the Trump Administration has decimated the country’s landmark climate funding programs, established under the Inflation Reduction Act (IRA). Several core programs supporting CDR, including the DOE’s Carbon Negative Earthshot Initiative and the 45Q tax credit expansion, are now either frozen, slashed, or stalled in bureaucratic uncertainty.
   
   This funding collapse comes at a bad time for our planet. The US was the world leader in CDR, and had created impressive scaffolding for public-private consortia, prize mechanisms, demonstration hubs, and early-stage market investment. Now, much of this is collapsing or gone. For example, the DOE canceled $3.7 billion in carbon capture project awards in June 2025, while subsequent rounds of federal review and project terminations expanded uncertainty across hundreds of additional clean energy and carbon management projects. The EPA also paused the Greenhouse Gas Reduction Fund, a $20 billion IRA-supported investment program that could have helped scale CDR-related infrastructure.
   
   US shortsightedness isn’t just a domestic problem. The US had been serving as a global catalyst, demonstrating that serious national investment in carbon removal was possible. Its sudden retreat is sending ripple effects through ministries and markets worldwide, reinforcing doubts that governments are ready to back CDR at the scale and speed required.
2. A limping market, frayed confidence, and fragile businesses: Despite years of bold forecasts, the CDR market remains anemic. Voluntary carbon credit purchases—especially those focused on removals—have stagnated, with most corporate buyers pulling back or delaying commitments. High prices, unclear standards, long delivery timelines, and a lack of policy clarity have all played a role.
   
   According to CDR.fyi, only a few million tons of durable CDR credits are purchased globally every year—a minuscule figure compared to what’s needed. Of those purchases, the overwhelming majority have historically come from a single buyer: Microsoft. In early 2026, reports emerged that Microsoft had paused new carbon removal purchases while reassessing aspects of its climate strategy, sending shockwaves through the sector. Whether temporary or not, the decision highlighted a troubling reality: a market that depends on a single dominant customer is not yet a mature market.
   
   The consequences were immediate. Developers suddenly found themselves facing a demand cliff, investors grew more cautious, and concerns intensified about whether the sector had become overly dependent on a small handful of corporate climate leaders. The episode exposed a fundamental weakness in the current model: voluntary markets alone have not generated the broad, durable demand needed to support large-scale deployment. Without stronger government procurement programs, compliance markets, or long-term policy signals, the sector remains vulnerable to the decisions of a few large buyers.
   
   Some CDR startups, seeing their funding decline and markets stagnate, are now quietly shifting their focus—diversifying into lower-risk or adjacent segments of the carbon market, such as MRV services, consulting, or credit aggregation—while others are merging or shutting down altogether. Meanwhile, carbon removal credit buyers are adopting a “wait and see” posture. Many want better verification, more regulatory clarity, or lower prices before they step back in. This creates a vicious cycle: buyers hesitate because the market isn’t mature, but the market can’t mature without buyers.
3. Europe adopts a 2040 climate target—but questions remain about carbon removal: In 2026, the European Union formally adopted a legally binding target to reduce net greenhouse gas emissions by 90% below 1990 levels by 2040. On paper, this represents one of the world’s most ambitious climate commitments and sends an important signal that Europe remains committed to long-term decarbonization.
   
   Yet significant questions remain about the role carbon dioxide removal will play in achieving this target. Debate continues over the scale of removals that will ultimately be required, how much reliance should be placed on international credits, and how rapidly Europe should build durable carbon removal infrastructure. Critics argue that Europe still lacks a sufficiently clear roadmap for developing the removal capacity that will eventually be needed to achieve climate neutrality and, ultimately, net-negative emissions.
   
   The result is a mixed picture: stronger climate ambition on paper, but lingering uncertainty about how carbon removal will be financed, deployed, and integrated into Europe’s long-term climate strategy. For a sector that depends on decade-long investment horizons, that uncertainty matters. If Europe remains hesitant on removals while the US continues to retreat, who will lead?
4. The global landscape: A growing gap between science and action: These developments come at a time when the scientific case for CDR has never been clearer or more urgent. The IPCC has repeatedly emphasized that keeping warming under 1.5°C—or even 2°C—will require substantial deployment of CDR, particularly in the second half of this century. Most modeled mitigation pathways continue to rely on 5–10 gigatons of additional carbon dioxide removal annually by mid-century, with some scenarios requiring even larger volumes later in the century.
   
   But today, only a tiny fraction of that is being delivered—largely through nature-based approaches like reforestation and soil management. Engineered removals, such as direct air capture and BECCS, still account for only a minute share of global carbon removal activity. While dozens of companies have announced ambitious deployment plans, only a small fraction of proposed capacity has actually materialized, and the sector remains years away from achieving sustained million-ton-scale deployment across multiple technologies.
   
   The need for rapid progress in CDR is evident, but outside a few national programs and philanthropic efforts, most countries still treat CDR as a fringe consideration—an add-on to climate policy, not a core pillar. There are a few bright spots: Australia has committed to developing a national strategy for CDR; Canada continues to fund large-scale carbon management infrastructure; and Singapore is investing in carbon management and removal technologies. But these are isolated signals, not a coherent response. The gap between what the science requires and what the global policy environment delivers remains wide.

So what happens next? Despite these gloomy headlines, this is not the end of the story for carbon removal. In some ways, it is the beginning of a necessary reckoning.

The CDR sector must grow up, and fast. This means building durable coalitions that include companies, communities, and national, state and local governments. It means distinguishing between short-term hype and long-term value. It means investing not just in startups, but in standards, infrastructure, governance, and equity. And most of all, it means embracing the truth that carbon dioxide removal is not optional, but a foundational part of our climate efforts.

The longer the world continues to delay this reckoning, the higher our costs will be in terms of climate instability, economic disruption, and preventable suffering. Conversely, if we face this challenge with clarity, urgency, and global cooperation, we can get the CDR market off the rocks and begin making real strides to stabilize the climate while there is still time.