A carbon removal buyers coalition founded by McKinsey, Google and others has backed a new approach to biomass energy that promises to provide always-on electricity while sequestering carbon dioxide deep underground.

The Frontier coalition announced this week that it would spend $41 million on 116,000 removal credits from Arbor, a startup founded by a former SpaceX engineer that’s developed a more efficient process for what’s known as bioenergy with carbon capture and storage (BECCS). The startup will generate the credits with a facility close to Louisiana’s Gulf Coast that is expected to be operational in 2028.

The deal is the latest in a flurry of recent interest in BECCS. Microsoft, by far the most active buyer of removal credits, has contracted for close to 10 million BECCS credits from projects in Norway, Louisiana and Sweden since April.

Trio of innovations

Arbor says its approach advances BECCS in three ways. Rather than burning biomass directly, the company uses a new gasifier design to convert it into syngas, a mixture of hydrogen and carbon monoxide. The gas is then sent to a specialized furnace that burns it in pure oxygen instead of air. This creates a stream of CO₂ in a liquid “supercritical” state, which is used to drive the turbine. (Conventional BECCS uses steam to do so.) Once used, the CO₂ stream is captured and piped to a geological reservoir for permanent storage.

These innovations boost the efficiency of the biomass-to-electricity energy conversion by more than 30 percent, noted Frontier. And because the waste stream contains just carbon dioxide and water, rather than the mix of gases generated by other BECCS approaches, separation of the CO₂ for storage is also cheaper. 

At present, the process is still expensive — Frontier’s is paying more than $350 per credit — but the coalition said costs could fall below $100 per ton of CO₂ removed as the technology is scaled. The fact that Arbor integrates the capture process with power generation will help cut costs as that happens, because every two- to three-fold increase in the size of the system is projected to generate a 10-fold increase in power generation and carbon removal. 

“One of the amazing features of their technology is that the output does not scale linearly with the size of the facility that they build,” said Hannah Bebbington, Frontier’s head of deployment. “That is an incredible cost saving, right as you’re thinking about the economics of the next facility.”

What counts as waste?

The promise of carbon-negative power generation has made BECCS systems an important part of global net-zero scenarios, but issues around biomass sourcing have dogged the technology. One prominent biomass power plant, the Drax facility in northeast England, has repeatedly found to be using wood sourced from primary forests. More recently, researchers modeled the impact of nine biomass projects planned for the same region of the U.S. that Arbor plans to operate in and found that the increased demand for biomass would likely lead to the conversion of natural forests to plantations. 

One challenge is knowing exactly what constitutes “waste” biomass, said Freya Chay, carbon removal project lead at Carbon Plan, a nonprofit that analyses climate solutions. As biomass becomes more valuable, landowners and others may be incentivized to thin forests that would otherwise have been left untouched, for example. “We like to use the word waste to just stop thinking about all the upstream dynamics,” argued Chay.

Frontier has developed a series of sustainable biomass sourcing principles that are designed to protect against outcomes. In Arbor’s case, the project passed muster in part because the feedstock for the power plant will be thinnings from commercial plantations. These are currently left in piles or burned, said Bebbington. The methodology that Arbor follows, developed by Isometric registry, also requires third-party tracking to ensure that biomass from other sources is not substituted for the thinnings.

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The voluntary carbon market has been in a slump. Amid a wave of negative press, the volume of credits traded has declined for three consecutive years, according to Ecosystem Marketplace, an information source for environmental markets. Prices have followed suit: After more than doubling between 2020 and 2022, the average cost of a carbon credit has since declined 14 percent, hitting $6.34 in 2024.

Yet buyers should not assume this state of affairs will persist, according to experts. New sources of demand are poised to disrupt the market, raising the likelihood of substantial price increases, particularly for high quality credits. 

“It is definitely worth looking at carbon markets now, because the period of time when there were cheaper options available is probably coming to an end as you see these various demand pools start to kick in,” said Sebastien Cross, chief innovation officer and co-founder at BeZero Carbon, a carbon credit ratings agency.

Four trends to watch

1. Nation states are entering the market

Proposals for an updated EU climate plan, released last week by the European Commission, require member countries to reduce emissions by 90 percent below a 1990 baseline by 2040. Critically for carbon markets, the commission suggested that credits equal to 3 percent of the 1990 total can be used to hit that target. 

The commission has not yet specified what kind of credits can be used, but demand from EU countries will likely absorb credits that would otherwise be available to corporate buyers. If countries max out their 3 percent allowance, just over 140 million credits would be used in 2040, according to an analysis of the proposal by the Oeko-Institut, a German research organization. That’s close to half the total number of credits issued in 2024, per Ecosystem Marketplace.

The commission’s proposals now need to be debated by member states. But another international agreement — Article 6 of the Paris Agreement, which was finalized at last year’s COP negotiations — is already being used by countries to trade credits: Last month, Switzerland and Norway became the first countries to use Article 6 to do so.

2. Compliance markets are spreading

Compliance markets are government-run schemes that require specific sectors to decarbonize and can include credit trading. They used to operate largely independently of the voluntary carbon market, but that’s changing as new compliance schemes pop up around the world. 

The spread is driven in part by the E.U.’s Carbon Border Adjustment Mechanism (CBAM), a tax on imported steel and other high-emission commodities that will take effect in January 2026. Companies exporting CBAM goods to Europe can avoid the levy if they have already paid a carbon price at home, which has prompted several countries to set up their own compliance schemes. Many of these allow companies to meet a fraction of their mandatory emissions reduction using carbon credits. In Singapore, the fraction is 5 percent; in Vietnam, 30 percent.

“These are small countries that don’t have that many emissions,” said Anton Root, co-founder of AlliedOffsets, which provides data on carbon markets. “But add them all together and you’re starting to look at the market growing in a pretty meaningful way.”

Japan is one of the largest economies to be developing a compliance scheme. Participation will become mandatory next year, with hundreds of companies accounting for more than half of Japan’s emissions involved. Companies in the scheme can use credits to offset up to 5 percent of annual emissions, which AlliedOffsets estimates could generate demand for around 40 million tons of credits annually.

3. Airlines will have to make big purchases

Airlines from the U.S., Europe and many other countries have to abide by the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which requires them to cap their emissions at 85 percent of 2019 levels. Any growth above that baseline needs to be offset using CORSIA-approved credits. 

Based on likely emissions growth in aviation, airlines will require 37-58 million credits to comply in 2026, with the range increasing to 81-130 million in 2030 and 150-230 million in 2035, according to an Allied Offsets forecast shared with Trellis.

CORSIA has been slow to approve credits, prompting fears of price spikes even while demand ramps up. Prices for credits generated by the first project to meet CORSIA quality criteria and issue credits — a forestry scheme in Guyana — have grown from around $5 to more than $20 since the credits were issued in February 2024.

4. Tech is turning to credits to deal with rising emissions

Technology companies have set some of the most ambitious emissions reductions targets, but the need for new data centers to power AI products is one of several factors making those targets look increasingly hard to hit. Google’s footprint has grown by a half compared to its 2019 baseline; Microsoft, which wants to be carbon negative in 2030, has seen emissions grow 30 percent since it announced that goal in 2020.

Among the tech giants, Microsoft has been clearest in stating the role that credits will play in 2030: it expects to use “single-digit millions” of credits annually to meet that commitment, Brian Marrs, the company’s senior director of energy and carbon removal, told Trellis in April.

Other tech companies have been more cagey about future use of credits, but they’re also buying. Two recent purchases from forestry projects will bring Meta more than 3.5 million credits, and Amazon is a co-founder of the LEAF Coalition, which brings together governments and companies to combat deforestation. The coalition’s biggest deal to date is a $180 million investment in the Brazilian state of Pará that will generate 12 million credits.

How buyers are reacting

With prices set to rise and supply of higher-quality credits limited, some companies are moving now to secure offtake agreements for future projects. Microsoft is again the highest-profile example. “Nearly 100 percent of the carbon removal purchases announced in our current fiscal year will be delivered between 2030 and 2050 via long-term offtake agreements,” said Marrs. “We’re not looking at this sustainability report to sustainability report.”

Cross has seen that trend reflected at BeZero, where the bulk of the company’s work is now in helping clients assess projects prior to any credits being issued, rather in helping buyers in spot markets. “Given the state of the market today,” he said, “there are some cheap hedges available relative to where you’d expect to see carbon prices get to.”

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The opinions expressed here by Trellis expert contributors are their own, not those of Trellis.​

Here’s a counterintuitive truth: just as sustainability reports became ubiquitous — 90 percent of S&P 500 companies publish detailed ESG disclosures — they also became controversial. The anti-ESG backlash has turned what seemed like straightforward progress in companies reporting on their sustainability efforts into a complex strategic puzzle. And that’s created an unexpected paradox for investors: Sustainability reports may be more valuable than ever, but for entirely different reasons than their creators intended.

The scale and impact of political pressure

The numbers reveal a dramatic investor retreat. ESG funds suffered significant withdrawals in the first quarter of this year, with more than $8 billion globally being taken out and $6 billion of that from U.S. investors alone. Shareholder resolutions dropped this proxy season, with 25 percent of filed proposals failing to reach ballots due to higher regulatory bars that now require proponents to demonstrate ESG issues and company efforts are “significant and economically relevant.”

The linguistic retreat in company reports is equally striking. Research from AlphaSense shows DEI mentions dropped nearly 70 percent  at U.S. firms, while climate change references fell 30 percent. Companies are in full-on “green-hushing” mode, maintaining sustainability programs while avoiding explicit ESG language.

Yet corporate sustainability reporting hasn’t decreased. If anything, it’s become more detailed and standardized, driven by regulatory requirements that persist despite political pressure. The U.S. Security and Exchange Commission’s March decision to stop defending climate disclosure rules has created a complex landscape where some companies continue detailed environmental reporting while others scale back.

The hidden value in corporate contradiction

The anti-ESG movement has inadvertently created a natural experiment revealing which companies are genuinely committed to sustainable practices versus those simply following trends. This filtering effect generates more reliable ESG investment signals because it helps investors determine which companies are virtue-signaling as expedient versus those genuinely on a path toward improved outcomes for people and planet.

Consider persistence: 79 percent of Russell 3000 companies receiving shareholder resolutions this year have faced them in the past five years. This concentration suggests activist investors continue targeting the same firms — either companies with persistent governance issues or those representing particularly impactful engagement opportunities.

More telling is what survives. Greenhouse gas emission-related resolutions remain among the most common shareholder proposals despite the overall environmental proposal decline. These surviving initiatives primarily request enhanced disclosure on emissions reporting, climate transition plans and progress on reduction strategies, which suggests climate concerns retain core investor interest even amid political pressure.

Companies maintaining robust sustainability reporting despite potential backlash signal something crucial about their long-term strategic thinking. They’re essentially saying, “We believe these practices create value regardless of political fashion.” Studies show companies that maintained ESG commitments during politically motivated pressures and scrutiny tend to have stronger financial performance over longer horizons; not necessarily because ESG practices directly drive returns, but because maintaining consistent strategic direction despite external pressure correlates with management excellence.

Reading between the lines

The anti-ESG environment has also made sustainability reports more informative by forcing companies to demonstrate actual value rather than virtue signal. When every disclosure carries potential political costs, only strategically important initiatives survive the regulatory gauntlet.

Smart investors now read these reports like organizational psychologists. A company quietly implementing water conservation measures while avoiding climate rhetoric tells a different story than one prominently featuring carbon neutrality goals despite potential backlash. Both might create value, but through different strategic approaches reflecting different risk tolerances and stakeholder priorities.

The SEC’s heightened standards may have inadvertently improved sustainability initiative quality. Companies can no longer rely on superficial commitments — every disclosure must justify its strategic importance. This creates a more rigorous framework where sustainability reports reveal organizational capabilities rather than corporate values.

What’s more, the backlash has fundamentally changed activist investor approaches. While total proposals declined, the focus has shifted from environmental advocacy to governance mechanisms. Companies receiving five or more proposals dropped from nearly two dozen in 2024 to just 10 in 2025. Activists are becoming more selective, focusing resources where they can demonstrate clear business cases.

Crucially, much engagement has moved behind closed doors. As Milla Craig of investor consulting firm Millani notes that investors aren’t backing off on the integration of ESG; they’re having these conversations privately rather than through public proxy battles. This shift from public confrontation to private engagement may prove more effective, allowing companies to address concerns without headline risk.

The bottom line

Political pressure has created a paradox: by making sustainability costly to discuss, it may have improved ESG investing by forcing companies to demonstrate genuine business benefits rather than good intentions. The result is a more nuanced framework for using sustainability reports in investment decisions.

Valuable reports now clearly connect environmental and social practices to business outcomes — how water efficiency reduces costs, employee engagement improves productivity or supply chain transparency reduces regulatory risk. This shift has made sustainability reports more rigorous and valuable for fundamental analysis.

The key insight: Focus less on what companies say about their values and more on what their actions reveal about strategic thinking and operational capabilities. When companies maintain environmental disclosures despite potential backlash, it’s likely because those practices are genuinely integrated into operations. When they abandon initiatives at the first sign of pressure, that reveals strategic commitment and risk management capabilities.

For investors, the lesson is clear. Sustainability reports remain valuable sources of investment intelligence, but their value comes from organizational insights rather than corporate virtue signaling. In a world where every disclosure carries political risk, only the most strategically important information survives — and the most valuable conversations may be happening behind closed doors rather than in public proxy battles.

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Banks and other financiers award only 2 percent of funding to the circular economy. As a result, innovations with the biggest potential to transform the global economy, reduce risks and slash emissions are left on the table, according to the first Circularity Gap Report Finance, released June 30.

Moreover, only 4.7 percent of circular funding flows to “high-impact” innovations, such as in materials, modular design and regenerative production, the authors found. In addition, they note, innovators struggle to scale, getting support early on but later suffering the “commercialization valley of death.”

In all, circular investments totaled $164 billion between 2018 and 2023. And while annual investments peaked in 2021, recent figures suggest new momentum: Funding totals were 87 percent higher in the period between 2021 and 2023 than between 2018 and 2020.

“The transition towards a circular economy is crucial for value preservation and value creation in the economy at large and for individual businesses,” said Suzanne Kuipers, director of circular economy and product decarbonization and KPMG, in a statement. The firm worked on the report with Circle Economy and the International Finance Corporation.

A $2.1 trillion opportunity stands to be realized by 2030 if the transportation, buildings and food sectors embed circular economy practices, the report noted. But there’s a long path ahead. Circle Economy, an Amsterdam think tank, found in May that the world’s economies are only 6.9 percent circular, a dip from 9.1 percent six years earlier.

What’s in the 2 percent?

The 2 percent slice of circular finance includes support for companies with fully circular business models as well as the transitional efforts of existing, linear companies. Yet most of the funding, 35.7 percent, went to the latter in the form of green and sustainability-linked loans.

The next biggest segment, 27.5 percent, supported material recovery efforts, including recycling, composting and biomass, followed by 23.5 percent for use models such as repair, resale, reuse, rental and product-as-a-service. Another 8.6 percent of funding was unclassified.

“Tracking capital flows in the circular economy is essential to unlocking its potential as a driver for competitiveness and innovation,” stated Massimiano Tellino, head of circular economy for the innovation center of Intesa Sanpaolo Group. The private bank in Turin, Italy, has allocated more than $23 billion to circular projects since 2018.

“Circular business models remain underfinanced despite their capacity to reduce risk and generate long-term value,” he said. “Aligning capital with circular principles is key to building a more regenerative and future-proof economy.”

Investments often went to conventional business models, such as car repair or online resale marketplaces, the report found. Waste prevention, packaging innovations and recycling efforts also attracted funding.

However, sectors that use the most resources and spew the greatest amount of climate emissions — including construction, farming and manufacturing — were underfunded, according to the report. So were disruptive circular business models, such as product-as-a-service offerings. The researchers suggested that lenders and investors need to better value material innovation, cradle-to-cradle design and zero-waste manufacturing.

Who is funding?

Big banks and other creditors provided 39 percent of total circularity investment over the six-year period studied in the report. Their average annual flows of $10.6 billion eclipsed the $3.2 billion from private equity, $2.3 billion from asset managers and institutional investors and $1.9 billion from investment banks. Venture capital firms provided the least, $1.5 billion.

Public funding, on the other hand, grew at an average annual rate of 46 percent between 2018 and 2023. That share from government and development institutions made up 22 percent of overall circular finance.

Equity investment, which accounted for 23 percent of total funding, soared by 154 percent between 2018 and 2023.  But despite high expectations and large deal sizes ($573 million on average), there were only 59 transactions.

Venture capitalists, meanwhile, were busy cementing 1,000 deals related to circularity, half of their overall disclosed total in that time period. Yet they only provided about 7 percent of circular finance.

Why the gap?

The misalignment between funding and the potential impact of the solutions receiving support stems partly from a lack of understanding of circular business models, according to the report. It suggested that circular services and reuse-focused business models may not map to traditional private equity or venture capital expectations for rapid growth and exits.

Circular ventures often involve physical assets, reverse logistics or long payback periods. In turn, they externalize benefits or help companies avoid costs, rather than providing strong revenue growth, according to the report. The non-linear models of reuse and repair also depend heavily on consumer change, which is hard to control.

That said, regulations can drive change: The researchers noted, for example, that after the European Union enacted its Circular Economy Action Plan in 2020, investment in circularity rose by 62 percent there — even as it was flailing in North America.

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