Carbon dioxide removal is moving from climate scenarios into corporate climate strategies.
To stay close to the 2°C target, removals will need to scale substantially. The demand for removals mostly depends on large companies that are increasingly buying CDR credits in voluntary markets — to compensate hard-to-abate emissions, signal climate ambition, or secure access to future removal capacity.
But this emerging market is still surrounded by uncertainty. The quality, durability, and credibility of many removal projects remain debated. This makes CDR purchases a potentially ambiguous signal: are firms investing in a credible transition strategy, or are they relying on costly compensation for emissions they are not yet reducing?
We study how financial markets read these purchases — and, in turn, how they may shape firms’ incentives in this growing market. We study stock-market reactions to CDR credit purchases by publicly listed firms using a short-run event study. We estimate abnormal returns around purchase events and examine how reactions vary across buyers, removal technologies, and transaction characteristics.
We find that, on average, the market reaction is negative. This response is especially concentrated in small, high-price transactions and technical removal methods. However, investors react more favourably when purchases are made by firms with more credible internal climate policies, recent emissions-intensity reductions, lower leverage, and larger CDR volumes.
This raises a broader question: when does CDR look like credible climate strategy, and when does it look like expensive compensation for insufficient mitigation?
I look forward to discussing these questions at the event, and to hearing how others think about the role of markets in shaping corporate demand for carbon removal.