FEED-IN TARIFFS / PER-TONNE SUBSIDY

Feed-in tariffs first gave companies producing renewable electricity a guaranteed price for each unit delivered. Applied to CDR, a public authority could approve projects and offers a multi-year contract paying a fixed amount for every verified tonne, up to an agreed limit. Projects could receive a published tariff or compete for contracts through an auction. The resulting revenue can support construction and operation. Unlike a reverse tax credit, payment is available only to contracted projects. Unlike a contract for difference, the rate does not move with a market price. The instrument becomes procurement if the payer takes ownership of the removal.

The central choice is how projects receive contracts. A published tariff is predictable but may overpay or attract little supply. Auctions can reveal the support projects require, although smaller suppliers may struggle to compete. Eligibility should be limited to net removals from atmospheric or sustainable biogenic carbon, with separate rates or rounds where costs and storage durability differ. Contracts should specify their length, delivery schedule, maximum funded tonnes, inflation adjustment, verification, payment timing and responsibility for delay, under-delivery or reversal. Ownership, private sales, other subsidies, imports, infrastructure dependencies and impacts on public budgets or consumer bills also need clear treatment.

Long-term payment for every verified tonne can give a project the income needed to raise construction finance and continue operating. Government pays only for delivery, while a spending or volume limit controls exposure. Competitive rounds can direct limited funding toward projects seeking the least support, and separate rounds can prevent newer methods from being crowded out. Repeated contracting may create demand across several projects, broaden the supplier base and generate evidence about costs and performance. Learning and cost reductions remain possible rather than guaranteed outcomes.

An excessive payment may waste public money, while an inadequate one may attract no projects. Without a volume cap, costs can exceed expectations. Auctions may concentrate support among large companies and exclude newer methods. Contracts awarded before transport or storage is ready may deliver late or fail. Weak eligibility or ownership rules can reward avoided fossil emissions instead of removals or allow one removal to be sold twice. Sudden cuts can deter investment.

The paying body should compare applications, contracts and verified deliveries, alongside support per tonne, total cost, whether awards go to only a few firms, finance raised, delays, other revenue and reversals. These results should determine future rates, budgets, method-specific rounds, delivery milestones and penalties. Persistent delivery shortfalls, overpayment or invalid removals should trigger tighter eligibility, stronger enforcement or programme suspension.

Engagement should establish how many tonnes could credibly be delivered, what contract terms projects need, and whether transport and storage will be ready. It should test whether auctions are accessible to smaller suppliers, who owns each removal, how costs are funded and whether verification and safeguards are credible. Evidence should come from industry, finance, buyers, regulators, communities and civil society.

Supranational institutions can fund cross-border programmes and establish common eligibility and contracting rules where their treaties and budgets permit. National governments can legislate spending and assign a climate, finance or energy agency to award contracts and make payments. Regions and states can do the same where they control relevant budgets and climate programmes. Cities can fund smaller schemes from municipal budgets. Higher levels may provide funding and shared verification rules while lower levels select projects and manage contracts. If any authority takes ownership of the removals it funds, the instrument becomes procurement instead.