By Siyu Feng, Johanna Arlinghaus, Joseph Stemmler, Steve Smith and Sam Fankhauser, based on their new working paper: A Taxonomy of Policies to Support Geological Carbon Dioxide Removal. They have also written a related policy briefing with recommendations for decision-makers. Read it here. Join us for a webinar featuring two of the authors and perspectives from industry and advocacy on 18 June at 12pm.
As countries race to meet net-zero goals, carbon dioxide removal (CDR) is increasingly seen as a necessary part of the solution to counterbalance residual emissions by hard-to-abate sectors—not just a backup plan. Yet, current national plans fall significantly short of the CDR levels needed to meet most climate goals, and only a handful of countries have laid out clear strategies to scale up CDR by 2050 (Lamb et al., 2024a). Bridging this gap requires a suite of well-designed policies tailored to different stages of technology development (Lamb et al., 2024b).
With a wide array of policy options but limited experience with respect to the design and implementation of CDR policies, choosing the right mix of policies to support CDR remains complex. In a new study (Arlinghaus, et al., 2025), we propose a taxonomy to evaluate policy instruments based on their implications for effectiveness, efficiency, feasibility and strategic fit, with a range of sub-questions, hoping to support policymakers to choose the best combination of policies to meet CDR goals, while addressing critical trade-offs.
Table 1: Criteria and Questions for Policy Evaluation
| Category | Question |
| Effectiveness |
Does the policy provide sufficient incentive to encourage carbon removals at the scales required? Does the policy provide sufficient legal certainty to attract private investment? Does the policy provide sufficient certainty on prices, risk and return to attract private investment? |
| Efficiency |
Does the policy encourage the deployment of the most efficient CDR technology, in £/tCO2? Does the policy lead to the desired balance between removal and abatement across both negative emissions and emissions abatement? |
| Feasibility |
Where is the main incidence of policy costs? How difficult is the policy to administer and monitor? |
| Strategic fit |
At which stage of technology readiness level is this policy most effective? Is the policy technologically neutral? Is price differentiation by technology possible? Can the policy be adjusted over time to reflect increasing CDR scale and maturity? |
What are the Main Trade-Offs Identified?
There are different types of policy instruments. Some are mandatory, like integrating removals in emissions trading systems (ETS) or extended producer responsibility such as carbon takeback obligations (CTBO), which legally require companies to remove or counterbalance their emissions. Others are voluntary, such as voluntary carbon markets (VCM), where participation isn’t required and credit quality can vary. There are financial incentives like tax breaks, for example the United States (US) tax incentive provided under Section 45Q of the Internal Revenue Code, and contractual tools like carbon contracts for difference (CCfDs), which offer price certainty to investors. Each of these policy types plays a different role in shaping the market for carbon removals. Understanding how they work helps clarify the trade-offs involved in designing effective CDR policy.
In general, mandatory compliance instruments are likely to be more effective at driving removals at the scale needed for net zero goals than VCMs, which have also faced challenges with inconsistent Monitoring, Reporting and Evaluation (MRV) (Probst et al., 2024). Policies that explicitly target removal methods, while also providing a relatively high price per tonne of carbon removed, such as the US 45Q tax credits, tend to be highly visible and effective, though they may come with significant public cost. In addition, providing reliable price signals with little reversal risk, for example via CCfDs, is crucial to foster a stable market environment, but that certainty can come at the expense of flexibility to adjust as technology costs decline.
Policy Interactions along Different Stages of Technology Innovation and Development
CDR technologies are at various stages of development, and the kind of policy support they need should evolve as technologies progress through Technology Readiness Levels (TRLs). Using a stylised technology innovation and development process, we match policies with TRLs, and identify the policy sequencing, i.e., which TRL policies target, and the main barriers to technological innovation. Unsurprisingly, tax breaks and grants are best suited to support early research and development. As technologies progress, instruments like public procurement, CCfDs, and ETS integration help support wider deployment and create demand.
One thing that stood out is that this isn’t a neat, one-policy-per-stage story. Many policies stretch across multiple stages and can take on different roles as technologies evolve. For example, CCfDs are usually seen as late-stage support, but they can also help mid-stage technologies by reducing price volatility and building investor confidence. This shows that policy portfolios shouldn’t just evolve over time—they often need to be layered, with different policies working together to cover persistent barriers like cost and uncertainty.
Dynamic Policy Combinations
No single policy can address all challenges in scaling up CDR. A strategic approach involves combining policies in ways that maximize their benefits while managing their limitations. We are interested in complementary policies that can not only target different TRLs, but can also be deployed simultaneously to target different barriers. Take ETS integration and CCfDs: one provides price certainty, the other helps build demand. Or look at the example from California, where the LCFS (a regulatory standard) is paired with the 45Q tax credit (a financial incentive). Together, they make DACCS projects financially viable by both lowering costs and guaranteeing a market.
Smart combinations, especially those that match different stages and solve different challenges, are much more powerful than isolated instruments. Countries with established climate policy frameworks may be able to lean more on mandates and standards, while others might need to focus on building markets and reducing risk. Either way, it’s clear that the path to scaling CDR will depend on getting the right mix of policies working in concert.
CDR Policy in the United Kingdom, the European Union, and the United States
We apply our criteria to analyse CDR policy in the European Union (EU), the United Kingdom (UK), and the US. The UK and EU offer well-rounded frameworks combining market-based mechanisms, grants, and standards, while in the US, tax credits and grants dominate, with less reliance on mandates. However, the EU and UK may still fall short of net-zero targets without stricter measures like mandates and well-designed CCfDs and integration of removals into their ETS. Expanding eligible technologies through portfolio or product standards and exploring mandates could drive CDR adoption at a faster pace, but might come at the expense of cost efficiency due to higher costs.
That said, both the UK and EU may struggle to meet their ambitious net-zero targets without stronger interventions. Introducing compliance-based instruments, such as portfolio or product standards, could drive higher volumes of CDR deployment. However, these options may come at the expense of cost efficiency, especially in more fiscally constrained EU member states. The US policy mix, while impactful in stimulating early-stage investment, remains narrower in scope and less suited for long-term scale-up without stronger regulatory drivers. A more balanced combination of incentives and mandates, tailored to each jurisdiction’s fiscal and political context, will be crucial to move from pilot projects to commercial deployment.
Moving Forward: Informing Future CDR Policies
No single policy can be deemed the “best” for driving the widespread roll-out of CDR. Effective policy selection requires a thorough understanding of CDR technologies and the existing policy environment, considering potential interactions with other policies. The nuances between carbon removal and carbon abatement/mitigation, particularly with the challenges of the limited availability of CDR policy data, further complicate this process.
The path to net-zero is complex, and the right mix of CDR policies must evolve with technology and market needs. There are numerous policy combinations described in this paper that can elicit meaningful deployment of CDR. We underscore the importance of carefully balancing costs, incentives, and policy flexibility. For policymakers, the challenge lies in designing portfolios that maximize impact while considering investment certainty and long-term sustainability. We aim to inform policymakers as they navigate trade-offs between benefits and compromises about which instruments to combine, and how, ultimately shaping the path forward for effective CDR roll-out toward a net-zero future.
References
Arlinghaus, J., Feng, S., Stemmler, J., Fankhauser, S. and Smith, S. (2025), A taxonomy of policies to support geological carbon dioxide removal, Smith School of Enterprise and the Environment Working Paper, University of Oxford, May 2025. https://www.smithschool.ox.ac.uk/sites/default/files/2025-05/A-taxonomy-of-policies-to-support-geological-carbon-dioxide-removal.pdf.
Lamb, W. F., Gasser, T., Roman-Cuesta, R. M., Grassi, G., Gidden, M. J., Powis, C. M., Geden, O., Nemet, G., Pratama, Y., Riahi, K., Smith, S. M., Steinhauser, J., Vaughan, N. E., Smith, H., and Minx, J. C. (2024a). Climate pledges: Current national proposals are off track to meet carbon dioxide removal needs. Nature Climate Change, 14(5), 555–556. https://doi.org/10.1038/s41558-024-01680-1.
Lamb, W. F., Gasser, T., Roman-Cuesta, R. M., Grassi, G., Gidden, M. J., Powis, C. M., Geden, O., Nemet, G., Pratama, Y., Riahi, K., Smith, S. M., Steinhauser, J., Vaughan, N. E., Smith, H. B., and Minx, J. C. (2024b). The carbon dioxide removal gap. Nature Climate Change, 14(5), 644–651. https://doi.org/10.1038/s41558-024-01679-8.
Probst, B. S., Toetzke, M., Kontoleon, A., Díaz Anadón, L., Minx, J. C., Haya, B. K., Schneider, L., Trotter, P. A., West, T. A. P., Gill-Wiehl, A., and Hoffmann, V. H. (2024). Systematic assessment of the achieved emission reductions of carbon crediting projects. Nature Communications, 15, Article 9562. https://doi.org/10.1038/s41467-024-09562-w.
This blog is based on a new working paper supported by Bank of America and the CO2RE Hub funded by the Natural Environment Research Council.
