Carbon dioxide removal (CDR) poses a significant and complex public policy challenge in the long-term. Presently treated as a marginal aspect of climate policy, addressing CDR as a public good is quickly becoming essential for limiting warming to well below 2 or 1.5°C by achieving net-zero emissions in time – including by mobilization of public and private finance. In this policy and practice review, we develop six functions jointly needed for policy mixes mobilizing CDR in a manner compatible with the Paris Agreement's objectives. We discuss the emerging CDR financing efforts in light of these functions, and we chart a path to a meaningful long-term structuring of policies and financing instruments. CDR characteristics point to the need for up-front capital, continuous funding for scaling, and long-term operating funding streams, as well as differentiation based on permanence of storage and should influence the design of policy instruments. Transparency and early public deliberation are essential for charting a politically stable course of action on CDR, while specific policy designs are being developed in a way that ensures effectiveness, prevents rent-seeking at public expense, and allows for iterative course corrections. We propose a stepwise approach whereby various CDR approaches initially need differentiated treatment based on their differing maturity and cost through R&D pilot activity subsidies. In the longer term, CDR increasingly ought to be funded through mitigation results-oriented financing and included in broader policy instruments. We conclude that CDR needs to become a regularly-provided public service like public waste management has become over the last century.

Over the past two decades, the emergence of multiple carbon market segments has led to fragmentation of governance of international carbon markets. International baseline-and-credit systems for greenhouse gas mitigation have been repeatedly expected to wither away, but show significant resilience. Still, Parties to the Paris Agreement have struggled to finalize rules for market-based cooperation under Article 6, which are still being negotiated. Generally, there is tension between international top-down and bottom-up governance. The former was pioneered through the Clean Development Mechanism under the Kyoto Protocol and is likely to be utilized for the Article 6.4 mechanism, while the latter was used for the first track of Joint Implementation and will be applied for Article 6.2. Voluntary carbon markets governed bottom-up and outside the Kyoto Protocol by private institutions have recently gained importance by offering complementary project types and methodological approaches. The clear intention of some Parties to use market-based cooperation in order to reach their nationally determined contributions to the Paris Agreement have led to an ongoing process of navigating the alignment of these fragmented carbon market instruments with the implementation of nationally determined contributions and Paris Agreement’s governance architecture. We discuss emerging features of international carbon market governance in the public and private domain, including political and technical issues. Fragmented governance is characterized by different degrees of transparency, centralization, and scales. We assess the crunch issues in the Article 6 negotiations through the lens of these governance features and their effectiveness, focusing on governance principles and their operationalization to ensure environmental integrity and avoid double counting.

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Voluntary compensation of greenhouse gas emissions Demand-side issues Supply-side issues Summary of good practice elements relevant to voluntary compensation Sammanfattning Frivillig klimatkompensation Klimatkompensationens användarsida Klimatkompensationens utbudssida Sammanfattning av bästa praxis-element som är relevanta för frivillig klimatkompensation Yhteenveto Vapaaehtoinen kompensaatio Kysyntä Tarjonta Tiivistelmä vapaaehtoiseen kompensaatioon liittyvistä hyvistä käytännöistä Abbreviations 1. Introduction 2. Policy context and key concepts 2.1 The Paris Agreement 2.2. Targets towards and beyond carbon neutrality 2.3 Voluntary compensation of greenhouse gas emissions 2.4 Carbon standards, crediting standards and the voluntary carbon market 3. Generating carbon credits 3.1. Carbon credit quality criteria 3.2. Carbon credit attributes 3.3. Assessing crediting standards 4. Using carbon credits, making claims and marketing 4.1. Good practice elements relevant to high-integrity voluntary compensation 4.2 Integrity of claims 4.3. Responsible marketing 5. Public efforts to facilitate good practice voluntary compensation

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