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CDR Inspiration
What inspired you to get into the CDR space?
Peter Mayer - After 25 years of practicing law, I feel this is the most exciting phase of my career. I started practicing law in Germany, where I became a partner at Dentons, a major international law firm. I headed their German energy practice and later moved to New York over a decade ago.
I’ve always had a strong connection to the energy sector, primarily working on renewable energy projects and advising international companies in the carbon compliance market. About six years ago, I started my own practice with a few colleagues, and three years ago, I had my first client in the voluntary carbon market. Since then, the practice has grown significantly, and now, around 80% of my work revolves around the VCM, focusing on carbon dioxide removal offtake and pre-purchase agreements.
Unique CDR experience
Why do you enjoy working in this space, and what sets your firm apart?
Peter Mayer - The CDR space is incredibly energizing. There’s a strong sense of collegiality and a shared mission to do something positive for the planet. The human ingenuity in this field is remarkable and the positive energy that there are things we can do to make a difference is contagious.
I think at our firm we combine flexibility and creativity with sound professional judgment in a way that’s accessible to clients. Carbon lawyers are rare, and that itself sets us apart. Additionally, my experience spans two prominent jurisdictions in the CDR world: Germany and the U.S. This is particularly valuable as many German and other European companies are looking toward the U.S. as a key market.
CDR Challenges
What challenges do businesses face when integrating carbon removal into their strategies?
Peter Mayer - Buyers of CDR credits often perceive the risks and costs as disproportionately high. Once a company commits to neutralizing residual emissions through CDR, they must navigate issues such as variability in credit quality, which can impact the credibility of their climate claims.
Factors like budget, risk appetite, and strategic goals shape their CDR portfolios. Technology-based CDR solutions are often favored by businesses with higher profit margins. Other companies may prioritize CDR types that align with their core business. For example, the aviation industry is investing in Direct Air Capture and Storage which also supports sustainable aviation fuel development.
The nascent state of the CDR industry adds another layer of complexity. Many projects are first-of-their-kind, with varying levels of technical, commercial, and operational uncertainty. Contracts can help to mitigate these risks. For example, long-term offtake agreements can provide financial stability for project developers and give buyers certainty regarding price and volume.
Legal framework
How do you foresee the legal framework around carbon removal evolving in the next decade?
Peter Mayer - Legal frameworks will undoubtedly evolve, but it’s essential to remember that they vary by jurisdiction. Even the legal definition of a voluntary carbon credit differs from one jurisdiction to another.
In the U.S., we’re seeing significant activity at the state level, particularly in places like New York and Massachusetts. These states are introducing incentives such as subsidies and tax breaks to encourage innovation in carbon removal technologies.
I also expect increased regulations and standardized methodologies for measuring, reporting, and verifying carbon removal. Over time, carbon removal credits may play a larger role in compliance markets, integrating with emissions trading systems and policies like carbon taxes. International collaboration under Article 6 of the Paris Agreement will likely expand even if the U.S. pulls out of the Paris Agreement again.
Scaling CDR
What are the biggest challenges facing nature-based and science-based CDR solutions, and what’s needed to scale them in 2024?
Peter Mayer - For nature-based solutions, the main challenges are permanence and integrity. Carbon stored in ecosystems is vulnerable to reversal through events like deforestation or wildfires. There’s also skepticism about the verifiability and scalability of these solutions, especially in areas with weak governance or land tenure issues.
Science-based solutions, on the other hand, face hurdles related to high costs and energy demands. These technologies need substantial investment and innovation to become more cost competitive.
To scale both approaches, we need robust standards and verification systems, stronger policy support, and innovative financial models. Expanding subsidies, tax credits, and carbon pricing mechanisms can level the playing field for high-cost solutions. Infrastructure development, such as CO₂ transport and storage networks, will also be crucial.
But the overarching challenge for both types of solutions is the current lack of a mature market. Liquidity, repeatability, and standardized practices are essential for the CDR industry to grow.
Recent developments
Are there any recent developments in your work that you’d like to share?
Peter Mayer - One of the most exciting aspects of working in this field is the opportunity to help shape its legal foundations. We’re still developing standardized agreements, which means we’re creating precedents for the industry.
The National Renewable Energy Laboratory under the U.S. Department of Energy is developing standardized carbon removal offtake agreements with input from various stakeholders in the industry, and we’ve been invited to join the advisory group for legal and contractual aspects. It’s an incredible opportunity that speaks to the reputation we’ve built in this space and provides us with exposure and access to a fantastic network.
We’re also working on a standardized offtake agreement for a consortium of corporate buyers. I find these projects to be particularly rewarding because of their creative elements. I mean how often does a lawyer get the chance to help establish industry precedents?
