Captured and Accounted For: Regulating the Future of Carbon Removal
As the world races towards net-zero emissions targets, carbon removal (also known as carbon dioxide removal or CDR) is gaining unprecedented attention. The stakes are high: the UN’s climate science panel (IPCC) has stated that deploying carbon removal is “unavoidable” to neutralize hard-to-abate emissions and reach net-zero[1]. It is becoming increasingly vital for efforts to ramp up: from development of new technologies to the means of taking them to market and – above all – to form regulation and policy that support this emerging field. Here, we explore the legal frameworks that are emerging around the world that will define not just how carbon is removed, but what climate action really looks like in practice.
What Is Carbon Removal and Why Does It Matter?
Carbon removal refers to any process that takes CO₂ out of the atmosphere and stores it in a stable form. This can be achieved through natural methods (like planting forests or enhancing soil carbon) or technological methods (like direct air capture machines that chemically extract CO₂ from air for underground storage)
Carbon removal is becoming increasingly important because most climate scenarios rely on it to limit warming to 1.5 °C. The IPCC estimates that roughly 6 gigatons of CO₂ per year may need to be removed by 2050 to meet the 1.5 °C goal. This need has elevated carbon removal from a fringe concept to a critical component of climate policy. It is not a substitute for deep emissions cuts, but a complement: even if we aggressively reduce emissions, some activities will still emit GHGs, and removals can counterbalance those residuals to achieve net-zero.
Crucially, carbon removal also offers positive co-benefits and business opportunities. Analysts project that by 2050 the carbon removal industry could become a trillion-dollar market, akin to a major new sector of the economy. Entrepreneurial activity is already picking up – from startups developing direct air capture plants to ventures turning captured CO₂ into products.
Why Legal Frameworks Are Essential for Carbon Removal
As the technology and entrepreneurial activities spur on, governments and regulators also need to step in to ensure that we can make the most of this opportunity for a sustainable future. Policy and legal frameworks are needed to catalyze carbon removal through incentives and to regulate it to ensure quality and accountability.
Robust legal frameworks can help in two key ways:
Incentivizing investment and innovation: Incentives such as funding R&D, de-risking first-of-a-kind projects, and creating financial incentives (e.g. tax credits, grants, carbon pricing) that make carbon removal projects economically viable remain necessary.[2]
Setting standards and ensuring integrity: A carbon removal is complex to measure, legal frameworks are emerging to define what counts as a valid removal and ensure it delivers real, lasting climate benefit. Monitoring, reporting, and verification (MRV) standards are key to building trust, ensuring permanence, and preventing greenwashing in this rapidly growing sector.[3]
The good news is that governments and even companies are waking up to these needs. In the past few years, there’s been an explosion of interest in creating a governance framework for carbon removal. For example, back in 2021 the EU announced plans to develop a carbon removal certification system, and by late 2024 it delivered on that promise with a first-of-its-kind regulation (discussed below). In the private sector, a coalition of tech companies (Stripe, Alphabet, Microsoft, and others) launched the Frontier fund with $925 million to buy carbon removal by 2030, providing a strong demand signal for high-quality projects.
Key initiatives to watch out from around the globe are discussed below.
Global Initiatives and Regional Carbon Removal Frameworks
Global Efforts and Agreements
Carbon removal is gaining momentum globally as countries recognize its role in achieving net-zero goals. The Paris Agreement implicitly relies on carbon sinks and removals: countries’ mid-century net-zero pledges assume that any remaining emissions will be counterbalanced by removing CO₂. The Mission Innovation CDR Mission, launched at COP26 by the U.S., Saudi Arabia, and others, aims to scale up removal to 100 million tonnes annually by 2030 through research and demonstration funding[4]. Under the Paris Agreement, Article 6 enables countries to trade carbon credits, including removals, with standardized accounting to support a global market. The IPCC’s guidance and the COP28 stocktake have further emphasized the need to ramp up removals. Voluntary initiatives are also emerging: the Integrity Council for the Voluntary Carbon Market (IC-VCM)[5] is setting global standards for credit quality, while the NextGen CDR Facility and First Movers Coalition are creating early demand by coordinating cross-border purchases. These collective efforts are shaping the foundational rules for scaling carbon removal responsibly and effectively.
United States: Incentives and Innovation
The United States has taken a lead in spurring carbon removal through powerful financial incentives and major investments, positioning itself as a hub for CDR innovation. Two recent laws – the 2021 Bipartisan Infrastructure Law (BIL) and the 2022 Inflation Reduction Act (IRA) – delivered an unprecedented boost to carbon removal efforts. Together these laws directed billions of dollars toward CDR and signaled long-term support, giving the U.S. a reputation as a “global leader” in carbon removal policy[6]. Another cornerstone of U.S. policy is the Section 45Q tax credit, which was expanded under the IRA. This provides a monetary reward per ton of CO₂ captured and stored. For direct air capture projects, the IRA raised the 45Q credit to $180 per ton of CO₂ permanently stored underground – a level that suddenly makes the economics much more attractive for developers.
In addition to tax incentives, the U.S. Department of Energy has committed $3.5 billion to building regional DAC hubs, with initial projects underway in Texas and Louisiana. Other efforts include research funding for alternative CDR methods (like enhanced mineralization and ocean removal) and natural climate solutions, such as soil carbon sequestration on farms.
Regulation in the U.S. is still evolving, but there are some moves toward standards. Federal agencies are developing monitoring and verification protocols for new CDR projects funded by government money. While the 2024’s One Big Beautiful Bill” (OBBB) clawed back some unspent climate funds, it preserved the 45Q tax credit itself as well as several other core incentives[7].
European Union: Toward Standardized Certification
The European Union has been focusing on creating a rigorous framework to certify and integrate carbon removals as part of its climate policy. In November 2024, the EU finalized a landmark Carbon Removal Certification Framework (CRCF) which is the first EU-wide law to certify high-quality carbon removals and carbon farming initiatives. The CRCF covers three main categories: permanent removal, carbon storage in products and carbon farming (land management that reduces emissions).
This EU system is initially voluntary, but it paves the way for future integration of removals into EU climate targets (for example, post-2030 the EU may allow certified removals to count toward national goals or corporate net-zero claims under regulated conditions). The certification framework also calls for an EU-wide registry of carbon removal credits by 2028, to ensure transparency and traceability of each “ton” removed.[8]
Australia: Carbon Credits and Carbon Farming
Australia has developed a robust system of carbon credits that includes carbon removal projects, making it a leading example in the Asia-Pacific of integrating CDR into climate policy. The centerpiece is the Australian Carbon Credit Unit (ACCU) Scheme, originally established under the Carbon Farming Initiative Act of 2011. This scheme provides a regulated market for emissions reduction and removal projects: for every tonne of CO₂ reduced or sequestered, an accredited project earns one tradable ACCU credit.[9]
One key aspect is that ACCUs can be sold either to the government or private buyers, effectively creating a carbon market. The Australian government initially acted as a major buyer through an Emissions Reduction Fund, contracting projects to deliver ACCUs. Now, with Australia’s strengthened 2030 targets and a commitment to net-zero by 2050, ACCUs are also in demand by companies for compliance and voluntary goals.
Japan: A Multi-layered approach to carbon neutrality
Japan has emerged as an interesting case by pushing forward with market mechanisms that include carbon removal. In 2023, Japan started the Green Transformation (GX) League and signaled that it will accept certain carbon removal credits for compliance. In April 2024, the Japanese government announced that durable CO₂ removal credits (especially from abroad) can be used by companies to meet part of their obligations in the GX-ETS.[10]
In parallel, Japan continues its Joint Crediting Mechanism (JCM) partnerships – bilateral agreements with developing countries to finance emissions cuts or removals and share the resulting credits. Some JCM projects focus on forest conservation or methane capture in Southeast Asia, which contribute indirectly to removals. Overall, Japan is building a multi-layered framework combining carbon taxation, an emerging ETS, and crediting systems, with an eye to fostering innovation in areas like DAC and carbon recycling
China and beyond: diverse approaches in Asia
China has so far emphasized natural carbon sinks in its strategy. China has undertaken massive tree-planting and forest expansion programs as a form of carbon removal. In fact, China’s 14th Five-Year Plan set a target to plant 36,000 square kilometers of new forest each year until 2025, aiming to raise national forest coverage and lock away more carbon.[11]
That said, China is also investing in carbon capture and storage (CCS) technology for industry, and some of that know-how could translate to direct air capture in the future. State-owned companies have begun pilot projects on CCS and exploring DAC, but policy support for engineered CDR is still nascent in China[12]. Importantly, China launched the world’s largest national carbon trading system in 2021, but currently it covers power plant emissions and does not yet award credits for removals. In time, China may consider integrating domestic offset credits (CCERs) for reforestation or CCS into its compliance market, pending stricter rules and transparency.[13]
Elsewhere in Asia, approaches are still developing. Singapore implemented the region’s first carbon tax (in 2019) and is now allowing companies to offset a portion (5%) of their taxable emissions using international carbon credits[14]. While Singapore’s focus is not specifically on removals, its use of offsets could include high-quality removal projects abroad, effectively creating some demand.
Several ASEAN countries have abundant forestry resources, so they are interested in monetizing nature-based removals (e.g. mangrove restoration or avoided deforestation) through carbon credits, often for sale on the voluntary market. A trend in the region is toward regional cooperation: ASEAN is discussing a potential unified carbon market to standardize credit trading and possibly boost pricing, as well as harmonizing MRV standards across countries. This could help scale up credible carbon removal projects in Southeast Asia by opening them to a broader market with common rules.
Global Approaches in Summary
Lessons for Companies and Private Players and Next Steps for Policy
For private companies, the evolving carbon removal landscape presents both opportunities and responsibilities. One key lesson is that early action and engagement can provide a competitive advantage. Companies with net-zero pledges are finding that after maximizing emissions cuts, they need to address the remainder with carbon removal – and this is not something to leave until 2049. Companies should follow suit by supporting high-quality removal projects, whether through direct investments, long-term purchase agreements, or R&D partnerships. Not only does this help meet climate targets, it also builds internal capacity to navigate carbon accounting and claims around removals, which stakeholders and regulators increasingly scrutinize.
For companies in the carbon removal supply chain (technology providers, project developers), policy signals are crucial. The existence of government incentives like 45Q or purchase programs can determine whether innovative CDR startups get funding. Businesses in this space should actively engage in policy development – for instance, providing feedback on standards or advocating for supportive measures (like public procurement of carbon removals or inclusion of removals in carbon pricing schemes). There is also likely to be growing demand for measurement and verification services, as every project needs to quantify CO₂ removed. This opens niches for tech firms specializing in sensors, satellite monitoring, or blockchain tracking of carbon credits. In sum, the rise of carbon removal is spawning a new ecosystem of business activity, and getting involved early can position companies as leaders when these solutions scale up.
The Next Steps in Policy
On the government side, despite progress, much remains to be done. Policymakers should consider setting explicit carbon removal targets or strategies for the mid-century mark. Very few countries have concrete CDR deployment goals yet. Governments should also ramp up collaboration – sharing best practices on what works and aligning standards to facilitate international trading of removal credits. This is especially important under Article 6 of the Paris Agreement, to ensure global accounting is correct when credits move across borders.
Another next step is to close policy gaps around oversight and liability. Some frameworks, like the EU’s, already demand liability mechanisms. Others might explore insurance or buffer pools (common in voluntary forestry offsets) to handle reversal risks. Additionally, governments could encourage the development of third-party standards and certification bodies to augment regulations and thus essentially creating an ecosystem of assurance (similar to financial auditing) for carbon removal projects.
Lastly, some NGOs have rightly warned that an over-reliance on future CDR could delay urgent emissions cuts today.[15] Governments should design policies to avoid this moral hazard, for example, by coupling any use of removals with stringent emissions reduction requirements
Conclusion
Carbon removal is no longer a futuristic idea - it is now a necessary part of how the world tackles climate change. Countries are experimenting with different legal frameworks, from U.S. tax incentives to the EU’s certification systems, each contributing to a growing global understanding of how to scale carbon removal responsibly. While there is no universal approach, the shared priority is clear: support growth while ensuring environmental integrity.
For businesses, governments, and communities, the next decade is critical. Carbon removal must scale rapidly, and that will require smart laws, trusted standards, and strong public-private partnerships. It is not a magic fix, but it is an essential part of the solution. With the right frameworks in place, carbon removal can help draw down legacy emissions and build a more stable climate. Getting the rules right today will shape whether carbon removal delivers on its promise tomorrow.
[5] https://icvcm.org/