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Carbon removal just got a new customer: The U.S. government

Updated: Aug 8

carbon being emitted into the air
Image Credit: Anne Nygård // Unsplash

  • Here’s the scoop: according to a report the U.S. government will pay to remove carbon from the atmosphere.

  • This marks the first time a federal government has offered up money to scrub the atmosphere, however, carbon dioxide removal (CDR) is still an extremely new industry.

  • The Department of Energy, which will lead the effort, has long funded research for carbon removal, utilization, and storage (CCUS), but not direct air capture (DAC). The former, which lowers the emissions of hard-to-abate sectors, is often criticized as a way to keep fossil fuels alive, while DAC directly removes human emissions and stores them away forever.

  • Nevertheless, to meet climate goals, the world must remove 10 billion tons of carbon by 2050, a conservatively trillion-dollar effort.

  • While it's unclear how the funding will be used, it’s clear startups with a mission to add structure to the wild west marketplace of carbon removal will be needed as government funding has the potential to fast-track the industry.

Carbon dioxide, emissions, climate pollution… Whatever you call it, it’s commonly accepted that reducing the greenhouse gas known as CO2 — aka the fossil fuel emissions responsible for climate change — is what will lead the way in slowing global warming.

But as we adapt to the climate crisis, a developing suite of technologies known as carbon dioxide removal, or CDR, has emerged to capture and store emissions already in the atmosphere in collaboration with transitioning to energy systems that don’t emit in the first place.

And now, for the first time ever, a federal government will pay to remove these planet-warming emissions — that federal government is the United States.

According to a scoop from the new climate news startup publication Heatmap, the Department of Energy will manage the effort, representatives from the program said, and the budget for this monumental feat will be tens of millions.

CDR refers to an entourage of technologies including direct air capture (DAC), which captures human-emitted CO2 and stores it permanently underground, and carbon capture, utilization, and storage (CCUS) which captures carbon directly emitted from fossil fuel-reliant operations like steel mills for example, and either stores it or uses it for a purpose or product.

Differentiating between the two is important because as the Congressional Research Service (CRS), a public policy research institute of the United States Congress, put in a 2021 report, “Many stakeholders see CCUS as a way to enable continued use of fossil fuels even if CO2 emissions were restricted in the United States and abroad,” while, “DAC would remove CO2 from the atmosphere.”

Climework's Orca DAC plant in Iceland against sunset
Climework's Orca DAC plant in Iceland // Image courtesy of Climeworks

Additionally, while climate authorities like the International Energy Agency make it clear that DAC will have to play a role in climate adaptation, climate scientists warn that deploying the technologies not as a mitigation strategy, but rather than as a later adaptation strategy, takes the focus away from proven renewables like solar and wind that provide alternatives to oil, gas, and coal-based energy.

Nevertheless, CDR technologies may be new, but the U.S. has been a long-time backer. Leading the race on policy, the United States announced in 2022 important funding under the Inflation Reduction Act (IRA), granting tax credits for CO2 captured for storage via DAC or CCUS. And the subsidies are working, as they've already lured CDR companies to the States like Switzerland-based pioneer Climeworks.

Prior to recent news, the DOE has supported research in the field since the late 2000s, when the department's coal research shifted to CCUS and established a grant program for oil companies to incorporate the nascent tech into their operations, as seen in the Energy Policy Act, dating all the way back to the ancient times of 2005.

Between 2009 and 2021, Congress has appropriated $2.7 billion to CCUS-specific programs, and while the CRS report shows that DAC has not been a focus area for DOE research historically, despite DAC research and development recommendations on behalf of Congress, the 2021 Infrastructure Investment and Jobs Act directed $3.5 billion to develop four Direct Air Capture Hubs, marking the biggest single federal investment in the technology ever.

These investments have played huge roles in accelerating the technology’s growth, which is key because, as Heatmap’s Robinson Meyer, a veteran climate reporter puts it, “By a rough estimate, the carbon-removal industry must grow thousands of times larger by the end of this decade in order for the world to hit its climate goals.”

And just like it helped fast-track necessities like semiconductors, which are needed for almost every piece of technology we have, and the COVID-19 vaccine, federally paying to remove CO2 from the atmosphere could not only push the accelerator on CDR but help establish excess CO2 as a waste product, rather than just a way of life.

Climeworks' "Mammoth" DAC Plant in Iceland
Climeworks' "Mammoth" DAC Plant in Iceland // Image Courtesy of Climeworks

Additionally, the Intergovernmental Panel on Climate Change says humanity needs carbon removal to become much cheaper and more widely deployed to make staying under 1.5 degrees Celsius more than a pipedream. So, this federal investment — which comes only months before the UN’s 28th Conference of the Parties on Climate Change (COP28) — may lead other nations to invest, globally driving the price down from its present $200 to $2,000 per ton price tag.

Through its Carbon Negative Shot initiative, the DOE has a goal to get this figure down to $100, and as Meyer points out, at that price point, the $1 trillion bill the 10 billion tons of carbon the world must remove by 2050 to help maintain climate goals, would only be 1% of the GDP.

While the details of the policy are not yet clear, as the DOE declined to comment for Heatmap, it could open the door for a handful of startups that are attempting to add some structure to the otherwise wild west of CO2 storage.

One startup, Isometric, recently landed $25 million to build a registry and science platform focused on carbon removal. With one of the largest seed rounds this year for a climate startup, Isometric claims it will have the first registry to issue “high-quality, long-duration” carbon removal credits.

As TechCrunch reports, with carbon removal startups like “Charm Industrial (a specialist in bio-oil sequestration); Eion (focusing on rock weathering); Planetary (ocean alkalinity enhancement company), and Brilliant Planet (a microalgae burial company)” already planned to be on the platform, the New York and London-based startup plans to address a scientific gap in the carbon removal space, to address the root causes of pollution and climate change.

Emissions from a coal-fired power plant
Emissions from a coal-fired power plant. Image credit: Wikimedia Commons/Monkeyboy0076

Another startup, Google-backed CUR8, raised $6.5 million in May with the goal of building builds these carbon removals portfolios for companies as an alternative to buying so-called “phantom” carbon credits.

Essentially what both Isometric and CUR8 are doing is vetting carbon removal companies and operations to ensure companies' money isn’t going into black holes, where many carbon offsets have led. This type of vetting may prove useful for whatever the federal government has up its sleeve when it comes to the incredibly new market.

One leader in Isometric’s round was the climate-focused venture capital firm, Lowercarbon Capital. According to Ryan Orbuch, a partner at Lowercarbon who leads the firm’s carbon removal work via Bloomberg, “[Isometric’s work is] important because we need to know if the money that we are spending on carbon removal is having an effect on the carbon cycle or not.”

He adds, “That’s the reason that any of this is worth doing.”

As the federal government makes a landmark investment in CDR, knowing how all that money will affect the carbon cycle is key.

Outside of federal investments, venture capital money is definitely flowing into CCUS especially, with Frontier, the public benefit company of the Stripe-owned tech giant syndicate including Microsoft, Klarna, Alphabet, Meta, and Shopify, making a splash earlier this year with one of the biggest CDR deals to date with Charm Industrial.

Prior to Charm the tech giants invested in Climeworks, Bill Gates-backed Heirloom, and a litany of other CDR ventures mobilizing a total of $925 million as of this time last year, with plans to invest upwards of a billion by 2030 all with the same goal as the DOE: to get CDR under a dollar her a ton.

The DOE has funded research in carbon removal for a long time, and as public and private funding finally join forces, it's clear that, as a marketplace, CDR will have to leave its wild west origins behind. How the DOE’s money is used could determine the direction it goes.

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