The intangible technological innovation system: The role and influence of voluntary and compliance carbon markets on carbon dioxide removal in the European Union

Abstract

Limiting global temperature rise requires many carbon mitigation solutions, including carbon dioxide removal (CDR); however, commercial deployment of CDR is limited. Due to the intangible nature of negative carbon, market formation is challenging. This research analyzes the CDR technological innovation system in the European Union to unravel how market formation for such products can occur. The research focuses on voluntary (soft) and compliance (hard) carbon market institutions to understand their impact on the development of intangible products. Interviews were conducted with 26 CDR experts, complemented by a separate survey. Our results show that private certification programs governed by soft institutions are crucial in driving demand in the early market phase; subsequently, stringent market formation mechanisms governed by hard institutions will be essential to foster market acceleration. However, the exact shape of hard institutions is not yet clear. Overall, a combination of soft and hard institutions is crucial for market formation and diffusion of CDR technologies.