As sustainability leaders digest the SBTi’s updated Corporate Net-Zero Standard, it’s clear that the new guidelines provide only a thin and distant lifeline to companies in the struggling carbon removal sector. The new standard’s limited and long-delayed requirement to take responsibility for ongoing emissions won’t reverse the recent fortunes of the voluntary carbon market (VCM), which was bigger in 2008 than it was in 2023.
Although innovative startups continue to find funding and advance, carbon dioxide removal (CDR) companies are the canary in the net-zero solutions coal mine. Nori, Running Tide and others have closed up shop, and Climeworks is adjusting its business model because customers won’t pay enough per ton of carbon. The forecast from the most recent State of CDR report of 42 million tons per year by 2030 is far below predictions from just a few years ago.
Climate tech’s Second Life moment
Here’s a historical precedent: Nearly 20 years ago, IBM made a big bet on the future of Second Life. IBM and other tech companies set up “virtual HQs” so that they could connect with employees and customers in the rapidly expanding digital world.
By 2010, the hype had faded, and Second Life never achieved commercial scale. Lack of demand sent the technology down the chasm that has claimed countless new technologies, from Segways to 3D TVs.
This same risk now looms over climate solutions providers. Venture investment is down more than 30 percent since 2022 — a reflection of sober expectations about the growth of demand in the sector.
How to drive demand
Much of the $250 billion invested in climate tech since 2018 was driven by aggressive growth forecasts that now look overzealous. This capital has created a heavily-stacked supply side in the market, from carbon credit brokers to energy and transportation tech to novel forms of carbon capture and GHG accounting platforms.
At The Change Climate Project we field requests from suppliers regularly to access our community of corporate climate actors. To succeed, these solutions providers must win new customers, prove practical use cases and achieve cost reductions, leveraging customer successes into rising sales volumes. If demand doesn’t materialize for net-zero solutions providers, they won’t meet hyped-up valuations, and will fail.
Some new markets materialize comparatively easily. Companies enter a space and, through the force of their marketing, convince customers to buy their products.
But climate solutions exist in a highly complex landscape of policy and market forces. Scaling demand requires intentional market-shaping far beyond what’s taking place now. Only an estimated 7-8 percent of total venture funding has gone into the supporting networks and systems such as measurement and verification, audits and standards that will help new markets form.
Even less has gone into dedicated efforts to drive demand. Climate philanthropy’s two top favorites, policy change and sustainable finance, aren’t increasing market demand for key solutions, even after decades of grantmaking. There’s new hope that AI wealth will multiply philanthropy’s impact, but donors would need to mobilize quickly and embrace new approaches to giving that respond to this make-or-break moment for climate tech.
The role for corporate sustainability
With demand lagging, corporate sustainability teams need to recognize their critical role as buyers of climate tech solutions. Microsoft recently paused its carbon removal program, sending shockwaves through the market. Microsoft can’t be the only buyer in the market. Sustainability teams thinking about their own longer-term objectives can help accelerate market-shaping and demand growth by recognizing that they are key to building the climate solutions we all need.
Here’s what companies should focus on now:
Lead from the top. CEOs of companies that have made long-term carbon reduction a public priority m
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