by Lydia.Chen, Founder of Seoi.Cure CDR

While the concept of financing high-quality Carbon Removal Credits (CDR) is entering uncharted territory, it is not beyond reach.

Carbon credits or offsets have been around for some time, yet the notion of high-quality Carbon Removal Credits (CDR) is relatively novel, particularly to those on one side of the financing solution equation: structured finance professionals. Conversely, for the brilliant minds in the CDR industry, the idea of securitization as a financing tool is somewhat new and unfamiliar.

This discussion paper seeks to capture the attention of leading experts in both securitization and the CDR ecosystem. The aim is to foster a dialogue on how to provide more expansive, lower-cost institutional capital to CDR credit developers. Achieving this is critical for scaling essential carbon removal projects, bridging the technical and financial expertise gaps, thereby significantly reducing funding costs and increasing the funds available for the market to scale to 10Gt

Currently, CDR Credits are primarily acquired through Advanced Market Commitments (AMCs) like Frontier or funded by selling topco equity to venture capitalists (VCs). These traditional funding avenues, whether through advance demand funds or venture capital, can be limited for the goals we want to achieve and and expensive at scale.

The CDR Market - $40 billion to $80 billion by 2030

The high quality CDR market is a huge market yet to be fully tapped, a recent McKinsey report shows that delivering 6 to 10 gigatons of carbon removal would create an industry worth $0.3 trillion to $1.2 trillion annually by 2050

“Based on expected delivery of announced CDR projects, we estimate a market size of $40 billion to $80 billion by 2030.” - McKinsey

CDR Market Size:

1. $40billion to $80billion by 2030 and
2. $0.3trillion to $1.2trillion annually by 2050

On investment gap

1. $0.5trillion to $2.0trillion in cumulative investment would be needed by 2030
2. $6.0trillion to $16.0trillion of investment required by 2050.

Source: McKinsey Sustainability: Carbon removals: How to scale a new gigaton industry

What’s High-integrity CDR?

High-integrity Carbon Dioxide Removal (CDR) refers to a process where each carbon credit represents the actual reduction or removal of one tonne of carbon dioxide from the atmosphere. But it’s not just about the numbers. For a carbon credit to be considered high-integrity, the reduction or removal must be verified and certified according to strict, globally recognized carbon standards. (such as VCS, Gold Standard, ACR, CORSIA, Paris Agreement etc.)