By Siyu Feng, Joseph Stemmler, Diarmid Roberts and Mark Workman – CO2RE.
This blog is Part 3 in a three-part series about how better decision-making tools can help the UK CDR sector to scale up. Read Part 1 here and Part 2 here.
In May 2026, CDR developers, financiers and policymakers sat down together to stress-test the science of CDR policy sequencing. They disagreed on plenty, but converged on something important.
The models are only as good as the reality they reflect. That is why the CO2RE research team did not just build a theoretical framework for direct air capture (DAC) deployment and publish it. Instead, they brought it into a room with the people who would actually have to live with its conclusions: the engineers trying to build carbon removal plants, the investors deciding whether to back them, and the civil servants designing the policies that might make it all possible.
What emerged from that workshop on 5th May 2026 was not a single unified prescription. It was something more valuable: a clear map of where different groups agree, where they diverge, and critically, where the gaps in the current policy landscape are most dangerous.
| DEVELOPERS | FINANCE | POLICYMAKERS |
| “Learning-by-doing is the biggest policy gap. You cannot learn from projects that have not been built. We need to build the first one and then take things from there…” | “Learning-by-doing is the biggest policy gap. You cannot learn from projects that have not been built. We need to build the first one and then take things from there…” | “The tension between technology immaturity and the need to provide market signal to invest whilst maintaining technology neutrality is hard.” |
The developer view: just get something built
For those who would actually construct and operate DAC plants, the most pressing problem is not the strike price of a future carbon contract; it is the sheer difficulty of getting any project to the point of final investment decision. The capital expenditure (CAPEX) requirement is enormous, funders are wary, and many of the policy instruments currently on offer only kick in once a project is already operational and selling carbon credits.
Developers pointed to a specific timing problem: Carbon Contracts for Difference may not be available until 2028 or the early 2030s, leaving an immediate gap for the first wave of projects. They called for CAPEX grants, state-backed performance guarantees and public procurement — mechanisms that reduce risk before a single tonne of CO₂ has been removed. One consistent message was that DAC will be financed through project finance, not corporate balance sheets, which makes the bankability of each individual project absolutely critical. Learning-by-doing needs to be the priority; we have enough learning by research. Policy needs to support the step from small-scale activity to actual large-scale deployment.
The finance view: the capital stack problem
Investors brought a different kind of clarity to the discussion. Working through a hypothetical £200 million First-of-a-Kind DAC project, the finance group mapped out what a viable capital structure would actually look like. Their conclusion was stark: 50% of that sum would potentially need to come from government development funds or philanthropic capital willing to absorb first-loss risk. Only then would private credit funds consider the remaining portion. Traditional banks, with their near-zero tolerance for technical risk, would take only a small, heavily guaranteed slice.
The group also identified what an offtake agreement needs to look like before any serious investor conversation can begin: secured, reputable, ideally collateralised and supported by secondary revenue streams. Without these foundations, no amount of policy generosity changes the arithmetic. Their broader contribution was that the government should act as initial insurer for First-of-a-Kind projects. This is a role private markets could eventually take over once risks are better understood and quantified.
The policymaker and enabler’s view: sequencing and fiscal reality
Policymakers and enablers brought fiscal discipline and a longer strategic view. They were broadly sympathetic to the case for early-stage support, but also clear-eyed about the limits of public budgets and political feasibility. On the central question of Carbon Contracts for Difference, they agreed with developers and investors that locking in high strike prices now – before technology costs have fallen – risks not providing value for money for the taxpayer.
They placed particular emphasis on demand-side instruments. ETS integration – tightening allowance caps to make DAC credits more competitive – was seen as essential, though the current carbon price was widely acknowledged as too low to drive meaningful deployment. Mandates requiring a growing share of compliance obligations to be met through permanent removals were seen as a more durable way to create the demand signal that investors actually need.
Where the room agreed
| CROSS-TABLE CONSENSUS – 5 MAY 2026 |
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None of this amounts to an easy answer. The workshop surfaced deep tensions between fiscal prudence and the need for bold, early action; between revenue certainty for developers and value for money for taxpayers; and between technology-neutral policy and the practical need to make something happen soon. But it also demonstrated that structured, honest dialogue between these groups produces something that modelling alone cannot: a shared understanding of where the real obstacles lie.
The CO2RE team will use these insights to refine the model further and inform both academic publication and policy guidance. The research has only just begun, but the conversation it has started is already overdue.
Photo by Ricardo Gomez Angel on Unsplash.
