Biochar carbon removal credits mature amid tightening of global supply

Demand for biochar carbon dioxide removal credits is increasing in the voluntary carbon market, driven by interest from a few buyers. Yet, supply remains constrained due to several challenges, even as buyer diversification and regulatory support for high-quality removals are anticipated.

Biochar is created by heating organic material, such as agricultural waste, in a low-oxygen environment through pyrolysis. This process captures CO2 within the biochar, allowing it to be stored for hundreds of years, creating carbon sinks. It is one technology within the broader carbon removal segment and can also be used to improve soil conditions for agriculture.

Over the past few years, the appetite for carbon credits has shifted towards engineered carbon removal credits, marking a shift from traditional avoidance credits due to integrity-related concerns in the latter. Despite prices being at a premium for CDR credits, large corporations such as Microsoft, Google and others are looking to secure long-term offtake agreements with removal project developers to ensure credibility and permanence are intact for these credits. Preference from major corporations in the West for durable CDR credits is likely to provide a much-needed stimulus to enhance biochar production across the globe further, sources say.

This shift to long-term contracts is likely to incentivize biochar production in the Global South, in particular India, which is likely to emerge as a key production hub because of the low cost of capital and labor, sources say.

"India has great potential and competitive advantages in becoming a global sourcing hub for both biochar and enhanced-rock weathering-CDR credits, while offering significant co-benefits to improve soil health, crop productivity and ecosystem restoration," according to an India-based carbon removal developer.

Certification delays cause significant challenges

Though there are challenges in securing quality biomass feedstock and subsequently convincing farmers to use physical biochar as a soil amendment for their fields, sources said that over time, they expect these challenges to gradually decrease.

"Biochar supply is constrained at the moment -- we're seeing a lot of buyers looking for this year's vintage," a US biochar developer. "[Given] we don't stop production, and the timeline [for certification] is delayed, [it means] you have to layer the uncertainty of when you will deliver."

Biochar projects calculate their CO2 removal credits based on the standard rules and methodology of their choice; until this process is completed, they must rely on the previous audit, or internal models to estimate the number of credits they can sell.

The delays in the certification process for biochar credits, sometimes taking over six months, depend on when the standard provider can perform the routine audits, a second US biochar developer said. The uncertainty consequently affects the producer's ability to account for and sell credits for previously produced biochar, he added.

Recent long-term offtakes for biochar are seen as indicators of a maturing market. However, a US carbon removal developer said, adding that these deals further limit the already constrained biochar supply.

Demand restricted to large corporates

Despite expectations of an improvement in the supply scenario for biochar credits going ahead, demand is largely limited to a few corporations across the world.

Over 2024, CDR volumes grew, largely driven by offtakes directed to Microsoft, said Alexander Rink, co-founder and executive officer of CDR.FYI.

"If anything, it has become even more of a Microsoft market," said Rink, referring to 2025 data. Historically, "there was a need to increase the number of purchasers because what we saw was that the volume per purchaser was outpacing the number of purchasers -- so we're already seeing the early signs of the need to bring more purchasers to the market."

This lends credit to market criticism that the removal market has been led by a small number of early buyers and a lack of new CDR buyers.

Exuberantly high price for CDR credits is one of the reasons for low participation from other traders and brokers in the market, sources say. Participation from other players is expected to improve once prices get competitive going ahead, they add.

However, "the next phase of market development will focus on diversifying that buyer base," Lukas May, chief commercial officer of Isometric, told Platts via email, adding that regulation is expected to be the primary catalyst for the shift towards high-quality carbon removals.

Many voluntary carbon market participants see Article 6, Section 4 of the Paris Agreement, which details mechanisms for countries to collaborate on climate goals through market and non-market approaches, as a key driver for the global demand and supply of CDR credits.

"By offering to incentivize private sector participation in climate change mitigation activities, the mechanism would stimulate private investment in CDR projects," a second India-based carbon removals developer said.

Also, most of the buyers in the VCM have the option of exploring removal credits in the nature-based segments, which are relatively much more affordable.

Availability of such alternatives for offset purposes, with comparable ratings to tech-based options, weakens the need to seek durable high-tech removal credits in the market, sources say.

Impact of methodology and production method

Certifiers' methodologies are gaining influence across biochar developers, while buyers prioritize co-benefits and permanence when choosing CDR credits.

An India-based biochar developer told Platts he is contemplating the use of the Isometrics 1,000-year permanence methodology and Puro.earth's approach, which ensures carbon sequestration for over 100 years. This decision may impact whether he receives a premium price for their pre-sale volumes, suggesting that he might adopt either of these methodologies.

On June 2, following the recent shift towards regionalizing the global biochar market and the launch of the India biochar price, Platts assessed the current-year biochar CDR credit price at $150/mtCO2e for US origin and $140/mtCO2e for India origin. Platts is part of S&P Global Commodity Insights.

Platts heard market indications for industrial biochar from India for spot delivery at a range of $140/mtCO2e to $160/mtCO2e, while similar specification Artisanal biochar was heard in the range of $100/mtCO2e to $120/mtCO2e.

Indian producers are looking at setting up both artisanal and industrial biochar production units, based on their accessibility to capital and labor.

This pricing difference and "causation is not because of region but because of methodology and production method," the first US biochar developer said. Biochar methodologies and standards play a crucial role in one's operations, delivering credits on time, and buyers' perception, the developer added.