The carbon dioxide removal (CDR) market is moving in two very different directions at once.
On one side, industry efforts to build clearer standards and reporting frameworks continue to gain momentum. On the other, Microsoft, the single largest buyer of CDR certificates to date, has reportedly paused new purchases. The stop has caused significant uncertainty for project developers and the broader voluntary market.
Together, these developments highlight an important tension in CDR today. While the market is becoming more structured, its strongest source of demand may be stepping back, at least for now.
The Intergovernmental Panel on Climate Change (IPCC) recently convened experts in Rome to begin work on its 2027 Methodology Report on Carbon Dioxide Removal Technologies, Carbon Capture, Utilization, and Storage. The report is intended to give governments a scientific basis for estimating CO₂ emissions and removals across a range of pathways.
The guidance is expected to cover several major CDR approaches, including:
Direct Air Capture (DAC)
Soil- and Biomass-Based Removals
Coastal Ecosystem Pathways
Durable CO₂-Derived Materials
The work falls under the IPCC Task Force on National Greenhouse Gas Inventories. This task force develops internationally agreed methodologies for estimating and reporting greenhouse gas emissions and removals under the United Nations Framework Convention on Climate Change and the Paris Agreement.
The report is scheduled to move through four development meetings and two formal review stages before going to member governments for approval by the end of 2027.
These and other efforts by stakeholders suggest that the market is still pushing toward stronger definitions of quality, transparency, and accountability.
Related: Regulatory Breakthrough in CDR Market Readies It for Scale
The push for stronger standards comes at a difficult moment for the voluntary CDR market.
Microsoft, which has accounted for the overwhelming majority of large-scale CDR purchases so far, has reportedly paused new buying. The timing itself is noteworthy as the pause came just after the company signed another major agreement: a fifteen-year offtake for 620,000 tons per year from a Canadian BECCS project using waste sawmill residues and carbon technology from Svante.
For a market that has relied heavily on a small number of early buyers, especially Microsoft, the implications are significant. A pause from the company removes a major source of funding for emerging projects. It also weakens near-term demand visibility across the sector.
As Microsoft continues to expand its data center footprint and increase energy consumption, the implied need for carbon removals would also be expected to rise. Slowing purchases now could worsen the company’s carbon balance unless it finds other pathways to manage emissions or lower the cost of mitigation.
Related: Microsoft Strikes Largest Biochar CDR Deal with Exomad Green
One possible explanation is cost. Current estimates place CDR cost at around $250 per ton of CO₂, and that number may rise in the short-term. Accordingly, Microsoft may be delaying further commitments until policy obligations sharpen or more cost-effective compliance mechanisms emerge.
By the end of 2024, Microsoft had reported nearly thirty million tons of CDR in its portfolio, including twenty-two million tons purchased in that year alone.
But the timing of those purchases matters. Much of the volume is scheduled for delivery from 2030 onward. Less than 600,000 tons were retired against the company’s 2024 emissions.
Microsoft also continued contracting large volumes through 2025 and early 2026. Again, these amounts are largely focused on delivery deep into the next decade.
That means the company’s buying has helped scale project development. But it has done less to address near-term emissions.
Until now, Microsoft’s approach has largely been shaped by voluntary corporate net-zero goals. The company has also argued that stricter public-sector rules are critical to scaling the market with integrity and equity. In particular, government carbon removal accounting frameworks must remain aligned with Article 6 of the Paris Agreement.
Since those statements were made, the policy backdrop has changed.
The Trump administration exited the Paris Agreement while also supporting changes to US federal tax credits that continue to monetize CDR as part of carbon intensity reduction in markets such as biofuels. That has helped drive investment in carbon removal within the ethanol sector. Here, buyers may be able to procure decarbonized fuel at a subsidized rate rather than purchasing removals solely as offsets against physical emissions.
This distinction matters as some parts of the CDR market are no longer just about compensating for emissions after the fact. They are becoming embedded in fuel pathways and other decarbonization strategies that can directly affect a product's physical emissions profile.
Microsoft itself has moved in that direction. The company recently joined Danish logistics firm DSV, United Airlines, and Phillips 66 in a deal to enable eleven million gallons of sustainable aviation fuel. Under the arrangement, United Airlines will use the fuel, while DSV and Microsoft will account for the emissions reductions through a book-and-claim model.
That transaction is expected to mitigate roughly 100,000 tons of physical CO₂ emissions.
The CDR market is still maturing, and recent developments show that supply-side credibility and demand-side confidence do not always move together.
Standards are advancing. Methodologies are becoming more formalized. Frameworks for responsible removals are getting stronger. But the market still depends heavily on a limited number of buyers willing to commit capital at scale.
If Microsoft is indeed slowing new purchases, even temporarily, the effects could ripple well beyond its own portfolio. For developers, investors, and other potential buyers, the next phase of the market may depend on whether demand broadens and whether policy creates clearer incentives to support that growth.
At this moment, the market is mixed. Foundational steps forward show promise for progress. But Microsoft’s pullback will shake the market’s stability as it continues through this critical developmental stage.