Denmark’s unprecedented carbon removals fund has facilitated the coexistence of corporate and national carbon claims in carbon accounting.

By Jean-Philippe Brisson, Paul A. Davies, Lars Kjølbye, John-Patrick Sweny, and Qingyi Pan

In the past few years, stakeholders in the carbon market have debated how to integrate the voluntary carbon market (VCM) and the emerging international carbon market governed by the Paris Agreement — Denmark’s recent move to allow stacking of voluntary carbon credits and nationally determined contribution (NDC) offers a promising solution. This approach, already supported by corporate purchasers of voluntary carbon credits, could serve as a useful model for developers of eligible projects — although its compatibility with the EU carbon accounting structure remains uncertain.

Denmark Carbon Removals Fund

The Danish government established a fund for negative emissions via carbon capture and storage (NECCS Fund) as part of the Danish Financial Act of 2022. The NECCS fund completed its first tender for negative emissions projects in mid-April this year, selecting three CO2 removal activities with a combined annual mitigation of 160,350 tons from 2026 to 2032. The selected project operators will receive €22 million in aggregate once they establish that the captured CO2 has been stored permanently in a geological storage underground through a flat-rate subsidy per ton of CO2.

The Danish government emphasizes that the carbon removals resulted from the CCS projects, subsidized by the government via the NECCS Fund, will contribute to the Danish NDC and the joint EU NDC under the Paris Agreement. At the same time, the project operators may also generate and sell voluntary carbon credits to corporate purchasers, as long as the NDC attributes stay within Denmark. The Danish government’s unprecedented approach clarifies its position allowing the same carbon removal activities to generate two types of environmental attributes, each satisfying its own purpose or compliance requirement, without triggering double-counting concerns.

Industry Practice

Microsoft Corp. (Microsoft), a leading purchaser of high-integrity voluntary carbon credits, recently released a paper outlining its stance on structuring corporate claims to reconcile with national goals.1 This position generally aligns with the Denmark model. In the paper, Microsoft proposes that private sector actors should be allowed to use voluntary removal credits to satisfy their voluntary emissions pledges or claims at a global level, provided that the private sector actors also disclose the quantity and national domiciles (the country that holds the corresponding NDC attributes) of such voluntary carbon removal credits.

According to this paper, in its sustainability disclosure, Microsoft will report the sources and national domiciles of each carbon removal credit to ensure a clear linkage between the corporate inventory and the national accountings for any credit.

Implications for Market Participants

Under the Danish model, international corporate purchasers may be expected to treat any purchases of voluntary carbon credits as “contributions” toward the host country’s NDC. When the host country is a member of the EU, the accounting may be further complicated by the fact that the EU has not yet clarified how the interaction between the VCM and the joint EU NDC under the Paris Agreement will play out. Therefore, when contracting for the purchase and sale of voluntary carbon credits, parties may want to clarify in advance if the credits will come with NDC attributes and how the parties should handle potential risks of changes in law.

The authors would like to thank Yuxuan Chen in the Beijing office of Latham & Watkins for her contribution to this blog post.

  1. Microsoft, “CDR Accounting: Transparently structuring corporate claims to reconcile with national goals,”, last visited May 31, 2024. ↩︎