Siti Muinah
The promise of carbon removal technologies is immense, yet their deployment lags significantly behind the urgent needs of a warming planet. Despite a surge in contracted removals, a stark market imbalance and a scarcity of buyers threaten to stifle this nascent industry. Experts are calling for a fundamental shift in how innovation is incentivized, moving beyond simple cash prizes to integrated market mechanisms that guarantee demand and de-risk investment.
A Glimpse into the Carbon Removal Market’s Reality
Data from CDR.fyi, as reported by Heatmap, paints a concerning picture of the durable carbon removal market. In 2025, buyers committed to nearly 30 million tons of carbon removal, a figure more than triple that of 2024. However, this impressive headline figure is heavily skewed by a single entity: Microsoft, which accounted for approximately 90% of these purchases. More critically, suppliers were only able to deliver about 450,000 tons during the year. This delivery rate is a minuscule fraction of the six to 10 billion tons of removal per year that climate scenarios project will be necessary by 2050 to avert the worst impacts of climate change. While the underlying technologies to extract carbon from the atmosphere demonstrably work, the crucial element—a robust and diverse customer base—remains elusive, leading to what many consider a significant market failure.
David Babson, Executive Vice President of the Energy, Climate, and Nature domain at the XPRIZE Foundation, is a leading voice in this discussion. He contends that the slow pace of adoption for carbon removal technologies is a testament to a market that is not functioning as it should, with technological progress outpacing market integration. Babson’s background is steeped in fostering innovation, having previously led MIT’s Climate Grand Challenges initiative and served as a program director at the U.S. Department of Energy’s ARPA-E. His current role at XPRIZE oversees initiatives like the groundbreaking XPRIZE Carbon Removal competition. This competition galvanized an impressive 1,334 teams and has seen its participants collectively raise over $3.3 billion. A prime example of its success is Mati Carbon, which clinched the competition’s $50 million grand prize in April 2025. Mati Carbon’s innovative approach involves spreading crushed basalt on smallholder farms in India, a method that effectively locks away atmospheric carbon dioxide.
"If people could make money taking carbon out of the air and putting it underground, as opposed to only being able to make money taking it from underground and putting it in the air, we would be in a better place," Babson observes, highlighting the fundamental economic inversion that hinders carbon removal’s ascent. Mati Carbon, for instance, is navigating the current market slump partly because its basalt dust not only sequesters carbon but also demonstrably improves soil health and crop yields. This dual benefit provides farmers with a compelling incentive to participate that transcends the volatility of carbon credit pricing.
The Evolving Landscape of Incentive Design
Rethinking the Prize Model: Beyond Cash Awards
XPRIZE’s strategy to address this market gap involves a significant evolution of its prize structures. Babson explains the foundation’s move towards "mixed purses," which combine a traditional cash award with a guaranteed buyer. This guarantee can manifest through various mechanisms, including advance market commitments, power purchase agreements, or offtake contracts. In a compelling thought experiment, Babson outlines a carbon removal prize scenario where a separate $1 billion fund, sourced from credit buyers, would be established. Qualified teams could then draw from this fund as they successfully deliver verified tons of removed carbon.
This innovative approach to incentivizing market adoption is not confined to carbon removal. XPRIZE is applying similar principles to a planned series of fusion energy prizes. These competitions will intricately link technical milestones with robust market mechanisms designed to cultivate the essential supply chains required for the commercialization of fusion power. The underlying principle is to bridge the persistent gap between invention and widespread adoption, a challenge that reverberates across many of XPRIZE’s initiatives.
Wildfire Response and the Challenge of Public Goods
The XPRIZE Wildfire competition, which concluded in September 2025, awarded approximately $4.55 million from its $11 million purse. Defense contractor Anduril Industries secured the first place in autonomous fire response, along with a $1 million bonus from Lockheed Martin. Babson anticipates that costs for these wildfire suppression technologies will decrease as fire agencies adopt them and as startups license individual components to create more affordable platforms. However, he acknowledges that underfunded agencies will require mechanisms to acquire these initial systems. The competition also strategically left critical areas like fuel management and ground-based autonomy for future prize designs, recognizing the multifaceted nature of wildfire mitigation.
Earlier in 2025, program director Andrea Santy highlighted a regulatory hurdle, noting that field testing had outpaced the development of drone regulations. This illustrates another critical dimension of bringing innovative solutions to market: the need for parallel progress in regulatory frameworks.
Biodiversity Monitoring: Quantifying the Unpriced
In the realm of biodiversity, Limelight Rainforest emerged victorious, claiming $5 million for its ability to survey 100 hectares of tropical forest and identify over 250 species in under 24 hours. While biodiversity itself currently lacks a direct market price, Babson argues that the ability to accurately and rapidly measure ecosystems fundamentally alters the policy landscape. Once ecosystems can be quantified, a slow-moving policy response becomes, in his view, "a dereliction of what they should be doing." This underscores the power of measurement and data in driving policy action, even for public goods.
The Interplay of Technology, Market, and Policy
Addressing Market Failures in Carbon Removal
Babson’s candid assessment of the carbon removal sector is stark: "It’s a market failure at this point." He emphasizes that while the XPRIZE Carbon Removal competition successfully identified diverse pathways for durable carbon removal—ranging from near-term, large-scale deployable solutions like Mati Carbon’s approach to more frontier technologies like direct air capture—the critical missing piece is the market demand signal to scale these innovations. The current voluntary carbon markets, plagued by uncertainty, are insufficient to unlock the necessary capital.
"The most valuable type of intervention now would be greater, more certain commitments about the market for carbon removal and the trajectory for demand over time," Babson states. Such commitments would empower companies within the carbon removal supply chain to plan, invest, and ultimately meet projected demand. Without this market-driven impetus, scaling these solutions to the magnitude required to stabilize the climate remains an formidable challenge.
The Role of Sponsors and Public-Private Partnerships
The involvement of sponsors like PG&E in the XPRIZE Wildfire program highlights the complex motivations behind such collaborations. While PG&E’s desire to reduce liability stemming from wildfire claims is evident, Babson notes their genuine philosophical alignment with sustainability and their recognition of the escalating wildfire risks tied to climate change. This symbiotic relationship, where corporate interests intersect with public good, can be a powerful engine for innovation.
Bridging the Gap: Technology and Traditional Practices
The discussion around wildfire response also raises the question of integrating technological advancements with traditional practices. Babson acknowledges the necessity of this synergy, recognizing that a single competition cannot address all facets of wildfire mitigation. Future prize designs could potentially bridge the gap between advanced aerial drone systems and ground-based autonomous systems for tasks like building firebreaks, or even incorporate traditional fuel management techniques, such as prescribed burns, often practiced by Indigenous communities.
The Affordability Conundrum: Defense Contractors and Public Agencies
The emergence of defense contractors like Anduril Industries as leaders in wildfire autonomy presents a unique challenge for underfunded public fire agencies. The premium pricing common in the defense sector raises concerns about the affordability of these critical tools. However, Babson expresses optimism that market forces will eventually drive down costs. As these technologies are deployed and licensed, new business models and startups are expected to emerge, integrating components into more accessible platforms. Nonetheless, the initial investment hurdle for public agencies remains a significant consideration, potentially necessitating philanthropic subsidies to seed adoption.
Measuring What Matters: Biodiversity and Policy Levers
In biodiversity, the ability to quantify ecosystem value is seen as a potent policy lever. Babson argues that once ecosystems can be accurately measured, policymakers lose the excuse of data scarcity, making inaction a "dereliction of duty." However, this optimistic outlook is tempered by the reality of regulatory lags, as seen with the SEC’s recent rollback of climate disclosure rules. The challenge lies in ensuring that the development of measurement tools is accompanied by equally robust requirements for their application.
The Vision of "Equitable Abundance"
Navigating Trade-offs: Health, Climate, and Consumption
XPRIZE’s vision of "equitable abundance" inherently involves navigating complex trade-offs. The foundation’s $101 million Healthspan prize, aimed at extending healthy lifespans, raises questions about increased consumption and its associated carbon footprint. Babson, however, believes that longer, healthier lives are not antithetical to sustainable economic systems. He posits that advancements in clean energy, fostered by initiatives like XPRIZE’s fusion energy prizes, can create the infrastructure for both extended well-being and environmental stewardship.
Abundance Through Energy: A Reimagining of Resource Use
The concept of energy abundance, driven by cheap and clean power, is central to XPRIZE’s vision. Babson contends that this abundance could fundamentally alter our relationship with resources. Imagine, he suggests, energy costs so low that they liberate us from the imperative of extreme efficiency. This could enable radical solutions like vast indoor vertical farms, freeing up millions of acres of agricultural land to be rewilded, thereby enhancing carbon sequestration and biodiversity. This vision challenges the prevailing sustainability paradigm of sufficiency and limits, proposing instead that technological advancement can create new avenues for abundance that are, paradoxically, more sustainable.
The Fusion Frontier: A Prize for Scalability
Looking ahead, the Fusion Energy Dominance Prize, and the anticipated series of prizes in this domain, represent a critical step in XPRIZE’s strategy. The goal is not merely to prove the scientific viability of fusion power but to concurrently build the market mechanisms—advance market commitments, power purchase agreements, and offtake contracts—necessary for its scalable deployment. As Babson points out, a scientific success without a corresponding market driver will fall short of its transformative potential. The challenge lies in ensuring that the development of this groundbreaking energy source is intrinsically linked to the creation of its demand and supply chains.
The journey of carbon removal and the broader quest for sustainable innovation underscore a critical imperative: bridging the gap between technological possibility and market reality. As David Babson and XPRIZE continue to pioneer new incentive structures, the focus must remain on creating not just novel solutions, but also the robust markets and supportive policies that will translate those innovations into tangible progress for the planet. The future hinges on our collective ability to foster demand, de-risk investment, and ensure that the promise of a sustainable future is not just envisioned, but actively built.
Neng Nana
Nana
