CDR.fyi Insight: Winning Durable CDR Policy

Executive Summary

Carbon Dioxide Removal (CDR) has become a critical component of global net-zero strategies. Early discussions focused solely on cost per ton of CO₂ removed - particularly the seemingly magical, potentially mythical, $100 benchmark - and overlooked critical factors that influence scalability and policy effectiveness, such as the social cost of carbon. However, successful deployment patterns reveal a more complex reality: price creates viability, but regional advantages determine scalability and undergird favorable policy. Importantly, the social cost of carbon, which reflects the true economic damages caused by emissions, underscores that even higher removal costs can deliver significant net benefits to society.

The emergence of the two leading CDR approaches in terms of tonnes purchased - Bioenergy with Carbon Capture and Storage (BECCS) and Direct Air Carbon Capture and Storage (DACCS) - show how this dynamic is working in practice. Initial government support through subsidies and incentives enables project economics. However, long-term success and scalability rely on alignment with regional advantages such as natural resources, industrial capabilities,clean energy potential and existing infrastructure.

Sweden & Denmark’s leadership in BECCS builds on their strong forestry sector and industrial base, made viable by substantial government support. The United States' emergence as a Direct Air Capture hub combines geological storage availability, industrial development and innovation capacity with significant federal funding through, among others, the Inflation Reduction Act and Bipartisan Infrastructure Law.

This interplay between economic enablers and regional advantages offers crucial insights for policymakers and investors. Rather than pursuing a race to the bottom on price, effective CDR policy makes strategic bets based on natural and regional advantages and then provides the economic support needed to realize these advantages at scale. This approach not only supports near-term deployment but also builds sustainable, competitive advantages in specific CDR pathways.

As the industry matures, success requires aligning policy support with regional capabilities to create durable, scalable CDR solutions.

Introduction

As of Dec 2024, BECCS and DACCS have accounted for 76% of durable CDR purchased volume on only 8% of orders. While other methods, particularly Biochar Carbon Removal (BCR) and Enhanced Weathering, have demonstrated traction with 1.6M and 560K tonnes purchased, respectively, BECCS and DACCS have emerged as the front-runners of high-volume purchasers, being the leading methods by volume contracted in 5 of the last 6 quarters.

From an equity investment perspective, DACCS dominates amongst durable CDR methods with 71% of equity value invested from 2020 - 2024.

Notwithstanding that other durable CDR methods may increase and even overtake BECCS and DACCS over the long term, what has led these two methods to account for the majority of volume to date? In seeking to answer this question, it became clear that both methods benefitted from policy advantages from their respective regions that significantly assisted their growth. We dive into the nature of these policies, how they are built on each region’s natural and historical strengths, and draw conclusions as to how other regions and countries can drive winning durable CDR policy.

Method Overviews

Bioenergy with Carbon Capture and Storage (BECCS)

In looking at BECCS volume by country of supplier origin, Denmark and Sweden stand out for their contributions to total BECCS sales. Three transactions account for almost all of the volume: two, where a single supplier in Denmark (Orsted) has committed to supply 3.7 million tonnes, and another in Sweden (Stockholm Exergi) has committed to supply 3.3 million tonnes of CO₂ removal. For all three transactions, the purchaser was Microsoft, which has demonstrated that it focused on “anchor scale” and prioritized high-reliability, high-volume delivery.

The story of these suppliers, who leverage strong industrial ecosystems and biomass resources, is that of these two Nordic countries, driven by their unique combination of natural resources, infrastructure and policy frameworks. Their approach provides an example for scaling durable carbon removal methods effectively.

These are lessons for policymakers and investors from Sweden and Denmark’s leadership in BECCS:

Natural Resources: Sweden and Denmark capitalize on access to vast, well-regulated forest resources which are expertly managed. These provide a sustainable foundation for BECCS with mature biomass supply chains that reduce the cost of sourcing biomass for carbon capture. Additionally, the proximity to the North Sea offers affordable and secure undersea CO₂ storage options, reducing logistical complexities and overall costs.

Industrial Infrastructure: Sweden and Denmark possess highly advanced industrial bases, particularly in sectors such as pulp and paper, district heating and waste management. These industries create natural integration points for BECCS technology. Adding to this foundation is Ørsted's longstanding leadership in renewable energy, which has paved the way for innovative climate solutions. As one of the first companies to transition from fossil fuels to renewables on a large scale, Ørsted demonstrated foresight and strategic implementation, years ahead of most of its peers. Such deep expertise in renewable energy technologies, combined with their experience transforming infrastructure, positions Ørsted as a natural leader in BECCS.

In the case of Stockholm Exergi, their Värtan facility is set to provide district heating alongside carbon removal, maximizing energy efficiency and lowering operational costs of facilities that will be adapted for carbon capture and eventual storage. Integrating BECCS into existing industrial infrastructure not only simplifies BECCS adoption but also leverages an experienced workforce, reducing barriers to implementation.

Strategic Policy: Sweden and Denmark have prioritized clear, long-term policy commitments to support BECCS’s deployment. Sweden’s SEK36 billion (~$3.3B) BECCS program, which spans 2026–2046, is a clear example of such commitment. This initiative primarily revolves around financial support mechanisms aimed at facilitating the development and implementation of BECCS technologies and includes innovative mechanisms like reverse auctions, which de-risk investments and incentivize cost reductions. One significant aspect of this program is the reverse auction system, designed to incentivize investments in negative emissions technologies. Under this system, companies can bid for government support based on their proposed carbon capture projects to reduce costs and promote innovation in the sector.

For its part, the Danish Climate Agreement for Energy and Industry lays the foundational framework for the development of CCS, explicitly including BECCS as a cornerstone of its approach. It allocates funds for feasibility studies, pilot projects and large-scale implementation. The Ørsted's Avedøre Power Station and Asnæs Power Station are central to Denmark's BECCS efforts. These facilities are being retrofitted to capture CO₂ emissions from biomass combustion, with plans to store the captured CO₂ offshore in the North Sea.

Providing predictable funding streams and aligning national net-negative emission goals with BECCS, Swedish and Danish policymakers have created a stable environment for private sector participation.

Industrial and infrastructural foundations are supported by ambitious climate policies. Sweden’s goal of achieving net negative emissions by 2045 specifically incorporates BECCS into its strategy. Similarly, Denmark has policy frameworks with targeted incentives for negative emissions technologies providing long-term certainty and fostering a stable environment for BECCS investments. Norway and Finland, while not as focused on BECCS, play complementary roles: Norway leverages its offshore geological storage capacity and tax exemptions for carbon storage, while Finland contributes through its strong, sustainable forest industry.

Danish and Norwegian political will to collaborate, as seen in projects like Ørsted’s integration with Northern Lights, highlights how regional synergies drive BECCS development by combining resources like CO₂ storage, biomass, and renewable energy across borders. Beyond BECCS, the Nordic region’s broader commitment to sustainability—including renewable energy, advanced infrastructure, and forest management—creates a foundation that supports the development of innovative climate solutions.

In summary, policies are critical to enabling market signals and attracting investments. The Nordic countries benefit from covered emissions schemes and strong political will to operationalize net-zero, creating the potential for demand-side policy support, such as compliance markets for example, that incentivize BECCS deployment.

Direct Air Carbon Capture and Storage (DACCS)

The United States is the clear leader in supplier country of origin in publicly announced DACCS volume. Leading US suppliers, such as OnePointFive, a subsidiary of Occidental Petroleum, and Heirloom, are at the top of the leaderboard of contracted DACCS volume.

Notwithstanding Switzerland’s standing, driven largely by longstanding DACCS pioneer Climeworks, over the last four years, the United States has emerged as the global epicenter for DACCS development and commercialization. As with BECCS in Sweden and Denmark, we see a similar pattern of beneficial natural resources, accelerated by a highly developed industrial infrastructure and galvanized by conducive strategic policy. Let’s examine how these have contributed to the US’s positioning in DACCS.

Natural Resources: The United States Geological Survey estimates a national storage potential of 3,000 metric gigatons of carbon dioxide. To put this number in context, it is 300-500x the annual expected carbon dioxide removal requirements in 2050, over 60x the world’s annual carbon emissions, and almost double the total historical excess CO₂ generated worldwide.

DACCS is considered energy-intensive, processing an enormous volume of air to extract carbon dioxide at roughly 420 parts per million. The rapid expansion of renewable energy in the US, combined with regions of low-cost natural gas (a transition fuel), provides DACCS operators with flexible energy options. Access to affordable and /or clean energy is crucial for minimizing operational costs and maintaining environmental integrity.

Industrial Infrastructure: The US is the world’s leading producer of oil and natural gas. It has developed significant expertise in subsurface exploration and large-scale industrial operations, both essential for DACCS implementation. These industries’ existing infrastructure and knowledge, the country's experience developing large infrastructure projects and sophisticated supply chains, and its skilled workforce, provide compelling ingredients for the rapid scaling of DACCS facilities and operations. For example, regions like the Gulf Coast’s existing oil & gas infrastructure can be repurposed for CO₂ storage and transport, and established regulatory frameworks for CO₂ injection and storage, developed through years of enhanced oil recovery operations, reduce deployment barriers.

In addition, collaboration between national laboratories, research institutions, and private enterprises creates a dynamic innovation ecosystem. From a financing perspective, there is a broad range of capital availability, from Silicon Valley’s venture capital networks and government-backed initiatives that accelerate technological innovations and advancements, to project, debt and private equity financing that can be accessed to scale up.

Strategic Policy: Recent legislation has accelerated DACCS development in the US. The Inflation Reduction Act’s enhanced 45Q credit of up to $180 per ton of CO₂ captured and stored through DACCS serves as an attractive cost subsidy and incentivized project development. If the Carbon Dioxide Removal Investment Act introduced in November 2024 is passed, this subsidy would increase to $250 per net-tonne removed of DACCS.

This bipartisan bill aims to establish a technology-neutral tax credit, potentially designated as 45BB, to support various CDR approaches. Under this proposal, a credit of $250 per ton of CO₂ net-removed would be available for most CDR methods, excluding Bioenergy with Carbon Capture and Storage (BECCS), which would receive $110 per ton.

If passed, the proposed 45BB credit will complement the existing 45Q tax credit and has the potential to generate as much or more uplift for other methods as 45Q has for DACCS.

Additionally, the Bipartisan Infrastructure Law allocated $3.5 billion for regional Direct Air Capture Hubs and $100 million for the Commercial DAC prize, intended to incentivize advancements in direct air capture technologies. The prize is divided into two tracks: one for commercial DAC pilot projects and another for CDR purchasing contracts, as well as $35 million for the CDR procurement program designed to support creating a domestic CDR economy.

Different paths, same playbook.

• Despite their differences, the Nordic countries and the United States demonstrate strikingly similar underlying approaches to advancing CDR technologies.
• Both regions identify and capitalize on their strategic advantages. The Nordic example leverages its robust forestry sector and existing industrial ecosystems to integrate BECCS, making it economically viable, while the U.S. builds on its access to vast volumes of geological storage and access to abundant, low-cost energy.
• Infrastructure is pivotal in accelerating deployment and minimizing capital costs in both regions. In the Nordics, existing industrial facilities support BECCS integration, while the U.S. leverages its extensive oil and gas pipeline network and geological storage capacity to streamline DACCS projects. Integration reduces costs.
• Policy alignment and certainty accelerate both region’s inherent advantages. The Nordics provide long-term certainty through mechanisms like reverse auctions that ensure predictable funding for BECCS projects. Similarly, the U.S. employs economic incentives, such as the 45Q tax credit, alongside government-backed R&D initiatives to attract private investment and lower deployment costs for DACCS.
  
  

Takeaways

In reviewing the success the Nordic countries have achieved in BECCS and the US has in DACCS, we can abstract a framework that both explains their effectiveness and establishes a roadmap for policymakers in other countries and regions to follow.

The foundation of regional success in durable CDR is access to the region’s natural resources. On top of that foundation, there must be the availability of a highly developed industrial and technological infrastructure that enables the exploitation of those natural resources for the fitting development of carbon dioxide removal methods. Winning CDR policy will seek to leverage those natural resources through the industrial infrastructure to accelerate the region’s CDR supplier base.

In essence, while the regional differences - forestry in the Nordics versus oil and gas in the U.S. - shape the specifics, the overarching approach to winning CDR policy remains consistent:

• Identify natural resources with abundant access;
• Determine the strength of industrial infrastructure;
• Design strategic policies with subsidies to lower costs for suppliers to leverage the established industrial infrastructure and usage of natural resources.

As demonstrated by Denmark and Sweden’s leadership in BECCS and the US in DACCS, these simple principles offer a proven pathway for policymakers and investors in other countries seeking to advance scalable and sustainable CDR solutions in their regions.

Final Thoughts

Applying this framework to selected regions worldwide enables us to project where selected durable CDR methods may flourish in future.

Will CDR development and deployment be most effective with policies guided by the framework we have outlined herein or by policies that make investment attractive, regardless of the regional advantages? Email us at team@cdr.fyi - we’d love to hear your thoughts!

Acknowledgements

Key contributors to the CDR.fyi Insight include Isaac De Léon, Nadine Walsh, Tank Chen, Jason Grillo, and Alex Rink.

We are grateful for the external review and feedback of Timothy Bushman, Alexander Mäkelä, Nishad Patel, and other parties who have requested not to be named.