With AI driving up emissions, President Trump’s attack on solar and wind projects, and just the general “bad vibes” around the climate movement since the election, one of the lingering corporate questions has been what will happen in the voluntary carbon offset and removal market.
“The hard reality is, political landscapes have shifted a bit,” Peter Minor, CEO of Absolute Carbon, told CFO Brew. “And some of these more nascent, riskier projects, it’s just harder to make them work today.”
Companies are still quietly working to achieve their climate goals, but they are facing some tough truths. The once-hyped engineered solutions and bargain-bin avoidance credits have proven disappointing—overly optimistic for the former, and either too difficult to measure or outright bogus for the latter.
So attention is shifting back to the one system that has sustained balance for millennia: nature-based removals, which include planting trees, rehabilitating mangroves, and enhanced rock weathering, which take advantage of naturally occurring systems to pull carbon dioxide out of the air.
For CFOs looking for carbon removal options, the answer might be “go look at trees.”
Avoidance is out, removals are in. Avoidance credits, or funding a project that prevents more carbon from being released into the atmosphere, have been used as an offsetting mechanism for companies in recent years. For example, a company may pay to protect a forest from logging, to avoid the potential emissions from burning and transporting the wood. These projects account for almost 75% of all credits available, according to research by carbon management firm Carbon Direct. But recent exposés have called into question the efficacy of those projects.
A 2023 investigation by The Guardian into the verified carbon standard crediting organization, Verra, found that 94% of its rainforest credits offered no environmental benefit. Also in 2023, carbon offset project developer South Pole, ended a REDD+ project (Reducing Emissions from Deforestation and Forest Degradation) in Zimbabwe that was supposed to prevent deforestation. The project had issued 36 million credits since 2011, but media reports raised doubts about how much forest was actually being preserved.
“There are avoidance projects that are really high quality, and there’s some that are really bad quality, and it’s really hard to tell the difference,” Minor said.
With avoidance projects, there are not only questions of efficacy, but also inherent difficulties quantifying impacts. They’re tough to evaluate because comparing the reality to a hypothetical situation where a project never intervened is a “counterfactual,” Minor said.
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As a result, companies are shifting their focus from avoidance projects to those that are easier and more concrete to quantify, like negative emissions and emissions reductions, according to Minor.
Tech is out, nature is in. It’s not just avoidance credits that are falling short. Tech-based carbon removals are turning out to be more challenging and less effective than promised. These engineered solutions don’t seem to be delivering the needed results quickly enough, according to climate tech platform Patch’s CEO, Brennan Spellacy.
Engineered solutions like direct air capture use new technologies to pull CO2 out of the atmosphere. But they’re expensive, and they’re currently pulling very little carbon out of the atmosphere. Carbon removal technologies are also a decades-long investment.
“They’re realizing that some of these technologies are taking longer to deploy than initially forecasted,” Spellacy said.
Back to basics. With avoidance credits and tech-driven carbon removal proving ineffectual, companies are turning to nature-based removal.
Minor told CFO Brew that he’s seen demand for nature-based removals grow faster than for any other type of carbon credit. Research backs that up. Removals like reforestation, afforestation, and revegetation have been in highest demand; the former two rank as the second and third most requested by buyers, according to a Patch report on the state of the voluntary carbon market.
Patch also found that nature-based solutions, both removal and avoidance, make up seven of the top 20 most requested projects, while another seven are hybrid, including both technological and natural solutions working in tandem.
More volume, sooner and cheaper. Companies still have carbon goals to meet so they’re turning to what’s available now at a good price.
Spellacy sees that as an opportunity for developers with nature-based removals in their portfolio to command a premium on projects that will deliver volume in 2025 and 2026. Nature-based carbon removal solutions are also easy for companies to access.
“Forestry is something that is available today. It’s available at scale,” Minor said. “We’re seeing an acceleration there, not just because it is higher quality now, but I think purely just because it’s there and they need something.”