Engineered Carbon Removal Picks Up Speed

A recent major funding announcement from the U.S. Department of Energy (DOE) highlights the importance of policy support in scaling climate technologies. The announcement came shortly after C2ES held the first meeting of a working group focused on engineered carbon removal. This is the first of four working groups focused on critical-path technologies: engineered carbon removal, sustainable aviation fuel, long-duration energy storage, and clean hydrogen. The working groups will provide a venue for communication and problem-solving across each technology’s ecosystem. Key outputs will include thought leadership, identification of synergies between technologies, and policy recommendations to enable deployment and commercialization.

The DOE awarded $1.2 billion on Aug. 11 to regional direct air capture (DAC) hubs in Texas and Louisiana. In addition to the two projects along the Gulf of Mexico, DOE intends to award $99 million for 19 projects supporting feasibility and front-end engineering and design studies for potential DAC hubs across the nation. DAC hubs can enable large-scale deployment and reduce overall costs by locating multiple direct air capture projects in a region where they share infrastructure. The department will also spend $35 million on carbon removal purchases to support long-term demand.

These announcements build on the bipartisan infrastructure law’s support for DAC hubs and the Inflation Reduction Act’s 45Q tax credit. All these initiatives will collectively contribute to the DOE’s efforts to capture carbon dioxide from the atmosphere and store it safely at gigaton scale for less than $100/ton within a decade, under its Carbon Negative Shot.

Carbon removal is not a substitute for reducing emissions. However, achieving net-zero or negative emissions will require large-scale deployment of new technologies, including tech to remove the excess carbon in the atmosphere generated over the past 200 years.

Technology Working Groups

Engineered carbon removal is among a multitude of new, innovative technologies critical to meeting our long-term climate goals. Government and private businesses are developing groundbreaking policies and making record-breaking investments toward deploying them across the U.S. economy. As climate technologies move out of the lab and into the field, they’ll need demonstration projects to prove their full potential and limitations. Multiple U.S. projects are currently under construction.

The next decade should focus on the rapid dispersal of engineered carbon removal (ECR) and other critical-path climate technologies. Innovators will need to critically consider the technical, market, and policy actions needed to enable large-scale deployment and long-term commercialization. The C2ES Technology Working Groups support this challenge by providing a venue where the entire technology ecosystem can convene to address these topics.

The first of these working groups focuses on the deployment and commercialization of ECR, specifically, direct air capture and biomass carbon removal and storage (BiCRS).

The Engineered Carbon Removal Ecosystem

Representatives from across the ECR supply chain and broader ecosystem attended the first meeting of the ECR Working Group. The conversation produced the following insights:

  • Engineered carbon removal is crucial to decarbonization and will play a key role in meeting net-zero climate goals. While ECR won’t replace emissions reductions, the Intergovernmental Panel on Climate Change (IPCC) has stated clearly that ECR will be necessary to limit warming to less than 2 degrees Celsius.
  • Recent policies and incentives are helping to establish the industry, but additional policies will be needed to achieve DOE targets. The recent $1.2 billion announcement is the first stage in the more than $3.5 billion in funding that the DOE’s office of Fossil Energy and Carbon Management has allocated for domestic DAC hubs.
  • The next wave of policy must establish long-term market demand for carbon removal. Pairing carbon removal with sector-specific policies (e.g., incentivizing power-to-liquid sustainable aviation fuel made from carbon removal waste streams) could be an effective way to build up market demand for multiple critical path technologies. Deployment efforts also need private sector leadership in the form of risk-tolerant capital investments and advanced purchasing agreements.
  • The carbon removal market is a multi-billion-dollar opportunity, and startups and investors are keen to gain a first-mover advantage. Between the federal 45Q tax credit, federal purchasing of carbon removal, and the rapidly growing voluntary market, carbon removal credits will be a key revenue driver in the ECR industry. Currently, carbon removal credits only represent about 5 percent of the total voluntary carbon credit market. This number is expected to increase as companies begin incorporating carbon removal into their net-zero strategies.
  • More U.S. states may need the authority to drill wells that inject removed carbon dioxide into underground geologic formations. Giving U.S. EPA authority to grant Class VI primacy status to wells in more states could help with the processing of permitting requests. Applications grew more than 53 percent between May and July of 2023, evidence of a growing national appetite for ECR. While granting more states primacy wouldn’t solve this issue alone, it could have a multiplier effect on the technology’s ability to be broadly deployed.

Now that federal and private investments in DAC are at work to scale this critical technology, the Engineered Carbon Removal Working Group will help build industry-wide consensus on responsibly and efficiently deploying and commercializing it. The working group will also discuss how to best leverage federal incentives and the additional long-term policy solutions needed for the long-term viability of the industry. C2ES looks forward to sharing the group’s thought leadership, research, and policy recommendations.