The parallel rise in greenhouse gas emissions created by the datacentres that house the internet’s physical infrastructure means that hyperscalers are not just driving climate tech investing overall – but also the nascent carbon dioxide removal (CDR) market. Now the challenge is to ensure that growth is channelled in the right direction.

Climate tech market growth

Hyperscalers’ rising demand for sources of clean, reliable energy that can power their datacentres means that low carbon energy startups overtook electric car and battery makers as the top global sector for climate tech investment last year. In fact, funding for such energy projects grew by 12% to $9.4B in 2024. 

However, greening energy sources can only go so far, which is why hyperscalers are making massive investments in CDR as a core element of their business strategies. Responsible for a staggering 91% of CDR transactions in the second quarter of 2024, Microsoft is the leading tech investor in this area. But others are following suit. Indeed, the interest and investment of hyperscalers means the market is booming, with the second quarter of last year seeing the highest volume of durable CDR transactions ever recorded – resulting in an 18% increase for the first half of 2024 compared with the whole of 2023. 

However, not all CDR was created equal and hyperscalers, as well as other industries, should bet on proven technologies working in harmony with nature. 

Hypothetical technologies versus nature-based solutions

As things stand, most technological CDR investments are still in expensive and high-risk technologies that remain hypothetical. A prime example is direct air capture (DAC), which uses chemical reactions to take carbon out of the air. While it has been the source of much hype, a new study from the Massachusetts Institute of Technology in the US has found that projections about how much carbon it can pull from the atmosphere are based on ‘unrealistic assumptions’.

Investors may be drawn to such technologies as they purport to offer an easy solution to an existential problem, apparently allowing us to carry on with business-as-usual while sucking vast volumes of emissions out of the air. But the reality is that they don’t yet work in practice at scale, despite extensive research and development over decades. And it increasingly seems as if predictions about what they will be able to achieve in the near future have been vastly overestimated. 

A better option for investors is to back the low-risk, scalable nature-based solutions that can be found in nature. In reality, most of the carbon dioxide currently being removed from the atmosphere is down to these kind of solutions – like afforestation, agroforestry and peatland restoration. Studies estimate the cost of natural climate solutions to be around $10–$100 per tonne of CO₂ removed, with many projects falling below $50 per tonne. In contrast, currently most DAC systems operate at costs of around $500–$1,000 per tonne, depending on the technology and scale.

Betting on biochar

Biochar – a charcoal-like substance that sequesters carbon – was responsible for a whopping 80% of all carbon removal projects in the third quarter of 2024. Made from sustainable organic feedstocks – like waste from agriculture, the food industry or sustainable forest management – it is a prime example of an affordable, low-risk solution to capturing carbon at scale. 

Alongside reliable removal of carbon dioxide from the atmosphere, it delivers multiple sustainability benefits. For example, when used as an agricultural soil amendment, it improves soil fertility and capacity to retain water. For a construction industry obliged to rapidly decarbonise, it can be added to conventional materials, like asphalt, to reduce carbon. With the right investment, it could do so much more.

The powerful combination of environmental benefits and commercial potential are why we at A Healthier Earth have partnered with the tech specialists at PYREG to build the UK’s largest biochar production facility, producing up to 9,000 tonnes of biochar a year, capturing and storing 17,000 tonnes of carbon dioxide. 

Keeping momentum on proven solutions

While a mismatch between investment expectations and market potential for nature-based CDR, many hyperscalers are already turning to these solutions and diversifying their CDR portfolios to include nature-based solutions. 

For example, last year Google, Meta and Microsoft formed the Symbiosis Coalition, a significant advance market commitment (AMC) aimed at purchasing nature-based carbon removal credits in the voluntary carbon market. Just last month, Google also signed the largest ever biochar carbon removal purchase agreements, with two new 100,000 tonne deals to buy carbon removal credits from India-based Varaha and California-based Charm Industrial. 

The hope is that these tried and tested solutions continue to grow as companies understand this is where their investment can drive the most impact. 

A holistic approach to investment

Nature-based solutions offer so much more than just carbon removal. While technological CDR solutions are one-trick ponies, their nature-based counterparts address the interlinked climate and nature crises in tandem. Investors can rest assured that their funding is not just bringing down emissions but also boosting living ecosystems.

Such a holistic approach is vital, according to new research from the Intergovernmental Platform on Biodiversity and Ecosystem Services. The complexity of the interactions between climate change and nature breakdown mandates the use of multifaceted solutions that simultaneously tackle emissions alongside issues like soil health, water scarcity and wildlife extinction. Experts are of the view that a siloed approach could have unintended consequences in terms of biodiversity loss, water and food insecurity and health risks. 

A safer bet

With the 2030 now just five years away, humanity urgently needs to halve global emissions. Alongside a strategy of reducing them as much as possible, scientists agree that carbon dioxide removal is crucial to attaining global climate goals. 

It is therefore encouraging to see hyperscalers driving the growth of the CDR market. Now, energies should be channelled into nature-based solutions that offer immediately viable investments at all levels. 

Why gamble on complex, expensive and risky technologies when we could bet on the proven solutions found in nature? 

Alastair Collier is Chief Research & Development Officer of A Healthier Earth.