It has been a big year so far for carbon dioxide removal (CDR) in the United States. In May, the U.S. Department of Energy (DOE) announced semifinalists for its first ever CDR Purchase Pilot Prize, followed by a call for proposals for a Direct Air Capture (DAC) Pilot Prize in August. The U.S. Environmental Protection Agency (EPA) also announced the first draft permits ever granted to marine CDR technology—in this case, a pilot study by the Woods Hole Oceanographic Institution on ocean alkalinity enhancement. And, the Biden administration weighed in on the potential for high-integrity voluntary carbon markets to meaningfully address climate change by issuing their own statement of policy and principles for participation in such markets. 

These announcements arrive as it becomes ever more clear that engineered carbon removal (ECR) solutions will be necessary to help the United States and the world to keep the target of warming by 1.5 degrees C alive. For example, the Intergovernmental Panel on Climate Change (IPCC) estimates that in addition to aggressive emissions reductions and nature-based CDR solutions, the world will need over three gigatons of CDR annually by 2050 from engineered techniques such as direct air capture (DAC), biomass with carbon removal and storage (BiCRS), enhanced rock weathering, and marine carbon dioxide removal.  

In recent years, thanks in large part to the Infrastructure Investment and Jobs Act and Inflation Reduction Act, there has been rapid growth in public and private investment in ECR technologies. In 2022, there was $1.5 billion of public and private investment in 131 CDR companies, compared to only $4 million of investments across three companies in 2013. Today, about 130,000 tons of carbon dioxide equivalent are being captured annually by ECR technology. However, to stay aligned with the gigaton removal goals of 2050 and beyond, ECR will need to scale an additional 10,000-fold over the next 25 years. 

Recognizing the value of ECR, in the summer of 2023, C2ES launched a technology working group dedicated to this topic. As one of four technology working groups focused on how to rapidly deploy and commercialize critical-path technologies, the ECR technology working group convenes leading voices across the ecosystem, including DAC and BiCRS companies, corporate buyers, financiers, developers of supporting infrastructure, technology providers, and members of C2ES’s Business Environmental Leadership Council (BELC). Informed by working group discussions, C2ES has published a shortlist of specific actions the federal government can take to address known markets and finance barriers to scaling ECR. These recommendations—outlined below and described in detail in the brief—fall into three broad categories: early project financing, derisking investment, and creating near- and long-term market certainty. 

1. Congress should increase the U.S. Department of Energy (DOE) program direction budget to fund staffing in the Office of Fossil Energy and Carbon Management (FECM) and the Office of Clean Energy Demonstrations (OCED). The timely awarding and disbursement of funds appropriated for the development and scaling of ECR technologies is particularly important for early-stage companies that depend on awarded federal funding to launch or sustain their research, development, or operations. This can only be accomplished if the departments responsible for such disbursement are adequately staffed with the experts needed to negotiate awards, assess technologies, and aid with implementation challenges. 
2. Congress should modify the section 45Q tax credit for carbon dioxide sequestration, specifically by making the inflation adjustment of the tax credit effective in 2024 (rather than in 2027, as in the statute), with 2022 as the base year. Inflation has already eroded the real value of the 45Q tax credit since it was increased by Congress in 2022. Adjusting the tax credit for inflation starting in 2024 will ensure that it can effectively deliver support for the nascent ECR industry for the credit period that Congress intended. 
3. Congress should establish a long-term monitoring, reporting, and verification (MRV) trust for all Class VI wells—used for the subsurface injection and permanent sequestration of carbon dioxide—to ensure responsible stewardship. Similar to the Leaking Underground Storage Tank (LUST) trust fund, the MRV trust would be funded through a small fee per metric ton of sequestered carbon dioxide, paid for by Class VI well operators. The fund would finance the administration and regulatory oversight of active projects by the EPA (or equivalent state authority for states granted primacy over Class VI wells) and finance the long-term (i.e. century-scale) stewardship of stored carbon projects.  
4. The U.S. federal government should establish a long-term federal carbon dioxide procurement policy, with a time horizon of at least ten years, to support the development and scale up of novel carbon removal technologies. The policy should take a portfolio approach across a set of CDR categories, comparable to those laid out in the CDR Purchase Pilot Prize. Within each category, offtake contracts would be awarded via reverse auction, where CDR sellers bid for government contracts by offering the lowest price. Each CDR category would include a maximum price per net metric ton of carbon dioxide to incentivize least-cost innovations, and would adhere to the federal “Voluntary Carbon Markets Joint Policy Statement and Principles.” 
5. The administration and Congress should examine options and work toward enacting an economy-wide market-based carbon reduction program, with provisions to credit verified carbon dioxide removals, that could contribute to the achievement of net-zero emissions by 2050. Setting a price on carbon—whether through a carbon tax or a cap-and-invest program—confers a clear market value to emissions reductions and emissions removals (including through ECR) that is commensurate with the environmental, societal, and economic benefits that reducing global greenhouse gas pollution provides. The revenue generated from a carbon price could be used to pay for lowering government deficits, reducing distortionary taxes, or for additional carbon management programs. 

Private and public investment in ECR is demonstrably growing, but it is not yet enough to ensure that high-quality, responsible, and affordable carbon removal will be available at the scale needed by mid-century. Similarly, the myriad of announcements this spring and summer demonstrate the U.S. federal government’s commitment to helping this sector scale, but more work needs to be done. Continuous improvement of existing programs and new, strategic initiatives are critical to ensuring that federal policy continues to comprehensively and durably support the entire CDR industry, including ECR. The policy recommendations offered in this brief prescribe a potential path forward in the pursuit of this objective. 

To explore the full brief of C2ES’s ECR federal policy recommendations, please click here.