Investment Need & Support Mechanisms for Scaling CDR in Germany and Europe

1. Targeted investments essential to scale CDR and unlock economic benefits. Carbon dioxide removal (CDR) is not only a climate necessity – it is also a major economic opportunity. By 2050, global CDR could become a €470-940B industry, driving innovation, job creation, and public co-benefits. In Germany, reaching net zero by 2045 could require the removal of 49–229 Mt CO₂e annually, with exact volume depending on residual emissions. Achieving this will require around €6B by 2030 and €90B in total capital investment by 2045, with energy infrastructure and CDR method-specific investments accounting for the largest shares. A broad portfolio of carbon removal approaches must be scaled up - including nature-based solutions, Bioenergy with Carbon Capture and Storage (BECCS), Direct Air Carbon Capture and Storage (DACCS), Biochar Carbon Removal (BCR), and Enhanced (Rock) Weathering (ERW), among other methods.

2. Public policy central to enabling CDR deployment. Governments are pivotal to addressing the four major barriers to CDR: limited demand, high costs, investment risks, and slow permitting. As shown in the scale-up of wind and solar with a compound annual growth rate (CAGR) of ~25% from 2000-2023, targeted public intervention can unlock private capital and accelerate cost reductions. Strong CDR support frameworks combine a long-term vision (e.g., national targets), financing instruments (e.g., subsidies and carbon pricing), and key enablers (e.g., accounting rules and CO₂ storage legislation). Only a handful of jurisdictions – such as Canada, Australia, the UK, Denmark, and parts of the USA – currently meet this bar. Each has taken different paths, but all share the use of binding targets, broad subsidies of more than €300M across removal methods, and regulatory tools that reduce friction and provide clarity. This underpins how comprehensive public action correlates with measurable market growth.

3. Thoughtful EU ETS integration could catalyze CDR at scale. Integrating CDR into the EU Emissions Trading System (EU ETS) is one of the clearest levers to create durable, large-scale demand for permanent CDR. While only seven jurisdictions globally have ETSs that (plan to) include CDR, the UK stands out by planning to limit eligibility to high-permanence methods. The EU could follow suit in ETS Phase V (from 2031), with early indications favoring inclusion of only high-permanence, CRCF-compliant, EU-based removals. To ensure cost-effectiveness and credibility, this report recommends a phased integration focused on high-permanence removals, gradually opening to further CDR methods as they overcome current challenges such as measurement, verification, or permanence. It illustrates how even a low-single-digit share of CDR in the EU ETS could unlock 50–75 Mt of removals p.a. by 2040 while stabilizing allowance prices and avoiding deterrence of deep decarbonization. At the same time, the report does not hide the challenges: reaching 5 Mt by 2030 (~1% of the projected ETS cap) requires a CAGR of ~80% from a starting point of just 0.5 Mt operational capacity in Europe forecasted for 2026. Building on global trends, the EU should avoid lenient offset schemes and instead prioritize a gradual, volume-capped, and quality-driven rollout. CDR buyers and suppliers can prepare despite current uncertainty by aligning with EU quality standards, building measurement, reporting, and verification (MRV) capacity, and establishing EU market presence now.

4. Structured national support framework required to scale CDR in Germany. To seize the opportunity and meet its emissions targets, Germany should accelerate CDR deployment at the necessary pace and scale. Therefore, Germany could adopt a national support framework that includes: (1) public credit procurement to create immediate demand and decarbonize public institutions, (2) one-time grants for early-stage or smaller CDR projects, and (3) carbon contracts for difference (CCfDs) to make large-scale, permanent removals investable. Further instruments such as concessional debt, equity investments or tax credits could complement the support framework but need to be detailed and evaluated carefully. Together, these mechanisms can de-risk projects, crowd in private capital, and enable a credible market ramp-up. Implementing this package would address Germany’s current shortfalls: the absence of an adopted CDR strategy, lack of legal clarity on CO₂ transport and storage, and subsidy programs that focus too narrowly on nature-based CDR methods. The current legislative period offers a critical window to finalize the Langfriststrategie Negativemissionen (LNe), pass key Carbon Capture and Storage (CCS) legislation, and operationalize tailored funding schemes. Without this action, Germany risks falling behind global frontrunners – and missing a strategic opportunity to lead in a high-potential climate and industrial domain.