Five years of stagnation: The VCM falls short of projections

For five consecutive years, muted growth and persistent oversupply of poor-quality credits have defined the market. In 2025, credit retirements—a proxy for spot-market demand—reached 157 million metric tonnes (Mt), down 7% from 2024.

This incremental growth is far below what market analysts anticipated earlier in the decade, when several projections expected demand to exceed 1 billion tonnes by 2030. 

VCM credit trends: Concentrated in avoidance and reduction

The VCM has historically been concentrated in avoidance and reduction carbon projects,  largely dominated by REDD+, renewable energy,  and cookstoves credits. 2025 marks the first year a new credit type has dominated, though: projects that reduce emissions of superpollutants now make up roughly 20% of all credits issued in the VCM. Superpollutant issuances increased by about 180% between 2020 and 2025, while retirements grew by roughly 150%.

CDR remains a small but critical VCM segment 

In 2025, CDR credits accounted for only 5% of 2025 retirements, but have a more active forward offtake market—where buyers commit today to purchase credits that will be delivered in the future, providing crucial early-stage financing for projects.

Within the CDR category, high-quality credits are still hard to find. Applying our Criteria for High-Quality Carbon Dioxide Removal, we find that less than 10% of the CDR projects we review meet our high-quality threshold with minimal reservations.

Nature-based CDR dominates the spot market

Of the all CDR credits issued in the VCM in 2025, 95% originated from nature-based CDR pathways, while 5% represented high-durability CDR pathways such as biochar or bioenergy with carbon capture and storage (BECCS). This distribution reflects the mature role that nature-based CDR projects continue to play in the market, alongside the early stage of durable CDR deployment.

Within nature-based credits, supply and demand dynamics differed significantly between afforestation, reforestation, and revegetation (ARR) and improved forest management (IFM). 

• For ARR credits, issuances and retirements have tracked closely at a roughly 1:1 ratio, with issuances remaining flat at around 7–8 Mt annually over the past four years, leaving little inventory available for spot purchasing. 

• IFM credits, by contrast, have grown 2.5-fold since 2023, making them one of the largest sources of growth within nature-based credits, though high-quality CDR credits from IFM are in much lower supply.

For buyers, this means ARR credits are increasingly difficult to source on the spot market, while IFM credits are more readily available—though careful diligence is needed to identify high-quality projects.

Nature-based offtakes and commitments have expanded in recent years, with more than 90 Mt of future delivery now contracted or committed. The vast majority of these commitments are concentrated in ARR projects, highlighting both the supply constraints facing ARR today and buyers' foresight in securing the supply they will need in the near future.

High-durability CDR is almost entirely forward looking

The spot market for high-durability CDR credits represents only 0.3% of activity in the VCM, but important dynamics are beginning to emerge as more high-durability CDR technologies reach the market.

From 2021 to 2025, roughly 80% of high-durability issuances and retirements came from biochar and geologic storage. However, the emergence of large-scale geologic CDR projects is beginning to shift the balance, with individual projects capable of delivering hundreds of thousands of tonnes annually. Early-stage methodologies such as enhanced rock weathering (ERW) and ocean alkalinity enhancement (OAE) issued their first credits in 2025, totaling roughly 12,000 tonnes.

While the spot market for high-durability CDR is growing and diversifying, forward offtake agreements continue to define the landscape. The ratio of high-durability spot retirements to volumes committed through forward offtake is 1:70—meaning for every tonne retired today, 70 tonnes have been committed for future delivery.

Forward offtake commitments are rising across CDR pathways

To date, forward offtake agreements, advanced market commitments (AMC), and large contracted deals with intermediaries cover more than 40 Mt of high-durability CDR, in addition to over 90 Mt of nature-based CDR. These cumulative volumes highlight the increasingly central role of forward purchasing in shaping future supply, particularly for capital-intensive, high-durability pathways. 

However, the success of forward offtake strategies depends critically on careful due diligence. Without a rigorous assessment of technological readiness, project viability, and delivery risks, forward commitments risk financing projects that fail to deliver, undermining both individual investments and broader market confidence.

Market concentration of forward offtake remains high

A small group of companies continues to drive the majority of forward offtake activity. In 2025, Microsoft remained the clear market leader, accounting for roughly 60% of contracted nature-based CDR offtakes and more than 80% of high-durability offtakes with a named buyer announced to date. Other active buyers—including Google, JPMorgan Chase, Equinor, and Amazon—have expanded their commitments, but overall market concentration remains high.

This concentration reveals both opportunity and risk: while anchor buyers are proving the market model works, broader participation is needed to unlock the full scale of CDR deployment required.

Growing gap between climate ambition and market action

Corporate climate targets anchor most current VCM activity: All of the top-10 buyers in the market today participate based on either self-declared commitments or net-zero commitments aligned with the Science Based Targets initiative (SBTi).

Demand forecasts based on these future commitments project that total CDR demand could reach 46-110 Mt by 2030, a ~6-14x from today. Yet, how companies decide to implement their targets will ultimately affect the composition of CDR demand within the VCM.

Rather than relying solely on public commitments, we analyzed the behavior of companies that are actively purchasing CDR today. Should today's top buyers follow through on their stated CDR commitments, CDR demand could reach a minimum of 28 Mt by 2030, with 6.5 Mt of demand for high-durability CDR.

However, the discrepancy between observed demand and target-led scenarios shows a persistent gap between what companies say and what they do. SBTi reported a 227% surge in companies setting both near-term and net-zero targets in the 18 months leading up to mid-2025, while carbon credit retirements in the VCM fell 7% in 2025. 

Shifting from intention to execution will ultimately determine whether the VCM evolves into a durable, functioning marketplace or stalls short of the scale required for credible, net-zero pathways.

Rising trends of greenhushing and anonymity obscure CDR demand

In the broader VCM, 55% of tonnes retired on the spot market over the past three years have been anonymous, and that fraction has been increasing. A similar trend is true of high-durability CDR: nearly 40% of all offtake transactions made in 2025 did not disclose the participating buyer. This buyer behaviour could reflect the often-discussed greenhushing phenomenon.

When anonymous actors dominate, it becomes harder to track demand signals, verify corporate progress, and establish clear integrity benchmarks. This opacity creates systemic risk for the entire market.

Market growth tipping points on the horizon

Several pivotal events on the horizon could mitigate risk and unlock project development, tipping buyers into action after half a decade of limited market growth:

• Voluntary demand: Publication of SBTi's revised Corporate Net Zero Standard V2.0 will likely clarify procurement expectations for the over 10,000 companies signed up to SBTi.

• Compliance demand: Decisions on inclusion of CDR in the UK's Sustainable Aviation Fuel (SAF) mandate and in national Emissions Trading Scheme (ETS) programs could create the first large-scale compliance demand for CDR credits.

• Regulatory support: Publication of Article 6.4 methodologies under the Paris Agreement and loosening of CORSIA credit supply bottlenecks could expand eligible supply and boost buyer confidence.

These tipping points in policies, standards, and market structures are advancing with clear timelines, creating conditions to move CDR procurement from hesitation to activation.

CDR supply faces critical challenges

While buyer inaction poses one threat to market growth, the supply side faces its own critical challenges.

30%–220% more investment is needed in nature-based CDR supply

Nature-based CDR would require a 30%–220% increase in finance to support current corporate targets. Carbon Direct has identified US$18 billion in publicly committed funds for nature-based CDR announced from 2018 to 2025. If deployed immediately to generate high-quality CDR, this level of funding could translate into up to 32 Mt per year by 2030 and 290 Mt cumulatively through 2040.

This is sufficient to meet the conservative 28 Mt demand floor from today's active buyers—but falls well short of what would be needed if even a fraction of companies with 2030 targets begin executing on their stated commitments.

80% of high-durability CDR projects are at risk

The situation is more acute for high-durability CDR. We estimate that over 80% of the total 2030 credit supply pipeline is at risk, due to insufficient project offtake and financing agreements.

Without increased offtake and financing support, we expect that the landscape for capital-intensive, high-durability CDR may consolidate

CDR buyers will determine which projects get built

The supply-side ecosystem features a sufficient number of high-quality CDR suppliers with the potential to scale. These suppliers face purchasing behavior insufficient to meet buyers' own stated climate goals. In this environment, every CDR procurement decision matters. Companies that delay procurement risk missing their own climate targets while also ceding competitive advantage to early movers who secure the limited supply of high-quality credits. 

Five actions to strengthen the CDR market

Buyers and investors can play a critical role in reducing project risk and strengthening the CDR market. Our full report details five essential actions:

1. Use purchasing power wisely

2. Prioritize project diligence

3. Construct bankable contracts

4. Support market data transparency and CDR goals

5. Undertake project assurance

Each action addresses specific market failures and, when implemented strategically, can significantly improve the likelihood that high-quality CDR projects reach operation and deliver credits as contracted.

With 2030 only four years away, the window for action is rapidly closing. Early movers will secure supply and define market standards, while those who wait risk entering a crowded market with limited access to high-quality credits and escalating prices.