The first step in reducing the risks of climate change is cutting carbon emissions. The world hit a notable milestone on that front, with global energy-related emissions likely peaking last year, according to a recent BloombergNEF report.
Now, the world’s carbon pollution is likely to begin a long, inexorable decline over the coming decades. But there’s a catch: Emissions almost certainly won’t fall fast enough to limit global warming to 2 degrees Celsius, let alone meet the 1.5 C target set in the Paris Agreement.
Increasingly, hitting that target looks like it will require the world to turn to technologies that can suck carbon straight from the air in a bid to turn the global thermostat down. Investors have spent years laying the groundwork to develop a sector that has the potential to undergird carbon markets that BNEF estimates could reach $1.1 trillion in the coming decades.
Companies from Occidental Petroleum to Microsoft along with firms like BlackRock and Bill Gates’ Breakthrough Energy Ventures are among the investors throwing billions at startups. The U.S. government has been a significant patron, with the Energy Department committing more than $1 billion to get carbon removal off the ground.
But funding and buyers of carbon removal services have so far targeted a narrow subset of techniques to clean the atmosphere. And U.S. federal support is now up in the air as the Donald Trump administration pursues funding cuts to all manner of climate programs.
This is happening in what is shaping up to be a formative period for the carbon removal industry as companies attempt the perilous journey from pilot projects to commercialization, said Robert Hoglund, co-founder of carbon removal clearinghouse CDR.fyi. To ensure the industry has a fighting chance to reach the scale needed, it will need an enormous financial boost.
“If we don’t get new buyers, we’re stuck in the seed stage,” he said.
There are at least eight broad categories for removing carbon to clean up the atmosphere, with more than 900 startups trying different approaches. The money that’s been rushing into the carbon chase has overwhelmingly backed a technique known as direct air capture (DAC), which involves using machines to suck up carbon. Firms are placing major bets on it even though the technology remains unproven at scale, inordinately expensive and energy intensive. Far less investor money is flowing to competing methods such as sequestering carbon dioxide in the ocean and using crushed rocks, a process known as enhanced weathering.
Between 2020 to 2024, firms have bet $3.3 billion on DAC compared to $3.4 billion for all other novel approaches, according to publicly available data compiled by CDR.fyi. The technology receives a disproportionate amount of private investment because it’s backed by U.S. federal tax credits and grants, according to Danny Cullenward, a senior fellow with the University of Pennsylvania Kleinman Center for Energy Policy.
That support isn’t because the government decided DAC is the best way to remove carbon, he said, but “because the political economy of the oil and gas industry is much more powerful than these other emerging industries.”
Carbon removal buyers looking to meet their climate targets have also not diversified their portfolios. Almost 60% of all purchases tracked by CDR.fyi between 2019 and 2024 are for bioenergy with carbon capture and storage (BECCS). It involves burning wood to run power plants, then capturing and sequestering the resulting emissions underground. Hence, the CO2 the trees and plants pull from the atmosphere during their lifetimes stays put. Despite the interest, research has found that cutting down and transporting feedstock can emit more carbon than it sequesters, making carbon accounting a big challenge.
BECCS made up about 85% of Microsoft’s 8.2 million metric ton portfolio for novel carbon removal through 2024 tracked by CDR.fyi. The technique “offers attractive costs with an achievable scale inside the 2030 timeline,” said Brian Marrs, the company’s senior director of energy and carbon removal. Bioenergy plants already exist, and retrofitting them for carbon capture is arguably faster than building and scaling novel carbon removal technology.
Since 2024, Microsoft has only added to its BECCS portfolio, signing a landmark 6.75 million ton deal with Houston-based developer Fidelis New Energy earlier this month to purchase removal from a plant being built near Baton Rouge, Louisiana. It’s the largest deal for novel carbon removal to date. The company also recently added another 3.7 million ton purchase from CO280 Solutions, which captures CO2 from pulp and paper mills, reflecting Microsoft’s aggressive expansion of its climate commitments.
Microsoft takes a “portfolio approach” to procuring carbon removal, balancing costs, deployment timelines and scale potential for different methods, Marrs said, adding that the company also purchases nature-based carbon credits in addition to engineered removals.
BECCS’s dominance is not to say DAC or other technologies haven’t seen big purchases. According to CDR.fyi, Oxy subsidiary 1PointFive has sold 1.3 million tons of carbon removal services to companies including Microsoft, Amazon.com and Airbus, making it the largest DAC purveyor. Its next-closest competitors, Heirloom Carbon Technologies and Climeworks, have each sold a bit more than a quarter of that amount.
Yet these approaches have yet to live up to their promise. Through 2024, DAC delivered around 1,200 tons of CO2 removal — less than 0.2% of all carbon removed over that time frame — and BECCS has delivered 10,000 tons — less than 1.7% of the total — per CDR.fyi.
Just a handful of companies are buying the bulk of carbon removal credits. Microsoft alone is responsible for the majority of carbon removal purchases to date, though Alphabet’s Google and Stripe are also among major buyers.
That’s because durable removal isn’t cheap. Using DAC can cost upwards of $1,000 per ton of CO2. Compare that to standard forest carbon credits, which are often sold for under $10.
“The only way to make this scale is to make it mandatory,” said Wim Carton, an associate professor of sustainability science at Lund University in Sweden.
Carbon removal is a public good governments should treat as akin to a “trash removal service,” said Vikrum Aiyer, Heirloom’s head of global public policy and external affairs. That approach should also include sticks, he added, much like littering results in a fine. But with Trump — who has called former President Joe Biden’s climate legislation “the green new scam” — the odds of the U.S. doubling down on climate regulation are low.
What climate scientists want investors and entrepreneurs to understand is that carbon removal has a narrow set of appropriate use cases.
The first is cleaning up legacy emissions. Decades of humanity’s CO2 is lingering in the atmosphere, warming the planet. If the Earth were an overflowing bathtub, turning the faucet off — cutting emissions — wouldn’t be enough to stop the water from spilling over. You also need to open the drain. The second use is for the unavoidable, steady drip of CO2 for decades from sectors like agriculture and aviation.
All other applications of carbon clean-up technologies could do more harm than good since they risk slowing down emissions cuts today by promising removals down the road, Carton said. That’s especially true for using captured CO2 to extract more fossil fuels, a practice that climate researchers agree needs to be rapidly wound down.
Exactly how much carbon the world needs to remove from the atmosphere depends on how quickly that happens.
In a scenario where humanity dramatically curbs emissions, scientists estimate that 4.8 billion tons of CO2 removal will be needed annually by mid-century to keep the climate stable with all of it coming from conventional methods like planting trees. In what’s an increasingly likely scenario of continuing to burn fossil fuels, the planet will require almost 9.8 billion tons annually to compensate for the added emissions with 3.5 billion of that from novel techniques like DAC.
The world is nowhere near that. Through 2024, about 13 million tons of carbon removal credits have been sold since CDR.fyi began tracking the market for novel carbon removal, what Cullenward called “a rounding error.”
The clock is ticking on scaling that up.
“We’re far too late, and we’ve eaten up too much of the carbon budget to say that we don’t need it,” said Sabine Fuss, co-chair of the Berlin-based Mercator Research Institute on Global Commons and Climate Change.
While DAC and BECCS are attracting the most investment and purchases respectively, they’re crowding out other promising carbon removal technologies. Some startups use clever engineering to accelerate natural processes, like increasing the ocean’s alkalinity. Others are electrolyzing seawater and spreading crushed basalt rock over farmland. These methods promise greater durability, verifiability and effectiveness of storing CO2 than simply planting trees.
Another method has provided the majority of all carbon removal delivered: biochar. It’s done so without the support of U.S. tax credits, large purchases from brand-name buyers or billions in investments.
In some ways, biochar is the “unrecognized star” of carbon removal, said Carton. Compared to other methods, it’s cheap and doesn’t require much upfront capital expenditure or high-tech research and development. Making it requires kilns to heat biomass, and the resulting charcoal-like product can also be used to help improve soil fertility.
But like all carbon removal techniques, there are downsides, the biggest being uncertainty about how much CO2 stays sequestered when it’s added to different soils. That’s an area of active investigation for researchers.
“It’s got so much potential, but it’s inconclusive,” said Ben Kolosz, an assistant professor in renewable energy and carbon removal at the University of Hull in the U.K.
Still other methods like ocean alkalinity enhancement and enhanced rock weathering hold even greater promise to capture and store vast amounts of CO2. But they are not as “approachable” or “intuitive” as technologies like DAC, which may give investors and would-be buyers pause, said Anu Khan, founder and executive director of the Carbon Removal Standards Initiative.
CDR.fyi’s Hoglund compared the carbon removal industry’s efforts to the pharmaceutical industry’s pursuit of new drugs. “You need huge upfront investments for it to work,” said Hoglund, who is also the manager of the Milkywire Climate Transformation Fund, an organization that supports carbon removal, decarbonization and nature-based projects. That ultimately means securing committed buyers with deep pockets.
“We need many Microsofts to start scaling this,” he said.
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