From Proof of Concept to Proof of Market
Over the last five years, carbon removal has moved beyond proof of concept to become a credible and necessary part of the journey to net zero. The next five years are about proving the market. Drawing on Carbonaires' work with project developers and capital providers, this paper examines what is holding back investment and what needs to change to unlock it.
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Executive summary
Since 2021, demand for carbon removals has become more established, supported by a broader, more diversified buyer base. Annual contracted volumes grew from 6 million tonnes (Mt) in 2022 to 64 Mt in 2025 (~120% CAGR), comprising 35 Mt of nature-based and 29 Mt of engineered removals. Government policies, evolving net-zero standards and proposed compliance mechanisms are starting to provide clearer signals of future demand, while buyers, project developers and investors have become more sophisticated, with increasingly aligned expectations around quality.
The key constraint is shifting from technical feasibility (proof of concept) to market viability (proof of market): whether carbon removals can be understood, priced and financed by mainstream capital.
Commercial commitments have outpaced both delivery capacity and project financing, making access to capital a key bottleneck. Many otherwise viable projects remain unbankable due to how offtake agreements allocate risk between buyers and developers, capital requirements exceeding investor appetite, or concerns over counterparties' ability to meet contractual obligations. These barriers can be overcome.
The work ahead is to develop market rules, contractual frameworks and financing structures that meet mainstream investor requirements, enabling carbon removals to access a much broader pool of capital. Growing demand and repeat transactions should encourage standardisation of contractual terms.
As the market moves towards delivery at scale, understanding what makes projects bankable is therefore increasingly urgent. This paper draws on public market data, Carbonaires' 2026 request for proposals for offtake-backed financing, 471 project reviews since our founding, and discussions with investors and lenders. It identifies barriers to investment and explores how they can be overcome, primarily for investors, lenders and developers, but also for buyers and policymakers.
Key takeaways
- Every part of the market has developed since 2021. Finance remains the least mature.
- More companies are signing multi-year offtakes, broadening demand beyond the largest buyer.
- Key dates for potential demand include SBTi's requirement from 2035, planned UK emissions trading integration by the end of 2029 and proposed EU purchases from 2031.
- The market has responded well to past criticism and is now aligned around new benchmarks of quality.
- Debt is growing slowly. Offtake terms, deal size and counterparty strength still constrain lending at scale.
- Market rules, contracts and financing structures need to become easier for mainstream investors to assess.