Companies are racing to reduce emissions to meet net-zero targets, with carbon credits evolving as a complementary strategy both during transition phases and to address residual emissions that cannot be eliminated.
Two major approaches dominate this space: engineered carbon dioxide removal (CDR) technologies and nature-based removals (NBR). While some industry sources use CDR as an umbrella term that includes both engineered and nature-based solutions, for clarity in this guide, we distinguish between these approaches. Each offers distinct advantages and limitations businesses need to understand to maximize their climate impact and navigate upcoming regulatory changes.
What's the difference between engineered carbon removal and nature-based removals?
Engineered CDR technologies like direct air capture (DAC) and bioenergy with carbon capture and storage (BECCS) offer long-term solutions by permanently removing CO₂ from the atmosphere. These technologies specifically remove carbon and store it for extended periods, unlike avoidance credits that prevent emissions from occurring in the first place.
Forward-thinking companies are increasingly backing these technologies despite their higher costs and limited availability. United Airlines recently invested in DAC startup Heirloom, securing rights to 500,000 tons of CO₂ for sequestration or sustainable aviation fuel production. Similarly, Climeworks partnered with Morgan Stanley to remove 40,000 tons of CO₂ by 2037.
While engineered CDR technologies are still evolving, they show tremendous promise for scaling carbon removal at industrial levels. Some approaches like BECCS even generate energy during operation, creating additional value streams. Ongoing innovation, strategic investment, and efficiency improvements are rapidly making these solutions more economically viable, with costs projected to decrease significantly as adoption increases.
Nature-based removals include afforestation, reforestation, and soil carbon sequestration. These approaches are typically more cost-effective and immediately scalable. They also deliver additional benefits beyond carbon removal, including:
- Biodiversity protection and ecosystem restoration
- Community economic development and sustainable livelihoods
- Water quality improvements and flood protection
- Preservation of indigenous land rights and cultural heritage
For example, Microsoft recently committed $200 million to purchase 3.5 million carbon credits from Brazilian startup re.green to restore parts of the Amazon and Atlantic forests. In the UK, Atom Bank purchased 10 hectares of newly planted woodland (approximately 35,000 trees) on a former coal mine to compensate a decade's worth of carbon emissions.
The downside: Nature-based projects can face permanence and leakage concerns. Risks like deforestation, wildfires, and land-use changes can compromise stored carbon.
While new monitoring and verification technologies are improving credibility for both technology and nature-based approaches, buyers must conduct thorough due diligence.
Supply and demand dynamics: Carbon credit pricing and supply challenges
The voluntary carbon market is experiencing major price swings due to supply constraints, rising demand, and shifting regulations. As companies intensify their decarbonization efforts, high-quality credits will become more expensive.
According to a McKinsey analysis, demand for engineered CDR credits could reach up to 100 million metric tons of CO₂ by 2030, and there is growing consensus that demand will outpace supply, creating urgency for early adoption.
High-quality NBR credits are similarly in extremely high demand with very limited market supply. Investors are prioritizing projects that demonstrate both “additionality” (meaning they wouldn't happen without carbon finance), permanence, and verifiable ecosystem services such as measurable positive impacts on biodiversity.
Without significant technological breakthroughs and financial incentives, the supply of high-quality engineered CDR may not keep pace with increasing corporate demand, driving prices even higher. This shift in buyer preferences has created pricing disparities. Projects with strong co-benefits and verifiable carbon sequestration can command premium prices, while lower-integrity credits face declining demand.
Market dynamics, regulatory frameworks, technological advances, and standardization efforts all contribute to long-term price stability in the voluntary carbon market. Companies need to monitor these factors closely as they develop their carbon credit strategies.
Why early adoption matters
Despite pricing volatility, companies that engage in the voluntary carbon market sooner rather than later stand to benefit from lower costs, better risk management, and stronger market positioning. As demand for high-quality credits continues to rise, securing carbon removal credits now can provide a hedge against future price increases.
With demand for high-quality carbon credits projected to far outpace supply through 2030 and beyond, early movers can lock in favorable pricing and secure access to increasingly scarce high-integrity projects before supply constraints become even more severe. This supply limitation is particularly acute for engineered CDR technologies, which makes early partnerships and procurement strategies essential.
In many markets, sustainability drives customer loyalty and investor confidence. Organizations with robust carbon credit strategies position themselves as industry leaders. By committing to a consistent, long-term climate strategy and showing proactive engagement, businesses can attract sustainability-conscious customers and investors while differentiating themselves from competitors.
Beyond cost considerations, early carbon credit adoption plays a crucial role in corporate risk mitigation regarding both price and availability. Companies that proactively invest in carbon removal demonstrate their commitment to sustainability, reducing exposure to reputational risks associated with inaction. For example, the Science Based Targets initiative (SBTi) is working to update its Scope 3 guidance to recognize voluntary carbon market engagement as part of comprehensive climate strategies. (As of April 2025, this update is in the public consultation phase.)
As investors, consumers, and regulators increasingly scrutinize corporate climate claims, firms with credible decarbonization strategies that include strategic carbon credit use can better maintain stakeholder trust and competitive advantage within these evolving frameworks.
Strategic considerations: Long-term agreements, timing and portfolio diversification
Long-Term Offtake (LTO) agreements represent one of the most effective strategies for securing future carbon removal capacity in an increasingly constrained market. By committing to purchase credits over extended periods (typically 5 to 10 years), companies not only hedge against anticipated supply shortages and price increases but also provide project developers with the financial certainty needed to scale operations. These agreements are particularly valuable for emerging engineered CDR technologies, where early corporate support can accelerate development and ensure preferential access to limited capacity.
Developing a well-balanced carbon credit strategy requires careful consideration of when to buy credits, when to retire them, and how to diversify portfolios to mitigate risk.
Many companies are adopting a “buy-now, retire-later” approach, purchasing credits at current market rates but delaying retirement until they are needed to meet future sustainability targets. This strategy enables organizations to hedge against rising prices while keeping their carbon management plans flexible.
Portfolio diversification is another crucial element of strategic carbon credit procurement. Companies that spread investments across different project types, geographies, and credit vintages can minimize exposure to price volatility, regulatory changes, and project-specific risks. A balanced portfolio may include a mix of NBR for short-term climate action and engineered CDR credits for long-term decarbonization commitments.
Risk management is an essential component of carbon credit strategy, requiring businesses to assess continuously the integrity and financial stability of their projects. Organizations should conduct rigorous due diligence on project developers, ensure alignment with internationally recognized standards, and work with qualified third-party verification bodies to enhance credibility. In addition, long-term contracts and forward purchasing agreements can help to provide price certainty and secure access to high-quality credits as market conditions evolve.
The bottom line
While the voluntary carbon market faces challenges typical of any developing market, the business case for carbon credits remains strong. The growing distinction between engineered CDR and NBR underscores the importance of selecting high-integrity projects that align with long-term decarbonization goals.
Organizations that move early to secure high-quality credits will benefit from cost savings, risk mitigation, and market leadership. By implementing a well-diversified approach that balances immediate action with long-term resilience, companies can leverage the voluntary carbon market to drive meaningful climate impact while maintaining a strong competitive edge in the sustainability economy.
Learn how CEEZER can help your company build, procure and monitor a diversified carbon portfolio that meets your needs. Schedule a call with our Solutions team today!
