Canadian flag with mountain and small town views in summer
Canada just made history with the world’s first government-backed Direct Air Capture (DAC) offset protocol. This bold move legitimizes the DAC industry, sets a global precedent for carbon removal regulation, and positions Canada as a leader in climate innovation. With climate change accelerating and net-zero targets looming, this framework could unlock massive investments and drive global adoption of DAC technology. Here’s why this matters.
1. Monetizing Carbon Removal Through the Carbon Credit Market
The business model for DAC today revolves around selling carbon credits in voluntary markets. Companies striving for net-zero buy DAC credits to offset their own emissions. This has driven investments from corporate buyers like major airlines and tech companies looking to neutralize their environmental impact. According to CDR.fyi, over 1.6 million tonnes of DAC carbon credits have been purchased to date at an average price of $470 per tonne.
The Canadian protocol strengthens this market by ensuring DAC credits meet stringent standards for permanence, quantifiability, and transparency. Aligning with the International Standard Organization’s greenhouse gas standard for emissions verification, it guarantees that each credit represents a measurable and lasting reduction in atmospheric CO₂.
Sales of carbon credits mean more project development in Canada, which is uniquely positioned for DAC with an abundance of clean energy and geologic storage. These projects lead to job creation and economic opportunity in often remote locations.
Additionally, as DAC credit prices continue to fall with increased adoption and improved technology, more customers may find DAC a viable and attractive offset solution, further expanding the market.
2. Raising the Bar for Carbon Offset Integrity
Unlike some offset programs with questionable long-term impact—such as forestry credits vulnerable to wildfires—Canada’s DAC protocol mandates that CO₂ be permanently stored in underground geological formations for at least 100 years. It also requires continuous monitoring to prevent reversals, setting a high standard for durability and accountability in the carbon market.
Additionally, the protocol bans the use of captured CO₂ for enhanced oil recovery, ensuring that DAC remains a true climate solution rather than a tool for fossil fuel production. This is particularly important for ensuring DAC’s reputation as an independent decarbonization strategy rather than a “license to operate” for continued fossil fuel use.
By setting stringent storage requirements and verification processes, Canada is demonstrating a commitment to making DAC credits highly credible, which could further bolster investor confidence and participation in the market.
3. The First Step Towards a Compliance Carbon Market
Canada’s DAC protocol isn’t just about voluntary credits—it’s laying the groundwork for DAC to be integrated into compliance carbon markets, where credits are legally required rather than optional. Currently, compliance markets such as the EU Emissions Trading System and California’s Cap-and-Trade Program dominate global carbon trading.
This transition would dramatically increase demand for DAC credits by allowing major emitters, from power plants to manufacturing facilities, to purchase DAC offsets to meet government-mandated reduction targets. This shift would significantly scale up investments in DAC infrastructure, driving costs down over time.
The potential for DAC to become a major player in compliance markets could reshape the economics of carbon removal, providing a stable and reliable demand base that extends well beyond voluntary corporate buyers.
4. Direct Air Capture is Essential to Hitting Net-Zero Targets
2024 marked the first time global temperatures exceeded the critical 1.5-degree Celsius threshold. Reducing emissions alone isn’t enough—we need to actively remove carbon from the atmosphere. DAC technology is one of the few solutions capable of eliminating legacy emissions and addressing hard-to-abate industries like aviation.
The Intergovernmental Panel on Climate Change (IPCC) stresses that Carbon Dioxide Removal technologies are vital to meeting net-zero goals. However, DAC remains an expensive and emerging technology, largely due to a lack of policy frameworks and relatively high cost today. Canada’s new protocol provides the structure needed to turn DAC from an experimental concept into a scalable climate solution.
DAC also has the advantage of being location-agnostic. Unlike nature-based solutions, which require specific land use conditions, DAC facilities can be built anywhere with suitable energy sources and geologic storage, making it a more flexible carbon removal option in a wide range of environments.
5. The Roadblocks and Opportunities Ahead
Despite this progress, DAC technology is still costly, ranging from $400 to $1,000 per ton of CO₂ removed. For DAC to reach widespread adoption, it will require policy support, including tax incentives, public-private partnerships, and continued investment in research and development.
Expanding renewable energy sources is also key. DAC facilities require significant energy inputs, and ensuring they are powered by clean energy sources is crucial for maintaining DAC’s overall climate benefits. Investments in low-carbon energy infrastructure, such as geothermal or nuclear power, could make DAC more viable in the long term.
The success of Canada’s protocol will depend on industry and public feedback, ensuring it is both effective and practical. If executed well, this framework could serve as a global model, accelerating DAC’s role in the global fight against climate change.
With this draft protocol, Canada is making a bold bet on the future of DAC as a critical piece of the net-zero puzzle. By creating a transparent, high-integrity framework for DAC credits, the government is paving the way for new investments, international adoption, and the integration of DAC into compliance markets.
The next few years will be pivotal in determining whether DAC can truly scale to meet its potential. Canada’s leadership in defining robust regulations and high-integrity credits could inspire other governments to follow suit, setting a global standard for DAC’s role in tackling climate change.
Disclaimer: I work for Deep Sky, a Canadian carbon removals project developer.
