Market Snapshot: The rise of Canada’s carbon dioxide removal industry

Release date: 2026-01-21

As part of the global community's efforts to combat climate change, carbon dioxide removal (CDR) is gaining traction as a tool in climate mitigation strategies. CDR is the process of removing carbon dioxide (CO₂) from the atmosphere and storing it away for centuries or longer. It serves two key purposes: offsetting emissions from hard-to-decarbonize sectors-steel, cement, and long-haul transportation-and removing legacy emissions that have accumulated since the industrial revolution.

According to the Intergovernmental Panel on Climate Change, all pathways that limit global warming to 1.5°C, or lower, use CDR to achieve . In scenarios where warming exceeds 1.5°C, CDR becomes essential for achieving to return warming to below 1.5°C by the end of the century.^{Footnote 1}

Technology-driven solutions

While nature-based CDR like reforestation and ecosystem restoration can play an important role in greenhouse gas mitigation, they are unlikely to meet the scale of CDR needed to limit warming to 1.5-2°C.^{Footnote 2} For large scale removals, attention is turning instead to technology-based CDR approaches given their potential for long-term CO₂ removal and storage.^{Footnote 3} The table below outlines key CDR technologies^{Footnote 4} and their estimated costs once scaled.

Table 1: CDR technology descriptions and costs

Canada's competitive edge

Canada has a unique advantage for developing a CDR industry. The country's climate policies-including industrial carbon pricing^{Footnote 6} and emissions regulations^{Footnote 7}-create a market for CDR technologies by allowing them to sell emissions credits, particularly to sectors with limited decarbonization options. Other incentive-based policies, like investment tax credits^{Footnote 8} and innovation funding^{Footnote 9}, provide financing for research and development and technology commercialization.

Canada's abundant natural resources can also support its CDR industry. Low-carbon electricity from hydro, wind, solar, and nuclear resources can help power CDR technologies like direct air capture. Significant provide ample opportunity for CO₂ storage. An abundance of biomass resources allows for the application of BiCRS and BECCS technologies. Coastlines and marine research centres provide a foundation for ocean-based CDR, such as direct ocean capture and ocean alkalinity enhancement. Lastly, a developed mining sector can support enhanced rock weathering and carbon mineralization CDR initiatives.

The CDR industry in Canada is growing due to these natural resource advantages and the policy landscape. Canada is already home to 78 CDR companies and 48 active and planned CDR projects, which is visualized on Carbon Removal Canada's Carbon Console. Several of these companies have attracted investment from major players like Microsoft, Amazon, and Shopify.^{Footnote 10} Other major companies like Google, Meta, British Airways, and Japan Airlines have expressed interest in CDR credits as a way to reduce their emissions, and a 2023 report from McKinsey & Company estimates that the global CDR market could be worth as much as $1.2 trillion USD by 2050.^{Footnote 11}

Challenges and the path forward

Despite their promise, CDR technologies face significant and diverse hurdles to reach commercialization. Many technologies remain costly and require sustained policy support to become viable, notwithstanding that some CDR technologies can produce useful products to partially offset costs such as biochar being used to boost agricultural productivity.^{Footnote 12} Other challenges-some of which also contribute to high costs-include high energy demands for technologies like direct air capture, land-use conflicts with agriculture and conservation for BiCRS, and the development of transport and storage networks for the captured CO₂ in technologies like BECCS and direct air capture. Ocean-based methods are still in early development and can have impacts on ocean environments, while scaling up enhanced rock weathering and carbon mineralization could raise environmental concerns due to potential increased mining activity.

In 2023, the federal government released Canada's Carbon Management Strategy, which recognizes the role of technology-based offsetting emissions from the hardest-to-decarbonize industrial sectors and its potential to contribute to economic growth and exports. The strategy outlined five key priorities to address CDR challenges and ensure the responsible development of Canada's CDR sector:^{Footnote 13}

1. Support innovation and research, development, and demonstration to help early-stage technology development
2. Advance policies and regulations to create market demand and ensure safe deployment of CDR technologies
3. Attract investment and trade opportunities
4. Scale up projects and infrastructure
5. Build partnerships and grow a diverse workforce