Net Zero: How Are Carbon Dioxide Removal Technologies Funded?

In the last article on this blog, we took an in-depth look at the topic of Carbon Dioxide Removal (click here for the article). Carbon Dioxide Removal refers to all technologies that actively remove CO₂ from the atmosphere. Some of the most promising methods include Biochar Carbon Removal (the conversion of biomass into stable carbon for long-term storage), Enhanced Weathering (accelerating natural weathering processes to bind CO₂), and Direct Air Capture and Storage (directly filtering CO₂ from the air and storing it).

Companies and countries around the world are setting ambitious targets to achieve net zero. These technologies are essential to that goal. However, they are often very resource- and cost-intensive.

So who is going to pay for that? Businesses will, through carbon credits aimed at increasing the funding of CDR technologies. Carbon credits are nothing new. Here’s a simple explanation of how they work: In order to reach net zero, a company reduces its emissions as much as possible and offsets hard-to-avoid emissions by purchasing carbon credits. By buying carbon credits, the company funds projects that prevent greenhouse gases from being released or remove them from the atmosphere. We’ll take a closer look at the different types of carbon credits later on in this article.

But first let’s look at how carbon markets are organized. There are compliance markets and a voluntary carbon market. In compliance carbon markets, businesses – mainly those that emit a lot of CO₂, such as the automotive industry and oil & gas companies, for example – are legally obligated to offset their emissions. In the voluntary market, businesses choose of their own volition to purchase carbon credits, often for strategic motives such as to improve their sustainability performance, to prepare for stricter regulations in the future, or to fulfill the expectations of their customers and investors.

When a business purchases carbon credits, that doesn’t necessarily mean that it is investing in CDR and thus in biochar carbon removal, enhanced weathering, or direct air capture. That happens, in fact, only in very few cases. At present, the vast majority of carbon credits are either avoidance or reduction credits. Avoidance credits funnel money to forest protection, for example, while reduction credits direct funds toward the transition to low-emission cooking stoves or toward improvements in industry. The crucial difference from carbon removal is that no CO₂ is reclaimed from the atmosphere. Hence, in order to achieve carbon neutrality, the focus in the future must be more on carbon credits associated with projects that remove and lastingly sequester CO₂. On one hand, regulators are ratcheting up the pressure toward this end, as the amendments to Switzerland’s Climate and Innovation Act illustrate, for instance. And on the other hand, there are more and more platforms that specialize in carbon removal credits.

One carbon removal credit platform provider, for example, is Carbonfuture, which helps other companies reach their net-zero targets through CDR credits. Strengthened by a strategic investment made by SIX in September 2024, Carbonfuture offers a portfolio of projects that are capable of removing CO₂ from the atmosphere or biosphere and sequestering it for centuries. All relevant data are collected digitally and are certified by an independent standards body.

First, a company works together with Carbonfuture to determine the amount of emissions to be offset and to identify which type of projects best match its goals. Afterwards, the company chooses from a portfolio of verified projects that meet strict standards such as Carbon Standards International or Puro.earth.

One credit equals one ton of removed CO₂. Each ton is recorded in a digital registry to ensure transparency and traceability. After credits are purchased, the buying company receives official verification that it can use in sustainability reports or in ESG disclosures. Companies like Carbonfuture also provide digital Monitoring, Reporting & Verification (dMRV) systems that collect data to permanently surveil the projects and ensure that CO₂ remains sequestered as promised.

Carbon markets must grow rapidly in the near future. This presents an opportunity also for traditional securities exchanges. They are ideally equipped to provide urgently needed organized trading platforms for voluntary carbon credits. Bringing supply and demand together and channeling capital flows at scale, thereby ensuring price transparency and liquidity, is the business model of securities exchanges.

Net zero is not an easy goal, but it is a necessary one in the fight against climate change. A combination of constant emissions reductions and investments in innovative projects is needed to reach this target. Special CDR technologies are enormously important in this context. If they accordingly are promoted and nurtured today, carbon neutrality is definitely realistic in many cases.