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TLDR

• Norway’s Longship program takes liquid CO₂ from a cement plant and a waste-to-energy plant and stores it under the North Sea floor

• The program was delivered on time and (seemingly) on budget — a rarity in mega-projects

• The Norwegian government understood exactly what types of risks the private market would not be willing to take, and when to give private partners the opportunity to use their unique skills

• This balanced public-private approach should be studied closely by others around the world trying to create a carbon management industry in their region

At the end of June, a boat carrying many tonnes of CO₂ arrived at Brevik, a Norwegian port on the North Sea. The liquid CO₂ was off-loaded at the terminal, and will be sent via pipeline to a storage facility under the ocean floor. By the end of August, it will be stored away permanently, the final stage in one of the world’s most ambitious carbon-negative supply chains.

This was the first shipment of what has become known as the Norwegian Longship Carbon Capture and Sequestration project - I’ll call it Longship from now on. This is one of the most impressive carbon management projects in the world, for a few reasons:

• Capacity: Longship has impressive ambitions, starting at 400,000 tonnes of CO₂ per year and scaling up to potentially 50 million tons total this century

• Public-private partnership: In addition to the Norwegian government, this represents a public-private partnership with at least 5 major companies

• Speed: the program was announced in 2020, and five years later is fully operational

We live in a world where almost every mega-project takes twice as long and costs twice as much as it should. Longship is one of those rare, refreshing counterpoints that shows we can build important things quickly. That makes understanding this public-private partnership even more important for those looking for inspiration in other regions.

The basic idea behind Longship

Longship (or Langskip in Norwegian) is Norway’s flagship full-scale carbon capture and storage (CCS) initiative – the first of its kind to develop an entire CCS value chain in one coordinated project. If we think about the process of carbon removal in simple terms, Longship represents the final two parts of the value chain - transporting and storing CO₂:

Companies focused on capturing CO₂ have to charter a tanker to transport CO₂ to the Brevik terminal. In practice this means that all capture facilities need to be coastal or on major rivers, which is easy given the geography of Norway. The tankers drop off the CO₂ at the Longship terminal, where it is sent on a pipeline to the storage site, an old oil and gas well below the North Sea, where the CO₂ will find its forever home.

The public-private partnership behind Longship

Announced in September 2020 by the Norwegian Prime Minister Erna Solberg, Longship is a public-private partnership, meaning early risks were taken by the Norwegian government, while long-term implementation and management are up to private companies. It is private companies that are doing the actual carbon capture: Heidelberg Materials is currently capturing CO₂ at its cement plant in Brevik, and Hafslund Celsio is doing the same at Oslo’s Klemetsrud waste-to-energy plant.

Meanwhile, Equinor, Shell, and TotalEnergies formed the “Northern Lights” joint venture to handle CO₂ transport and storage – essentially building the offshore infrastructure to ship liquid CO₂ and inject it beneath the seabed. This includes the CO₂ tankers, the first of which is pictured at the beginning of the article.

Accelerating Infrastructure vs. Subsidies: Norway’s Approach

A central question about Longship is whether it’s essentially a state subsidy or an acceleration of new infrastructure. In practice, it is very much the latter – a deliberate government intervention to jump-start a CCS network that wouldn’t materialize on its own. The Norwegian state did indeed commit significant funding (on the order of NOK 16–20 billion, roughly $2–2.5 billion) to cover the upfront costs of the terminal, pipeline, and storage infrastructure.

The offshore transport and storage system in Northern Lights Phase 1 was 80% state-funded as part of Longship. However, rather than a perpetual subsidy to private emitters, this investment is about de-risking and building critical infrastructure that multiple industries and countries can utilize going forward.

Longship will not perpetually hand out taxpayer money — the Northern Lights JV will be responsible for the costs of maintaining transport and storage infrastructure going forward. This is in stark contrast to tax credits and OpEx subsidies that are common in other parts of the world.

Norway recognized that CCS has high barriers to entry: no single company would finance a CO₂ pipeline or offshore storage hub just to serve its own emissions. By providing large upfront grants and co-financing, the government essentially served as the lead investor in the CO₂ network. In other words, public funding was used to accelerate the development of an entire value chain, as opposed to expecting one player to build the whole value chain, and rewarding them after the fact.

Crucially, the state’s support was conditional and catalytic. The government insisted on cost-sharing and external contributions: for instance, funding for the Oslo waste-CO₂ capture was contingent on the project securing some of its own financing and EU support. This ensured the private sector had skin in the game and that Longship would spur broader deployment.

Geography and scaling potential

Norway’s foresight was broadly recognized. The EU classified Northern Lights as a Project of Common Interest, providing €131 million in Connecting Europe Facility funding – a sign that Norway’s investment attracted international buy-in.

Now that the infrastructure is becoming operational, it’s open-access: third parties can ship their CO₂ to Norway, paying a storage fee, which over time will further reduce the need for Norwegian subsidies. A map of the North Sea shows just how many carbon-conscious countries operate in the area:

And Longship has the scale to assure new capture entrants. Hafslund Celsio and Heidelberg are planning to produce ~440,000 tonnes of CDR per year, which should grow to ~750,000 tonnes each year once Hafslund scales up. Phase I of the Northern Lights project can handle up to 1.5 million tonnes per year. So about 50% of the transport and storage capacity is available for new entrants. It gets better — Phase II of Northern Lights was just approved for an additional 5 million tonnes per year.

And Equinor, a founding member of the Northern Lights JV, has a stated ambition is 30–50 million tonnes per year on the of Norwegian Continental Shelf storage by 2035 across a number of new locations — Smeaheia, Kinno, and Albondigas.

50 million tons a year of CO2 storage is hard to fathom. In the history of Carbon Removal to date, only ~30 million tons have been contracted — and that’s not what’s been contracted per year, that’s total contracts, spanning mostly the years 2028 through 2040. So on the surface this storage capacity looks way too ambitious.

But take a step back and look at where the market was in 2020, when Norway’s leadership announced Longship. At that point, only ~10,000 tonnes of carbon removal had been contracted! And yet the government went ahead, believing that if they built the infrastructure, customers will come.

And they were right! Just this week, we got hints that a Danish joint venture1 will leverage Longship for a waste-to-energy plant. This underscores the geographic advantage of Longship — it allows countries any country on the North Sea to access its facilities at a relatively low cost. In that sense it’s much more than a Norwegian project.

Closing thoughts on speed and scale (under budget)

The common path in carbon management right now is for governments to hand out three types of subsidies: up-front CapEx, ongoing tax credits, and ongoing OpEx support.

Norway did a few things differently. First, instead of spreading around tax dollars, they focused most of the subsidies on the riskiest CapEx part of the project — the transport and storage infrastructure. No single player would have been able to do this alone. This guaranteed that the project would get off the ground without committing taxpayers to never-ending subsidies and tax breaks.2

Second, Longship coordinated private companies and created partnerships capable of maintaining and expanding the infrastructure, hopefully with minimal government intervention and subsidization.

And third, it got out of the way of the private developers. At a time when many jurisdictions are imposing harsh restrictions on new projects (NIMBY), Norway streamlined permitting and licensing.

There’s one more component of Longship that I’d like to touch on. Research by groups within the Norwegian government agencies and academic institutions began in 2015. Real detailed planning started between 2017 and 2019. By the time the PM announced the project in 2020, there was broad consensus among most experts that this could be done, especially if Norway made a push to complete Longship quickly.

The key to mega-project management is detailed planning well before a commitment has been made. Norway’s foresight and patience to let the plans develop, followed by all-in CapEx subsidies to reduce risk, should be copied by every other region that wants to make large-scale carbon management projects a reality.

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The New York Times recently highlighted a thorny issue for Direct Air Capture (DAC) companies: procuring low-emissions or zero-carbon power. As they put it:

Thanks in large part to booming data center construction and the surge in artificial intelligence, electricity demand in the U.S. is rising for the first time in decades.

But the timing of this rise in demand, as far as the race to fight global warming goes, is awkward.

To help fight climate change, the nascent direct air capture industry is racing to develop technology to remove carbon dioxide directly from the sky. But in some areas of the country, the DAC industry is facing a shortage of available renewable energy to run its operations, particularly wind and solar power.

It’s a fair concern. To remove carbon effectively and credibly, DAC must rely on clean power. But a closer look at the numbers should put to rest any notion that these startups will overload America’s grids. Like the big data center builders who came before them, DAC developers will ultimately add more clean power to the system than they take out.

A near-term challenge, but not a crisis

Yes, finding renewable energy (and the transmission capacity to move it around) is challenging, especially in Louisiana where many of these plants will be built. But in the U.S., we have a menu of workarounds:

• Purchasing green tariffs on “dirtier” grids (like Louisiana’s)

• Investing in renewable energy credits (RECs) or power purchase agreements (PPAs) on other grids

• Relying on other incentive programs and the broader drive to decarbonize the grid

Each of these approaches directly or indirectly finance new clean energy capacity.

In the short run, it’s easy to assume that DAC plants will become voracious electricity hogs. But the scale of electricity usage through the early 2030s will be modest. Take the three large-scale plants being discussed in Louisiana, one from Climeworks, Heirloom, and CarbonCapture. Each will likely have a nameplate capacity in the range of 100,000 to 250,000 tons of CO₂ per year.

Let’s assume these plants will require 1.5 MWh per ton of CO₂ captured, which is on the higher end of public estimates by DAC companies. That means each plant might draw about 150–375 gigawatt hours annually. If all three of these plants (again, from Climeworks, Heirloom, and CarbonCapture) come online, that’s somewhere between 0.5 and 1 terrawatt hours (TWh) of total annual demand.

1 TWh seems like a lot but it’s small in the grand scheme of things. Meta, for example, is building a data center complex in Louisiana in the 6 - 12TWh range. In all, AI data centers are going to add hundreds, if not thousands, of TWh in the coming decade.

And as a generation load, 1 TWh is not that large. If Louisiana approved a new large nuclear reactor, it could power all three next-gen DAC plants 10 times over.

1 TWh is a worthy price to find out if DAC scales well

DAC providers are on a mission to drive down costs from today’s $500–$1,000 per ton of CO₂ to a target of $100–$200 per ton by the late 2030s. At that cost, DAC could potentially scale to mitigate ~50% of human CO₂ emissions in 2050 and beyond. It’s the only carbon removal technology that can get big enough to have a truly lasting impact on our atmosphere.

But to get big, DAC must get cheap. To get cheap, it needs next-gen plants to take advantage of:

• Learning: Larger plants allow engineers to learn and refine processes in real-world operating conditions—R&D that can’t happen purely on lab benches

• Economies of scale: As we’ve seen in solar, once manufacturers and plant builders start repeating the same process at scale, costs can plummet

• Supply chain optimization: Sourcing cheaper materials and standardizing manufacturing steps become easier at higher volumes

These new plants could demonstrate 25 - 50% drops in cost per ton, and unlock improvements in energy efficiency. If they can deliver on projected cost declines, that opens up the opportunity for more DAC plants. We should give these companies a chance to execute — 1TWh is a small price to pay to potentially unlock a powerful new emissions-reduction tool.

DAC companies are following the data-center playbook

If there’s still doubt that DAC companies will do right by the grid, consider the way data-center builders have reshaped the energy market. For the last decade, hyperscalers like Microsoft, Meta, and Google have purchased green tariffs, secured PPAs, and championed new transmission lines. Put differently, they have actively funded the renewable energy transition.

At a conference last week, Microsoft’s Charlie Sellars noted that the company has added around 34 GW of clean energy to grids worldwide — that’s close to 100 TWh on an annual basis.

DAC companies are poised to do the same. Climeworks, Heirloom, and CarbonCapture surely recognize that their reputation, compliance requirements, and environmental outcomes hinge on powering facilities with as much clean electricity as possible. They will all likely be willing to pay premium rates for the renewable energy incentives I mentioned earlier, knowing that these efforts eventually help bring more wind, solar, nuclear, or geothermal projects online.

Closing thoughts

In the short run, the anxiety over DAC’s electricity demand is understandable. We are living through a transition in our energy systems—with new demands and new decarbonization mandates piling up all at once. But DAC’s power requirements, at least in these early plants, are miniscule compared to massive data-center complexes and other large industrial users.

And investigating whether a DAC scale-up is possible is worth it. We need a number of cheap, scalable carbon removal solutions to manage with the atmosphere in the second half of this century.

The only way to figure out whether $100–$200 per ton is genuinely attainable is by building the next generation of plants, letting engineers iterate, and (yes) buying up enough clean power and credits to ensure that net CO₂ removal remains credible. Call me an optimist, but I genuinely believe that DAC, like the data centers before it, will be a catalyst for more green power—not a burden.

Disclosure: My employer, Climeworks, is one of the companies building a DAC plant in Louisiana. This article was compiled entirely from public information, and does not reflect the views of Climeworks.

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Biochar is fast approaching 500,000 tons of carbon dioxide removed, and as I write this in early 2025 the pace of deliveries is accelerating rapidly.1 In 2025, we’re likely to see Biochar reach a megaton of delivered CDR — 1 million tons. This will be a monumental achievement for Biochar and the CDR industry as a whole, and proves that a large number of entrepreneurs can make a difference in a relatively short period of time.

Take Exomad Green, the leading producer of CDR credits from Biochar. In October 2023, it had delivered 0 tons, and now Exomad has delivered over 120,000 tons, according to cdr.fyi.

Deliveries are hard to come by in CDR. Frontier, which buys CDR on behalf of companies, just reported that they missed 84% of their deliveries for 2024.2 Other players, across technologies, are surely falling short of the ambitious timelines they set for their projects. I’m sure that many Biochar projects face delays, and that some fail altogether. But it’s clear that, on average, Biochar is the most deliverable CDR in the short-term. That inspires tremendous confidence.

A few delivery trends are worth calling out:

• Deliveries explain sales success: the companies with the highest deliveries have the highest sales, with deliveries explaining ~90% of the variance3 in sales outcomes4

• Lots of producers: 12 companies have delivered >10,000 tons, and 31 companies have delivered >1,000 tons

• Healthy geographic mix: While most deliveries have come from the Western Hemisphere, every major region is represented and has multiple producers that can scale up. Many future projects are focused on Africa and Asia, so we should expect this mix to change

  

Beyond deliverability

Two other positive developments in the Biochar market are driving sales and bringing new biochar producers into the market. First, recent studies have suggested that Biochar is more durable than previously expected. Consensus is that Biochar (done right) has >1000 year durability, whereas just a year ago there was more uncertainty. That makes Biochar a higher-quality purchase, and easier to justify.

Second, Biochar producers are finding real co-benefits with local communities. Google’s recent 100,000 ton deal with Varaha in India is a prime example:

Project developer Varaha will produce the biochar from an invasive species of mesquite that has aggressively advanced into India’s grasslands, sucking up soil nutrients and moisture and crowding out the native ecosystem. The damage has depressed milk production from cattle grazing, damaging local livelihoods. The problem has become so acute that local governments across the country fund eradication programs to remove the shrub. But there hasn’t been a clear plan for what to do with the huge brush piles once they’ve been pulled out of the ground.

Biomass sourcing is easier when you have to eliminate an invasive species, and CDR buyers love co-benefits. This is one creative approach to biomass sourcing, and we should expect to see many more. Co-benefits is not a passing trend - it’s a core selling proposition for CDR.

Watchouts for the Biochar industry

The question is what happens when producers run out of easy-to-source biomass with strong co-benefits. I’ve taken plenty of heat for my skepticism that Biochar will get anywhere close to the 2.6 billion tons that the IPCC predicts it can reach. There is simply not enough easy-to-source biomass, and Biochar is competing with other forms of carbon removal — namely Bio Energy with Carbon Capture and Storage (BECCS) and bio-oil — for biomass.

As both Biochar and BECCS ramps up, they will compete over dry woody biomass, and to what end? Will we see more problematic biomass sourcing like we have in BECCS, but on the Biochar side? It remains to be seen.

A more immediate trend that should worry the Biochar ecosystem is prices, which have been rising ~20% per year in real terms since 2020. There are two issues with rising prices:

1. Undercuts affordability: One reason Biochar is so attractive is because it was advertised as the only <$100 per ton CDR that was truly durable. Now customers are consistently paying >$200 per ton. This will discourage buyers who are used to afforestation at $10 - $30 per ton from transitioning into the durable CDR market.

2. Attracts many entrepreneurs: Buyers are beginning to complain that they get too many Biochar companies reaching out to them, each of whom have started up in the last year and don’t have a real sense for just how hard this business is. In general, more entrepreneurs is good. But slower increases in prices would not have attracted so many entrepeneurs to the same space, all at once, muddying the waters and creating potential quality issues down the line. It’s strange, but rapidly rising prices from 2020-2024 increases the likelihood of Biochar scandals in 2028.

On the other hand, high prices allow low-cost producers like Exomad to go from small to large. They can charge lower than market prices and still have enough margin leftover to invest in more reactors, retain their people, and grow.

Exciting times for Biochar. On to 10 million tons delivered!

Disclosure: My employer, Climeworks, sells Biochar as part of our Solutions portfolios. This article was compiled entirely from public information, and does not reflect the views of Climeworks.

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TLDR:

• A bill supporting durable carbon removal (CDR) was proposed in the US Senate with a $250 per ton tax credit

• Congress is listening to CDR buyers as they write legislation, a big shift from listening to a few CDR sellers

• This bill is an encouraging sign that there is bipartisan support for durable carbon removal

Amidst the alarmism that climate initiatives will die in America once President Trump takes office, there are some signs of life from an unexpected corner: The US Senate. The Carbon Dioxide Removal Investment Act (let’s call it CDRIA) was introduced in late November by Lisa Murkowski, a Republican from Alaska, and Michael Bennet, a Democrat from Colorado.

In the past I have been skeptical about CDR bills introduced in Congress. But the CDRIA is a huge improvement on past ideas. The timing is better, it is well-written, has bipartisan support, and it targets the technologies that have massive scaling potential — particularly rock weathering and DAC — but that need to be affordable now to finance massive scale in the 2030s. The CDR industry should be lauding these Senators for their thoughtful approach.

The CDRIA is quite simple: it grants a blanket $250 tax credit for every ton of CO2 permanently stored for Direct Air Capture, Biomass Carbon Removal, Enhanced Rock Weathering, and Ocean-based carbon removal (descriptions below). That means it complements the 45Q, the existing tax credit, quite well.

If the CDRIA passes, Americans would have two parallel sets of incentives for two types of carbon credits. The 45Q would cover avoided CO2 emissions with tax credits in the $60-$85 range. And the CDRIA would cover emissions directly removed from the atmosphere with a $250 credit.1 This makes a lot of sense, because sustainability buyers view avoidance and removal credits as fulfilling different needs.2

Notice how policymakers are listening to a previously ignored group — the CDR buyer. The 45Q was how a fossil-fuel company views carbon capture: EOR, point-source capture, and DAC.3 The CDRIA proposal is built around how buyers of carbon removal think — buyers want DAC, Biomass removal, ERW, and Ocean-based removals to have the same treatment. They tend to be less interested in point-source capture, and paying oil companies for EOR is out of the question.

Excluding point-source carbon capture from the CDRIA is also just smart politics.4 Point-source carbon capture is tricky politically, because it is fixed to fossil fuel plants, and (usually) owned by the fossil fuel companies. For some environmentalists, a tax credit for point-source capture means paying fossil fuel companies to continue to operate5.

I disagree with this take — obviously capturing CO2 from a natural gas plant that would otherwise emit for the next 20 years is a good thing. But I understand why some people oppose the technology. It’s good that there’s a small incentive in the 45Q, and it doesn’t need reforming in the CDRIA.

There’s a lot more to like about the CDRIA. Some highlights:

• Makes engineered solutions more cost competitive with Biochar: The most deliverable form of carbon removal today is Biochar, priced at $180-$250 a ton. While it’s an awesome technology, Biochar will have serious scaling challenges and the CDR market desperately needs engineered pathways to mature. The CDRIA $250 subsidy will make rock weathering prices very competitive with Biochar. And next-gen DAC plants6 will also be close to Biochar after applying this tax break. This will catalyze scale of all these technologies, bringing cost down even more over time.

• Rewards innovation regardless of pathway: The $250 incentive is the same for every technology, keeping market forces alive and rewarding innovation. CDR providers that can bring down cost and scale quickly will still win, unlike the 45Q which was picking DAC out of the crowd as the ‘favored’ form of durable CDR.

• Allows carbon buyers to do more with less: The CDRIA includes the technologies that buyers are excited about, which means this tax break could significantly move the needle for the removal market. A removal portfolio of Direct Air Capture and Enhanced Rock Weathering would be 40-60% cheaper if this bill passes, allowing buyers to do more on a tight budget.

• Plays to American strengths: The CDRIA is all about developing the American carbon removal ecosystem, so it focuses on CDR solutions that require engineering ingenuity, which America has in spades. It largely ignores nature-based removal approaches that rely on fast-growing trees which America doesn’t have.

The future of the bill is uncertain, but the fact that these Senators are getting feedback on the bill is encouraging. At the very least, it’s exciting that politicians on both sides of the aisle see carbon removal as an industry of the future — and they want America to lead.

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The biggest criticism of Direct Air Capture (DAC) is that it costs too much. DAC providers are cagey about sharing their current costs, but most estimates have it between $700 and $1300 per ton …

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Microsoft is single-handedly committing more to carbon removal than anyone else. It has purchased 56% of all high-quality carbon removal credits, and has outspent it’s Cloud and AI rivals, Amazon…

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Today we’re diving into the business model of a very interesting player in Direct Air Capture (DAC), Carbon Capture, Inc. This company has a novel approach to building DAC that, with a bit of foc…

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In Part 1 in our series on Biochar, I wrote all about why this carbon dioxide removal (CDR) tech is gaining traction. To summarize, there’s a lot to get excited about:

• Biochar delivers carbon credits quickly, often in <1 year

• Biochar is relatively cheap, recently in the $25 - $100 range per ton of CO₂

• Biochar companies can sell two products: (1) their carbon credit product to businesses, and (2) the physical biochar product to organic farmers to improve their soil

• Biochar does not require much up-front capital, which is why there are so many local and regional players entering the market

Now, given all the wonderful benefits that biochar has to offer, you might expect advocates to say that we should really just standardize on this approach to carbon removal, scale it up, and call off global warming as an issue. But no one is saying this. Why?

Biochar faces some hard but not insurmountable problems to scale. The logistics of transporting all that biomass is not negligible. And sourcing the right biomass is a real supply chain challenge — you don’t want to be known for taking logged trees and turning them into biomass.

But both of these problems can, and will, be overcome by companies with A+ supply chains. The real challenge facing Biochar is that we can’t cultivate enough land to make billions of tons of Biochar. This will keep Biochar small.

Let’s first cover biomass sources, since it’s critical to understanding the land-use issue, which I’ll cover in the second half of this article.

Sources of biomass

Biochar is a fairly straightforward process. From last week’s article:

Biochar is produced through a process called pyrolysis — we chop up the fallen tree and heat it up in a container with very little oxygen. Because there's not enough oxygen for the wood to burn1 completely, it doesn't release its carbon as CO₂, and the carbon crystalizes into a stable form.

The question we have to ask is "what would happen to the biomass without an intervention from Biochar producers.” Let’s start with trees.

There are a few ways to get wood that you can feed into a pyrolysis machine to get Biochar:

• Chop down trees and turn them into Biochar

• Chop down trees in high-wildfire risk areas

• Find dead trees

Chopping down trees that may live decades or centuries to make Biochar is very bad carbon accounting. And this is true even in high-wildfire zones where thinning trees cuts down wildfire risk. Yes, preventing wildfires is a net good. But the risk of a fire in that spot has to be balanced with the good that the ‘at risk’ tree can do for the ecosystem and for sequestering carbon.

As for dead trees, this seems like a huge logistics challenge. Are companies really prepared to go from forest to forest, lifting out only the recently dead trees? It would require a lot of infrastructure, from trucks to manpower, and high transportation costs.

It’s also worth noting that dead trees play an important role in forest ecosystems by adding nutrients back into the soil and providing refuge for animals of all kinds.

The bottom line is that if Biochar producers feel they must push volume to survive, incentives can get messy. I worry that as demand for Biochar ramps up, producers will get wood from less-than-savory sources. The risk with trees is too high — fraud just seems too easy — so trees should be off the table for Biochar producers.

So Biochar will probably have to rely on agriculture byproducts.

Crop stalks

Let’s turn to agricultural byproducts, and to make it more real, consider the stalks that come from crops like corn and wheat. Once the harvest is over, farmers have a few options for what they can do with crop stalks:

• Burn them

• Let them decompose in the open

• Compost them

• Use as building materials (e.g. as retaining structure for irrigation)

What farmers do with stalks varies widely. Open decomposition is quite common everywhere. In places like California, burning crop stalks is basically prohibited, and there’s a robust composting ecosystem in most of Western Europe and North America. In large parts of the Global South, burning or openly decomposing agricultural byproducts is more the norm.

Burning crops immediately puts greenhouse gases into the atmosphere. Decomposing out in the open, though less dramatic, is almost as bad.

It gets murkier with composting and the use of crop stalks in building materials. In both cases, there is some decomposition that will happen, but much of the carbon from these plants will return to the soil.1

If Biochar companies are certain that they are getting crop stalks that would otherwise burn or decompose, that’s good carbon accounting. Composting and building materials are more of a grey area. And the history of carbon accounting suggests that too much reliance on grey areas eventually creates scandals that destroy companies.

But let’s assume that Biochar companies can build great supply chains and get their hands on crop stalks that would otherwise burn or decompose. The question then is: how much of this actually exists? How much can realistically be turned into Biochar?

The problem of scale

It’s worth taking a step back to consider what kind of scale we need from Biochar.

In The Case for Carbon Removal, I argued that we should aim for carbon dioxide removal (CDR) at a scale of 18+ billion tons per year by 2040. Check out that article for the detail.

Let’s imagine that we want to make Biochar the cornerstone of our CDR program in 2040. Any target we pick here is arbitrary, given how little we know about the future and the development of other CDR technologies. But let’s say that we need Biochar to take out 12 billion tons of CO₂ per year. Today, Biochar is in the ~200,000 ton per year range.

Here are some other assumptions:

• 1 ton of plant biomass generates 1 ton of CO₂ credits

• We switch from agricultural byproducts to a very fast-growing plant — like bamboo — that is specifically designed to maximize Biochar yield

• One acre of land gets us 5 tonnes of plant biomass

Put all of this together, and we would need 2.4 billion acres of land. The amount of land under cultivation today is ~4.9 billion acres, so we’re talking about collecting all biomass from ~50% of the world’s farmland. That seems very unlikely!

Getting Biochar to scale up to even 1% of global farmland will be extremely difficult. That’s ~500 million tons of CO₂, about the same as Brazil emits today. Impressive, but not enough to turn the tide in our fight against climate change.

Where would we put 12 billion tons of Biochar?

For the sake of argument, let’s imagine a world where companies have the tools to get all the extra biomass from 50% of the world’s farmland. That’s a world with highly automated electric tractors that not only clear farmland, but collect the biomass efficiently. And it’s a world of mobile pyrolysis trucks driving from farm to farm, year round, creating Biochar onsite.

Even in this world we would have a major challenge: where would all this Biochar go? It is far too much material for farmers to put back in their soil. And we don’t have a good place to put Biochar. Some suggest that concrete would be a good storage basin for biochar, but concrete has its own problems.

We have an excellent storage paradigm for CO₂, because it can be compressed into a liquid and put underground, where there is plenty of space for it in emptied oil and gas wells. We have no such paradigm for billions of tons of what is essentially charcoal.

Any creative solutions?

The thing that I keep coming back to is how cheap Biochar is. And it is likely to remain cheaper than Direct Air Capture for a very long time. So we should be thinking hard about wild ideas to scale it.

Here’s one: how about growing plants that sequester carbon very quickly, harvesting them, and turning them into Biochar? It’s a middle ground between crop stalks and trees. I ran the numbers with bamboo, and it’s not pretty. We’d still have to use ~25% of global farmland just dedicated to bamboo to get to that 12 billion tons of CO₂ removed. Again, very unlikely!

Ok, but what if: we built city-size vertical farms, often called arcologies, with 30+ floors, powered by giant arrays of solar panels and nuclear power plants, all to grow bamboo to turn into Biochar?

Now we’re in science fiction territory. Let me know in the comments if you have any ideas to make Biochar scale!

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This is the first in a two part series on Biochar, a carbon dioxide removal (CDR) technology that gets some people excited, and others skeptical.

Today I’ll cover what Biochar is, and what makes it one of the most seductive technologies in carbon removal today. In Part 2, I share my concerns with Biochar and the pitfalls that Biochar providers will face as they try to scale.

What is Biochar?

Trees are 50% carbon by weight, and they get all this carbon by absorbing CO₂ from the atmosphere. When trees die, they either decompose or burn. In both cases, carbon in the wood interacts with oxygen in the atmosphere to create CO₂. For decomposition CO₂ is released over many decades, while burning obviously releases CO₂ much faster.

Here’s where Biochar comes in. Biochar is produced through a process called pyrolysis — we chop up the fallen tree and heat it up in a container with very little oxygen. Because there's not enough oxygen for the wood to burn1 completely, it doesn't release its carbon as CO₂, and the carbon crystalizes into a stable form.

So instead of the dead tree becoming a source of emissions, we end up with a stable charcoal-like substance that won’t emit CO₂ or other greenhouse gases for thousands of years.

To be clear, Biochar doesn’t require wood as an input — it can take just about any plant biomass. The most important up-and-coming input for pyrolysis is agricultural by-products like cornstalk and wheat straw. These are interesting because:

• Ag byproducts decompose fast, releasing CO₂ to the air in months. Trees typically decompose over decades

• Ag byproducts are likely to be piled up and burned as waste, which would also release CO₂

Just like trees, these byproducts that become Biochar won’t emit any CO₂ or other greenhouse gases for thousands of years. You could just leave this Biochar in a pile and forget about it or bury it underground, but this stuff is actually useful for making soil healthier, so some farmers are willing to pay for it.

With that basic understanding, we can now get into what makes Biochar so exciting for buyers of carbon dioxide removal (CDR).

Biochar has a great business model

Relative to other CDR technologies, Biochar has an intriguing business model. Biochar delivers offsets quickly and cheaply, has multiple revenue streams, and requires less up-front capital than more industrial solutions like Direct Air Capture (DAC). It also is currently beating DAC on unit economics due to better physics / chemistry and has proven to be ‘verifiable enough’ for big buyers.

Let’s look at each of these in turn.

(1/5) Biochar delivers offsets quickly

If we look at two major BioChar players in the US, they have delivered on their promises to business customers:

Compare this to the delivery speed for DAC and Bio-oil, and Biochar looks excellent. This speaks to the technological maturity and chemical feasibility of Biochar. The technology here is simply a few decades ahead of Direct Air Capture. I’d still consider Biochar ‘subscale’ for the problems we are trying to solve, and we’ll get into why it might stay that way next week. But the tech is real and companies are having an impact today.

The short cycle times for Biochar are just wonderful. In a single agricultural season a small company can produce Biochar and deliver offsets. DAC facilities, by contrast, are taking years to build and running into all sorts of ‘first-of-its kind’ hurdles.

(2/5) Biochar is cheaper than Direct Air Capture

Now this process that involves ‘cooking biomass without oxygen’ sounds like it needs a lot of energy and heat, and it does. But relative to the alternative CDR methods Biochar is quite efficient. Lower energy and heat requirements explain why Biochar costs between $25 and $100 per ton of CO₂, while DAC is upwards of $600 per ton.

And what makes Biochar so much cheaper? Biochar physics are just better than DAC.2

When people think about CDR and DAC, they often think about the difficulty of capturing CO₂ from the air. But capturing CO₂ is the easy part. The energy- and cost-intensive part of the process comes from stripping the CO₂ away from whatever chemical you’ve used to capture it. This is typically 65-85% of energy requirements for a DAC chemical reaction.

Biochar gets around this problem because it doesn’t ever have to remove CO₂ from another chemical. Instead of dealing with carbon dioxide from the atmosphere, Biochar is dealing with carbon in wood, corn stalks, or other plant matter. Instead of stripping away CO₂, it just has to stabilize the carbon in a way that prevents it from becoming CO₂.

(3/5) Biochar companies can sell the same product to two customers… sometimes

Microsoft recently announced that they’ll be purchasing almost 100,000 tons of Biochar credits from Next150, by far the largest Biochar deal yet. This deal proves that big CDR buyers are taking Biochar seriously, as other tech companies typically follow Microsoft’s lead.

But forward-thinking companies looking to buy offsets are not the only potential Biochar customers. Some farmers will pay Biochar companies for their physical charcoal-like product because it improves soil health.

So, two birds with one stone, right? If only it were that simple. While helpful, Biochar is not exactly a magical elixer for all soils. Biochar improves soil in 4 ways — (1) it helps soil hold water (2) it helps it hold nutrients, (3) it is an anti-toxin, absorbing things like plastics that might otherwise degrade the soil and (4) is an OK fertilizer, which means that farmers don’t have to rely as much on expensive man-made fertilizers.

Sadly, these have only a small impact on soil health, and many farmers see Biochar as just another product with big promises and mixed results. That’s why putting Biochar in soil is not standard practice in agriculture already.

Perhaps that will change. Biochar works best in fully organic farms, and this segment is growing. Smart Biochar companies can get leads relatively easily, as in most countries organic farms submit regulatory filings. These companies will need to develop a targeted, smooth sales motion for farmers, and from the outside looking in it seems no one has cracked this yet.

I’ve written before about how CDR companies are looking for more revenue streams via consumer buyers. In that article I was critical of two large Biochar players, Wakefield and Pacific, for ignoring the consumer market altogether.3 But given the constraints that these companies are dealing with — namely, small marketing and sales teams — it probably makes sense for them to focus on their core buyers of businesses and organic farmers.

(4/5) Biochar requires less up-front capital than DAC

For many CDR companies, they are building first-of-its-kind facilities — think about the massive DAC facilities that Climeworks, Oxy, and Heirloom have to build. These are $500M+ investments.

Pyrolysis (the process used to make Biochar) has two advantages:

• It is very well understood, so will not run into first-of-its-kind complexities

• Pyrolysis facilities have a much smaller footprint, like the size of a semi-truck or a bit larger

Put these two together, and you have relatively low barriers to entry. That means the Biochar industry will start out as a fragmented competitive landscape — many small, local players. Entrepreneurs need to know enough to buy the right pyrolysis machine, build relationships with farmers, and sell effectively to CDR buyers. But it’s doable at a small scale in a way that DAC or even reforestation are not.

(5/5) Biochar is ‘good enough’ for big verifiers

The relationship between carbon in plant matter and CO₂ is very well understood. It takes about 1.1-1.5 tons of plant matter to mitigate 1 ton of CO₂, which means verifiers can get weigh-in readings of either inputs or outputs to the pyrolysis. That is an easily verifiable solution.

I mentioned Microsoft earlier. It is one of the few credible verifiers — organizations that are big enough, and with enough at stake from a climate perspective that when they choose to endorse a CDR solution, it’s better than some independent auditor giving that solution a high score.

That said, we probably didn’t need this big purchase from Microsoft to prove that Biochar is the real deal. All the big credible verifiers — Microsoft, Frontier, and Amazon — have purchased Biochar in the last year.

It’s not all sunshine and unicorns for Biochar

So there are a lot of reasons to get excited about Biochar. At this point, you might be wondering why we even need other CDR solution, and in particular why we need costly solutions like DAC if Biochar is so wonderful and cheap.

But I think we should hedge our bets, because Biochar may not get big enough to matter. In the next article, I’ll go deep on some of the concerns I have with Biochar — including land-use, sources of biomass, and the logistics challenge of doing Biochar at scale.

I’m certain that Biochar will be around as a CDR tool for a long time. The question is really how big and useful Biochar can be given constraints on its growth.

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Two weeks ago I praised the Direct Air Capture (DAC) company Climeworks for their leading consumer strategy and brand. In a footnote to that article, I wrote:

Clime…

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The best consumer products help people tell a more coherent story about their lives. Climate-conscious consumers are looking for products that allow them to live in a modern consumerist worl…

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In early 2024, the US Congress is awfully busy solving an immigration crisis, sending weapons to Ukraine, and tweaking the tax system. These headline-grabbing bills are overshadowing the Car…

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TLDR:

• There are a lot of businesses focused on putting CO₂ in concrete to replace geologic storage

• The amount of CO₂ we’ll practically be able to store in concrete is smaller than most estimates

• CO₂-infused concrete is more expensive than geologic storage. The most cost-effective de-carbonization option for concrete companies will be paying for offsets to put CO₂ underground

• CO₂-infused concrete will be hard to sustain as a business model without muscular government support, similar to what California provides today

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I am writing this from San Francisco International Airport, which is made in large part from concrete infused with carbon dioxide (CO₂). A company called Blue Planet captures CO₂ from a local natural gas plant, creates a carbonate by combining it with calcium, and uses that as part of aggregate, a gravel and sand mixture that makes up ~80% of concrete.

Blue Planet is not alone. In recent years, many companies have developed technology to infuse CO₂ in concrete:

Business models vary, but there are three broad approaches:

• Integrated removers like Blue Planet own the source of CO₂ with carbon capture equipment on power plants or Direct Air Capture plants (DAC). They then mix the CO₂ into concrete, sometimes at the construction site

• Materials developers create a process to get CO₂ into concrete in a pilot setting and license the technology to concrete suppliers

• Concrete manufacturers buy CO₂ and mix it into concrete using a licensed technology

And there are two different ingredients in concrete that can act as storage for CO₂:

• Cement (~15% of concrete by mass) is the active ingredient in concrete, the yeast to the bread. Since it has to be fired in a hot kiln, it’s the source of most of the emissions associated with concrete

• Aggregate (~85%) is the gravel, sand, and other bulk materials that are mixed in with cement before pouring the concrete

A decade ago, most companies focused on putting CO₂ in cement because it is the source of emissions1. Recently, companies have shifted to infusing aggregate for two reasons. First, there’s so much more aggregate — on average concrete has 6x as much aggregate vs. cement. Second, aggregate is less delicate than cement, meaning it can accept a variety of materials without putting the overall concrete mixture at risk. This makes aggregate a better path for maximizing the amount of CO₂ that can fit into a given ton of concrete.

All of this is very exciting — these companies are doing cool work, and are approaching the problem in a more reasonable way than they were a few years ago. And there are other good reasons companies and investors get excited about CO₂-infused concrete:

• Humans pour a lot of concrete

• Concrete manufacturing makes up 8% of global emissions, so it seems like a good industry to de-carbonize

• Sticking CO₂ underground seems wasteful when you could actually use it in something, like building an airport

• Putting CO₂ in concrete is permanent, unlike using CO₂ in recycled fuels or agricultural products that might re-release it into the atmosphere2

But in the long run, concrete will not play a sizeable role in carbon removal for three reasons. First, most concrete will be poured in countries that can’t afford (and won’t prioritize) carbon neutral concrete. Second, concrete as a storage option for CO₂ will be too small to matter once CDR scales. Finally, it’s just too expensive and will require muscular government support to succeed in the long-run.

Countries that are doing the most on carbon removal pour the least concrete

Bill Gates likes to say that humanity is going to pour enough concrete to build a new Manhattan each month for the next 40 years. He glosses over where all that concrete is going to be poured3:

About half of all concrete in 2022 was poured in China. The United States, with a quarter of global economic output, poured only ~3% of the world’s concrete, and the EU poured just ~5%.

In the 21st century, ~70% of the world’s concrete will be poured in countries with a GDP per capita lower than $20,000 per year. We have good reason to believe that countries with fewer economic resources are unlikely to prioritize carbon removal. Policy in these countries will be, and should be, focused on creating a thriving middle class.

Take China, which has no clear plans to remove carbon on a large scale. Pilots of carbon-negative concrete have stalled, and I have trouble finding Chinese companies focused on scaling this tech in the last 3 years. And this makes sense! China’s Communist Party is focused on solving a slow-moving housing crisis, building a world-class military, and creating a healthcare system that can serve their aging population. In the eyes of Chinese leaders, who are all over 60 and unlikely to live to see the impacts of climate change, these are way more important initiatives than de-carbonizing concrete.

Concrete is a sizeable storage basin, but is tiny compared to geologic storage

Every year ~30 billion tons of concrete4 are poured on Earth. Perhaps ~8% of any given ton of concrete could be mineral-state CO₂5, which means about 2.5 billion tons of CO₂ storage potential each year.

Seems like a lot, but relative to geologic storage this is simply tiny. This stretch of land, along the coast of Texas and Louisiana, has ~125 billion tons of potential geologic storage — that’s decades of global concrete CO₂ storage. The world as a whole has between 2 and 16 trillion tons of storage potential. There’s at least 1000x more geologic storage than concrete storage.

It’s worth noting that relative to the current scale of Direct Air Capture and capturing CO₂ at emission’s source, concrete is indeed large. And relative to non-storage markets for CO₂, like fertilizer, soda, etc., concrete is also very large.

Even if we assume that only countries with high GDP per capita could scale CO₂-infused concrete, concrete dwarfs these sources and uses of CO₂:

This is why folks are excited about concrete — it seems like a better solution than, say, fertilizer. But if you take a step back and consider the bigger picture, it’s just too small of a storage basin to matter.

Each year, we emit ~40B tons of CO₂e6 into the atmosphere. Optimistic assessments have this going down to 0 by 2025, but it’s more likely that we stay at about 40B tons, give or take ~25%, for the foreseeable future.

To reach the elusive goal of net zero greenhouse gas emissions, carbon removal needs to take out tens of billions of tons of CO₂ each year.

Geologic storage can easily handle all of this capacity. Concrete can handle between 0.1% and ~30% of this capacity, depending on your assumptions.

That said, if putting CO₂ in concrete were cheaper on a per ton basis, then we should preferentially fill up the concrete storage basin first, then move onto geologic storage. But this is not the case — geologic storage is much cheaper.

Concrete storage is more expensive than geologic storage

Let’s lay out a few assumptions:

• All-in costs of pouring one metric ton of concrete = $100

• Number of tons of concrete that can store one ton of CO₂ = 8

• Cost to transport a ton of CO₂ by truck = $7

• Cost to capture a ton of CO₂ from a power plant (the cheapest way) = $50

• Additional manufacturing cost to add CO₂ into aggregate mixture = $1 per ton of concrete

Putting all that together, 8 tons of regular concrete cost ~$800 to pour, while 8 tons of concrete infused with CO₂ is ~$865 — making CO2-infused concrete ~8% more expensive than regular concrete.

What’s more important is comparing the cost to infuse CO₂ in concrete vs. storing CO₂ underground:

It’s ~3x more expensive to put carbon dioxide in concrete vs. in the ground! Much of the delta comes from lower transportation cost for geologic storage. For construction projects, which are distributed all over the place, CO₂ will have to be brought out by truck. For geologic storage, we’ll build pipelines from the capture facility to the storage site, and these are very cheap on a per ton basis:

Now imagine a carbon-negative concrete manufacturer starting a project on an expansion of a local highway. They budgeted $2M to put CO₂ into their concrete. Their sustainability team presents two options: (1) put the CO₂ in concrete or (2) put the CO₂ underground, in geologic storage. Again, let’s assume this company is buying CO₂ captured from a nearby natural gas plant at the going rate of ~$50 per ton.

The concrete company could spend the same amount of money and remove 6,700 tons, or 21%, more than if they put CO₂ in their own concrete mixture. They could also save an extra manufacturing step, and delete the logistics complexity of bringing extra deliveries to busy construction sites.

So the most cost-effective solution for concrete companies looking to de-carbonize is to pay for offsets to put CO₂ underground.

So how are concrete companies surviving?

Because it is a more expensive solution, CO₂-infused concrete makers would not have a competitive product in a free market. But California, where CO₂-infused concrete has been most successful — and where Blue Planet is based — has heavy- handed government intervention. Blue Planet benefits from a long list of policies:

• Environmentalism is a guiding light in California’s many building codes

• California has a carbon price, currently at $56 - $72 per ton (compare to ~$7 per ton in China)

• The US federal government has tax credits worth ~$60 per ton for carbon removal used in concrete7

• California voters shrug off cost overruns on big projects, so adding concrete that is 8% more expensive to an airport doesn’t put politicians in hot water

• Californians take pride in being early adopters of technology

For CO₂-infused concrete to take off, you have to believe that countries like China, India, and Indonesia — the big pourers of concrete in the 21st century — will have political economies that look like California’s. That’s not a bet I’m willing to take.

Generally speaking, countries prioritize the climate solutions that are most of interest to their success in other ways. Let’s return to China. Prices for solar photovoltaics and batteries are dropping rapidly, in large part because Chinese factories are pumping them out at unprecedented rates. This is a direct result of Communist Party policy to subsidize manufacture of export goods. The Party is motivated to increase manufacturing to keep the Chinese economy growing as it enters a new phase where it is less reliant on housing and infrastructure to drive growth. Things like carbon-negative concrete do not help policymakers in China with these (or other) goals.

And emerging economies are much more likely to imitate China than California. That dampens the outlook for CO₂-infused concrete companies.

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This is the third Terraform Now’s series on CO₂ storage. Part 1 is all about why CO₂ storage will be so important and what types of rock formations are best suited to storage. Part 2 covers the main obstacles to storage and why it takes so long to build an underground storage facility.

You’re reading Terraform Now, my newsletter on the business of carbon removal. To support my work, you can subscribe here or share this article with interested folks

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Yesterday BlackRock announced a $550M investment in a Direct Air Capture (DAC) plant being built by Occidental Petroleum. An investment of this size, and from such a reputable investor, sends a profound signal — that the business case behind DAC is compelling.

BlackRock, even more than most investors, is relentlessly focused on marginal unit economics. In plain English, this means two things:

• Cost: How much does it cost to produce the next unit? How are these costs changing over time?

• Revenue: What price can the next unit produced get on the open market? How are these prices changing over time? How defensible is this price?

Here’s the current state of DAC, with revenue per ton on the left and cost per ton on the right:

At first glance, the unit economics for DAC are uninspiring. Costs per ton are more than revenue, and costs are uncertain and highly variable. Yet this looks better than it looks a year ago — revenue per ton is way higher, and the promise of scale could bring down costs.

Revenue catalysts

There are two catalysts on the revenue side. First, DAC credits are fetching much higher prices from private buyers, up ~40% since 20221:

Second, DAC gets much larger subsidies from the US government, up 3.6x since 2022:

Perhaps more important than the increase itself are the new rules that allow DAC producers to sell these credits. That makes it a much more valuable asset, since once it has been used to wipe out taxes for DAC providers, it can be sold to others (at a slight discount).

Put both the tax credit and the price increases together, and revenue per ton is up 63% in just a year!

While much has been made of America’s green subsidies, it’s the steady increase in DAC prices paid by private buyers that is a bigger draw for a long-term investor like BlackRock. Supply of these credits is highly restricted, which is driving up the price. Some companies are contracting for more than $1000 for DAC credits.

There are cheaper ways to offset your company’s carbon emissions, but after a bunch of scandals buyers are less interested in reforestation and other unverifiable schemes. As I wrote in CDR’s Best Quarter Yet:

Instead of going for many, cheap credits, buyers are choosing fewer, more expensive, and higher quality credits. Three indicators of quality — permanence, verification and transparency — now top the list for buyers

There are very few of these high quality credits to go around, and given the immense capital expenditure involved in building a DAC plant2 it’s unlikely that there will be a rush of new supply. So, prices will remain high and the big moat of building plants should make prices defensible for a while.

The ‘Early Adopter’ critique of high prices

One criticism of DAC is that it’s only for early adopters like Big Tech companies who like to lead the market in all things. And it’s true that the big orders have come from Microsoft and Amazon. But have a look at some of the customers for three big DAC providers — Oxy (via subsidiary 1PointFive), Climeworks, and Heirloom:

With the exception of Heirloom’s customers, this is not a list of Silicon Valley trendsetters. It’s a fairly diverse set of (Western) buyers dipping their toes into DAC credits. I’m not saying DAC is going mainstream — it’s far from that — but we should be encouraged by the broad range of industries represented among early customers.

Costs

No DAC player is transparent about cost per ton. One benchmark, using a small data set, has the weighted average cost at $718 per ton, implying that an efficient DAC project could breakeven at current average revenue per ton.

It is certainly possible that Oxy is on track to get lower costs down when Stratos is scaled up in 2-5 years, but it’s not off to a good start. The plant is 30% complete costs are higher than expected. From Reuters:

Occidental on Tuesday [Nov 8] increased project costs to $1.3 billion, the second price increase this year. The project was estimated between $800 million and $1 billion in 2022. Its start-up is planned for 2025, from 2024 previously.

Costs will remain a mystery in the short run, for Oxy and the whole industry. And even in the best scenario, costs will not decline fast. Unlike many climate tech cost-curves that we’re used to, like solar panels and batteries, DAC is not a manufacturing process. It’s a combination of chemical engineering and construction, neither of these benefit as much from scale as manufacturing.

But that does not mean there are no benefits to scale and leaerning — these benefits are just slower. It’s likely that DAC costs come down from $700 - $1,000 per ton to the $300 - $500 range in the 10-15 years. The literature suggests that lower costs that this are theoretically possible, especially for Oxy’s liquid-based DAC that it just picked up in the Carbon Engineering Aquisition.

Final thoughts: 550 million reasons to be excited

When I started writing about Direct Air Capture a few months ago, I did not expect to spend so much time thinking about Oxy, a fossil fuel company. To their credit, the folks at Oxy have been very active: acquiring Carbon Engineering, persuading customers like Amazon to sign on, winning grant money from the US government, and now onboarding BlackRock as an investor in Stratos.

When I first evaluated the Oxy & Carbon Engineering partnership, before the acquisition, I noted that Oxy could bring in more financing than Carbon Engineering ever could alone:

So I’m not surprised that Oxy brought in an outside investor. Having said that, BlackRock’s check size is simply mind-boggling. I spent three years doing due diligence for big investors like BlackRock and I can tell you that savvy investors do not write half-billion dollar check on reputation alone. The revenue plan must be solid, and there has to be high technical confidence in a path to lower costs.

That said, this investment does not vault Oxy to the top of my DAC Power Rankings. I believe there are only two signals of winning in the DAC market — scale & cost.

In spite of all the noise Oxy has been making, we don’t yet have a signal on either. BlackRock seems to be excited about cost, but I haven’t seen any data suggesting Carbon Engineering is cheaper than Climeworks or Heirloom. And big plant announcements are great, but these cost overruns and schedule delays are concerning.

The DAC provider that delivers >50,000 tons of carbon credits to customers first at will be at the top of my DAC Power Rankings. The top contenders are Climeworks, and Oxy, with Heirloom a not-too-distant third.

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TLDR: Q3 2023, was the best quarter yet for the Carbon Dioxide Removal (CDR) industry. There were a few big milestones:

• CDR providers signed big deals with the world’s most valuable tech companies

• Two scaled DAC plants announced record-breaking plans thanks to >$1B backing of the US government

• Carbon Engineering, a Direct Air Capture provider, was acquired by Oxy for $1.2B — by far the biggest CDR aquisition ever

It took us centuries to build an economy that warms the planet, and it is taking decades to build an economy that can solve the warming problem. Reading the climate discourse, I sense impatience with the business community. Critics want businesses to not just set nebulous targets, but spend their budget to counter emissions. Some argue that companies will never do this, and government should step in and make major changes to the 200-year old capitalism contract. The least governments can do, goes this line of thinking, is institute a tax on emissions.

Three recent developments in Carbon Dioxide Removal (CDR) should give pessimists cause for hope. From July to October 2023, Microsoft, Amazon, and Apple signed the biggest deals yet to purchase CDR credits. The biggest companies in the world are now paying to take CO2 out of the sky. At the same time, the American government released over a billion dollars in funding to build new CDR plants on the Gulf Coast. Finally, an oil behemoth bought Carbon Engineering, a leading CDR technology developer for $1.2B.

All of this happened in America & Canada, neither of which have a carbon text. This suggests that, at least when it comes to CDR, capitalism may not need a redesign to make progress on climate.

Big Deals from Big Tech

In early September, Microsoft announced that it would purchase 315,000 CDR credits. This means that Microsoft will pay Heirloom Carbon a few hundred dollars each time Heirloom removes a ton of carbon dioxide (CO2) from the atmosphere. Microsoft will certify that those tons are dedicated to Microsoft, meaning they can’t be sold again to other buyers. Double-dipping would be considered fraudulent, even if it doesn’t break any actual laws.

Fraud is a serious problem in the carbon credit industry, as Heidi Brooke laid out in a recent New Yorker piece:

Yet it is extraordinarily difficult to quantify how much carbon these schemes really save. To do so, you must demonstrate that the forest would have been razed without protection—a counterfactual that is nearly impossible to prove. There are also issues of “leakage”: even if the agents of deforestation are driven out of one area, they may cut down trees someplace else. Then there is the question of permanence. Greenhouse gases can linger in the atmosphere for thousands of years—but forests are vulnerable to wildfires and other calamities, and most protection schemes last no more than a few decades

In this piece Brooke is mostly discussing reforestation projects, where a carbon credit provider offers to plant X trees for Y dollars.

High-quality CDR, like Heirloom’s Direct Air Capture (DAC) technology, is different. These are industrial processes that can be measured using sensors. Microsoft can visit the site as much as they want — they could even plant someone at the Cypress Plant in Louisiana where CO2 removal will happen. And because Heirloom’s captured CO2 will generally be stored underground, it is permanent in a way that planting trees can never be.

In the 2010s, businesses looked for a quick fix for their emissions and bought cheap, reforestation credits. They did this in part because it was the only gig in town, but also because the credits were $10 per ton of CO2, buyers could get a lot of bang for their buck.

That is, until many of these projects were revealed to be frauds. Now buyers are much more mature. Instead of going for many, cheap credits, they are choosing fewer, more expensive, and higher quality credits. Three indicators of quality — permanence, verification and transparency — now top the list for CDR buyers:

Back to Microsoft. Just after they inked a deal with Heirloom, I predicted that Amazon, a close competitor in the all important cloud market, would be forced to follow, working with either Climeworks or Occidental Petroleum (Oxy). Sure enough, Amazon then signed a >$150M deal with 1PointFive, Oxy’s sales and marketing arm.

And this is just the beginning. We can sort out what organizations are potential CDR buyers by focusing on companies with an SBTi1, which is a fancy way of saying that these companies have prioritized reducing their emissions. According to cdr.fyi, only 0.5% of these companies have purchased credits:

Don’t get me wrong, CDR will have challenges convincing customers that it’s worth spending their small climate budgets on pricey credits. But some companies will look at Microsoft, Amazon, and early buyers and conclude that CDR credits are a good way to diversify and offset emissions that they don’t have a path to mitigating.

The key issue for many of these buyers will be supply of credits. That 315,000 ton deal that Microsoft and Heirloom signed represents ~100x more credits than Heirloom has every produced. And Heirloom is not alone — every CDR project today is tiny.

Enter Uncle Sam

The American Department of Energy is looking to change that. In August, it announced that it would give $1.2B to two groups that will build large Direct Air Capture (DAC)2 plants on the Gulf Coast.

These projects are exciting for a lot of reasons:

• Scale: Each plant will capture (up to) 1M tons of carbon dioxide per year. That’s >100x the scale of the largest DAC plants operating today

• Geography: Texas and Louisiana are right next to each other, and both projects are close to the coast of the Gulf of Mexico

• Geologic storage potential: A recent study of the Gulf Coast Miocene, a thin layer of geology along the coast, found 125 billion tons of potential CO2 storage — that’s enough storage for three years of global emissions at 2023 levels.

• Skills: The gulf coast region is full of chemical engineers and geologists looking to move on from the oil and gas industries

I have much more to say about this DOE program, both good and bad, and wrote a long post on it when the news broke:

I hope that in the medium-term, there is enough demand for CDR credits that extra government funding won’t be necessary. But in the short-term, this program will play a big role in not just getting the plants built, but also making CDR legitimate in the eyes of the broader market. The scientists at the DOE think CDR has legs, which will give even more buyers confidence that carbon removal is here to stay.

Carbon Engineering’s $1.2B exit

Just a few days after the DOE announced $1.2B in funding, Occidental Petroleum (Oxy), made a $1.2B announcement of its own, an agreement to purchase DAC technology provider Carbon Engineering. At the time, I wrote about the many reasons this deal makes sense, and sounded notes of caution. Here I’d like to focus on the longer-term impacts for CDR.

(1/3) Learning from failure: A lot of people are rooting for Oxy to fail because it is an oil company — the big bad for most environmentalists.

Failure is valuable because it teaches the industry what not to do. I’m personally bullish on Oxy’s ability to capture CO2 because they have so much experience building petrochemical plants, which are similar to Carbon Engineering’s liquid-based tech. But even if Oxy is able to make big DAC plants, they can still mess up. As I wrote at the time of the aquisition:

My guess is that Oxy will do very little true geologic storage, instead engaging in Enhanced Oil Recovery (EOR) and making recycled fuels. EOR pumps CO2 into active oil wells, increasing the pressure and pushing out more hydrocarbons. Recycled fuels — also called synthetic or drop-in fuels — use captured CO2 to make gasoline for cars, trucks, etc. EOR is a core part of Oxy’s drilling process, while marketing fuels of all kinds is a core part of Oxy’s go-to-market. Oxy might relish the opportunity to market fuels made with DAC.

Let’s say that Oxy uses 90% of it’s captured CO2 to do EOR. It then sells credits to Amazon. In 2027, Heidi Brooke writes an expose showing how terrible it is that Amazon’s climate budget went to pumping more oil out of the ground. Amazon cancels its contract with Oxy, and other customers follow.

That would all be very bad for Oxy, but good for the companies that are focusing on permanently storing CO2 underground or in cement without creating new emissions. Customers will again flock to high quality, transparent credits from Climeworks, Heirloom, and others.

This may not be Oxy’s path to failure. The point is that there are dozens of ways Oxy can fail, an each of them holds a lesson for the CDR industry.

(2/3) Oxy might succeed: Yes, an oil company might make the green trasition. Stranger things have happened. And there are a lot of reasons Oxy & Carbon Engineering are good for each other:

• Technology: Carbon Engineering’s liquid-based tech is a nice fit with Oxy’s chemical engineering expertise

• Full stack: Oxy has arguably the best sales & marketing engine in the industry in 1PointFive, and has already inked big customers

• Revealed ambition: It seems unlikely that the Carbon Engineering board agreed to the aquisition just for the money. Oxy must have shown a good strategy and a genuine desire to win the DAC market

Here’s what I’m monitoring from Oxy going forward:

1. Credit delivery: 1PointFive has made massive DAC sales, but can it deliver? Will they actually build 1 million ton capacity at both plants?

2. Impact on carbon removal: What is the split of permanent storage, EOR, recycled fuels, and other uses for capture CO2?

3. Cost of DAC and slope of the learning curve: What is all-in $ per ton of CO2 captured at Oxy’s plants?

4. Revenue: What is Oxy’s avg. revenue from a ton of CO2?

5. Shareholder value from DAC: In 2033, how much of Oxy’s market cap will come from fossil fuels vs. carbon removal?

Success is not just about Oxy’s stock price. It’s about building a sustainable business removing CO2 from the sky while providing value to shareholders, customers, and employees. Oxy’s DAC business might fail even as it drastically brings down the costs of Carbon Engineering’s liquid-based DAC (#3 above), then spins it off. That’s why we have to monitor all of these metrics independently.

(3/3) Capitalism & Climate Tech: Many of the folks who get into Climate Tech have a rebellious, idealist personality:

I think profits are actually good. Entrepreneurs should be rewarded for solving tough problems, otherwise no one will try. Take David Keith, a 60-year-old professor who started working on CDR in the 1990s before co-founding Carbon Engineering in 2009. In the popular imagination climate tech entrepreneurs are 27-year-old Stanford graduates looking for a quick buck. But in capital intensive industries like CDR, patient, farsighted founding teams will win, and should get a payday3.

Of course most profits don’t flow to founders and investors. Executives mostly reinvest profits in improve the company by hiring new people or improving the product. A company turning a profit usually has product-market fit, which draws in more investment, which helps the company scale and extend its product-market fit to more customers.

This is exactly what happened with Carbon Engineering, which built a compelling product that Oxy and Chevron both wanted to use in their DAC plants. The fact that multiple customers vetted the technology gave Oxy the confidence to buy Carbon Engineering and commit to scaling it up4. That, in turn, gave Amazon the confidence to buy credits from the new combined entity. That will increase demand for Oxy’s credits, assuming what they deliver is high-quality, permanent, and transparent. All of that seems pretty good to me!

This big exit is going to attract more talented entrepreneurs into Climate Tech, not repel them.

Momentum

CDR has a long way to go. The DAC plants that broke ground this year might be able to take out ~2M tons of CO2 per year, about 0.03% of the IEA’s target of ~7B tons per year, sometime in 2026. I believe we will need way more than 7B tons per year of CDR capacity because it’s unlikely that we reduce emissions below 15-20B tons of CO25 per year.

But these plants represent real progress. Each are >20x larger than any existing DAC plant.

In the same vein, it would be great to see more government funding for CDR, especially in Europe and China. But the fact that the United States went from having a backwards climate policy to funding cutting edge climate tech is cause for celebration.

And as I’ve argued, even the big paydays for Carbon Engineering stakeholders. Who knows, maybe Oxy will become a big green champion.

You’re reading Terraform Now, my newsletter on the business of climate tech. Feel free to share with interested folks. You can subscribe here:

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This is part 2 in our series on carbon dioxide storage. Here’s Part 1, an overview of why geologic storage matters & what formations are best for storing CO2

TLDR, geologic storage projects share a few challenges:

• Timing: it takes longer to develop a storage site than to build a carbon capture plant

• Engineering: creating a system that reliably holds CO2 underground is straightforward, but geology talent is scarce

• Regulatory oversight: bureaucracies where carbon capture is taking off are slow to approve geologic storage

• Safety: storing CO2 underground can increase the chance of earthquakes, though the risk appears to be low

It takes a long time to develop an underground storage site — up to 10x longer than developing a DAC plant:

It is often assumed that if/when we adopt more of a ‘wartime mentality’ with respect to climate, we’ll develop storage sites much faster. This was my assumption going into reading up on storage, but now I’m skeptical. Geological work just takes much longer than processes that most of us are more familiar with, like manufacturing. Urgency is unlikely to speed things up dramatically, and this is not a case of ‘regulators just need to get out of the way’ — though faster responses from regulators will help storage move faster, as we’ll see.

The closest analogy for doing CO2 storage (at scale) is drilling for oil, as they both involve exploring and developing caverns deep underground. During the biggest war of the 20th century, WWII, America desperately needed more oil but couldn’t bring supply up faster than 4% per year. It never grew faster than 10% in any given year. Compare oil output to another American wartime priority — making the boats that supplied English, Soviet, and American armed forces — and you can see just how much faster manufacturing scales than geological work:

You might look at this and say ‘yes but we just shifted manufacturing capacity around during the war because manufacturing boats is similar to manufacturing cars.’ But that’s exactly the point. There’s a lot of transferable skills between different types of manufacturing. Geology is different — everything is specific, from actual geologists to people who can write documents for EPA approval to specialized drill bits. Few skills transfer from other domains.

So the path to developing a lot of storage is likely to be a long, slow increase rather than a sudden leap. That said, there are a few things we can do to ensure that we develop enough enough storage:

• Start now: The good news is that there are a lot of people trying to get storage sites approved, and recent demand for high-quality carbon offsets is strengthening their appeals

• Pick big sites1: We should be looking for sites that are 2-3 orders of magnitude larger than current DAC plants

• Pick well understood sites: Old oil and gas wells will be well documented, and their might even be living geologists and regulators who worked on them

• Accelerate regulatory approval

• Recruit geologists

Timing may not feel urgent now since DAC and carbon capture generally is so small. But imagine that carbon capture capacity — a manufacturing process like building boats — begins to grow at rates of 50 - 100% per year. If storage grows at only 5% a year, we could end up with storage as the scarce resource. This would be all the more frustrating given the vast amount of geologic storage available and the lack of alternatives for storing billions of tons of CO2.

Engineering talent

The actual engineering of caverns for CO2 is well understood. You need a minimum depth of ~800m, a sealing caprock, a cavern that immobilizes CO2, and assurance that there are no holes going to the surface that would allow CO2 to leak out.

Researchers have developed sophisticated models for underground storage, like this one from Nature, which focuses on sources of leakage and ways to immobilize CO2:

The engineering is not that hard, but it does require a specific type of geological skill set to do it right, and there aren’t that many people who can do the work. Most qualified geologists work at large oil & gas companies doing (lucrative) exploration and development.

I’ve written before about how many oil & gas folks will inevitably migrate to working on CO2 removal. I discussed three different skill sets from oil & gas that translate well:

• Industrial construction workers for the basic infrastructure to get the plants operational

• Chemical engineers to manage and improve DAC processes

• Geologists to explore, develop and monitor storage sites

Of these three, geologists are the highest paid and tend to be highly specialized. That means they are hard to pry away from their companies. And while it’s all very nice to suggest that geologists take a pay cut to do more meaningful work, that’s a hard sell for an actual human trying to support their family.

We can hope that a new generation of geologists who have been focusing on CO2 storage from their university days will enter the market solve the talent shortage problem. But that is at best a long-term shift, and in the next decade recruiting great geologists will probably be a challenge for firms focused on storing emissions.

Yes, regulation is a problem

One of the things that geologists do is develop applications for regulators to approve. In the America, regulators at the Environmental Protection Agency (EPA) need to approve something called a Class VI well:

Right now there are >100 Class VI wells waiting for EPA approval, with an average wait time of around 6 years. I mentioned earlier that developing a storage site takes between 5-15 years, which means that waiting for regulatory approval is often more than half the total timeline for developing a storage site.

I’m certain that regulators have a lot of work to make sure these wells are safe and will not leak. This work involves a lot of planning, paperwork, site visits, and quadruple-checking the engineering has zero defects. I don’t mean to suggest that these are simple and easy. But the EPA should be able to move faster. In six years a single person can finish a PhD. A full team of regulators should be able to assess the risks of a project and sign off in half that time.

There’s plenty of evidence to suggest the American EPA us capable of moving faster. American fossil fuel companies discovered a bunch of natural gas in the 1930s, a time when the economy was relatively energy-poor and unemployment was at >20%. Politicians wanted to put people to work developing natural gas infrastructure, but the permitting regime was slow. So Congress wrote a law that capped the wait time for new pipeline permits at 3 years. For ~85 years, this has worked just fine. Nothing accelerates timelines like a deadline.

Politicians in America and the EU say they are concerned about climate change, and have doled out hundreds of billions of dollars for all things green. But the critical path for most climate tech — from renewables to storage — is painfully slow permitting.

Two groups are unintentionally holding up permitting reform. Environmentalists worry that it will accelerate fossil fuel projects, and they’re correct. Some right-leaning folks argue that if solar and wind are cheaper than fossil fuels, they’ll win on the open market. This is mostly2 correct, but muddied by other right-leaning folks who are champions of fossil fuels because their local economy depends on them or for national security reasons. Every time Congress gets close to permitting reform, one of these groups throws a wrench in the negotiations that angers another group, and all agree to scrap the whole thing.

To the EPA’s credit, they are making strides toward making permitting more transparent, but this is a far cry from the acceleration that carbon capture needs.

Preventing earthquakes

Even if regulators should move faster, I’m not arguing for deregulation. The EPA and other regulatory bodies should be closely involved managing the risks of geologic storage. Pumping lots of liquid (like CO2) underground tends to change the pressure in underground caverns, and this can cause earthquakes. The good news is that the industry and regulators both have very recent experience with this exact problem.

From 2008, America experienced a boom in oil production as a result a somewhat destructive process called fracking. Around this time, there was a large increase in earthquakes, especially in Oklahoma:

In the popular imagination these shakes were a result of fracking, but that’s a myth. It was the result of what oil & gas companies call ‘wastewater management.’ As I covered in our earlier post on geologic storage, oil is often mixed with water that is briny and gross to the point of being poisonous. When companies drill for oil, a bunch of this water comes shooting out of the well, and because it’s so dangerous it has to be sent back down quickly or dealt with very carefully and at great expense. Oil companies started pumping this wastewater right back underground at very high pressures. This caused the massive spike in earthquakes in Oklahoma and other states.

If you put the massive spike in man-made Oklahoma earthquakes in the context of what happens naturally in California, the wastewater scandal does not seem like a big deal:

I’m not saying earthquakes are good, but they are manageable. I’ve lived in California for about half my life, and have been near the top floor of San Francisco’s tallest building during 4.0 earthquake. It was a little unsettling, but Californians have been making buildings with earthquake-proof designs for over a century, so I was fine. I’m more worried about a tree falling on my house in a storm than the next big shake.

The good news is that in recent years, oil companies and the EPA have worked hand-in-hand to drastically reduce the number of earthquakes, and better practices will continue to bring these down. Lessons learned about how not to over-pressurize can be applied directly to CO2 storage.

Final thoughts on balancing risk

This article has spent a lot of time focused on the good and the bad of the American EPA. In part that’s because I just understand it better, being an American. But it’s also because folks thinking about storage have the most to learn from the EPA’s recent history.

America has a larger appetite for geologic risk than most other conscious countries. America’s quest for energy independence in the mid-2000s kicked off many new oil and gas projects, which gave geologists and onsite engineers real-world training. And, importantly, successive American presidential administrations were willing to take environmental risks with fracking. The ‘move fast and break things mentality’ taught both regulators and companies how to responsibly deal with risky new technologies.

While most environmentalists might hate to admit the irony here, this experience is already doing wonders for geologic storage. The technology for storing CO2 underground is child’s play relative to sophisticated fracking techniques. As a result, America is set to be the leader in geologic storage in the next few years, in large part on the back of its deep skill set and a relatively permissive regulatory regime. I’ve criticized the EPA plenty in this article, but at least they are approving Class VI wells.

That’s more than you can say for Germany, the EU’s biggest economy. It too has deep reserves of natural gas, but did not invest in energy independence in the last few decades. The short-term consequences of this decision are high energy prices, a direct result of relying on Russia for a key resource. Then there are the longer-term consequences for Germany’s chances of doing geologic storage of CO2:

• The public is scared of geologic work

• The regulatory regime is not staffed with many geologists who can make calls on what storage projects are safe

• The actual geology of Germany is not all that well documented, at least relative to the entirely mapped Gulf Coast of the US

As a result, Germany is not building geologic storage with any urgency, hoping instead to store CO2 ‘cooperatively’ in the North Sea — this is code for paying a consortium of Norwegian and British entities to store CO2 somewhere else. I’m not saying that this won’t work out for Germany, but they have much less control over their carbon management supply chain than America, and as a result have less room for real ambition. This is likely to show in the data in the coming years.

A part of me understands why Germany takes this stance. The idea that you might create earthquakes by putting emissions underground is unsettling. It’s a more dense country than the US, so (potential) shakes are more likely to affect people. But, as we’ve seen, these shakes can be eliminated or managed.

Rich, climate conscious countries like Germany should balance the risk of shakes with the good that storing emissions could do. Earthquakes are a local problem that can be controlled by a good regulatory state and a responsible construction sector. Climate change is obviously a big global problem — but more than that, the market for carbon offsets is fast-growing market that is rewarding good entrants with high-quality offsets. It’s better to develop local, German champions now, while demand exceeds supply, than come late to the party.

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Heirloom Carbon just landed an anchor customer for its forthcoming Cypress plant in Louisiana. From the WSJ:

Microsoft said Thursday it agreed to buy credits from startup Heirloom Carbon for …

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Since Occidental Petroleum (Oxy from now on) announced that they intend to acquire Carbon Engine…

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TLDR:

• The US Department of Energy is doling out $1.2B to two Direct Air Capture hubs on the Gulf Coast

• While the funding is generous, money alone isn’t enough — execution is vital

• The skills of Gulf Coast firms and people — construction, chemical engineering, and geology — are crucial for making DAC hubs a successful reality

• American industrial policy has had big failures, but I’m optimistic about these DAC hubs because of the co-location of skills, storage, and great companies

As I wrote a few weeks ago, the best places to build the first large Direct Air Capture plants (DAC) are near empty oil and gas wells. The American Department of Energy (DOE) agrees. Last week, the DOE granted $1.2B to two Direct Air Capture groups that will capture and store carbon dioxide along the Gulf Coast — the spiritual and commercial home of the American oil and gas industry.

The differences between the two projects are fascinating. The Cypress plant will use two different DAC technologies — air-based from Climeworks and limestone-based from Heirloom — and a web of partnerships:

The South Texas DAC Hub couldn’t be more different. An oil and gas giant, Occidental Petroleum (Oxy), is taking point, relying on a single technology, liquid-based DAC, from newly-acquired Carbon Engineering:

What we’re looking at in Oxy is the first DAC player that is integrated end-to-end, with technology development, plant design, financing, and marketing all under one roof:

So there are big differences between Cypress and South Texas, but these plants do have a a lot in common:

• Scale: Each plant will capture (up to) 1M tons of carbon dioxide per year. That’s >100x the scale of the largest DAC plants operating today

• Geography: Texas and Louisiana are right next to each other, and both projects are close to the coast of the Gulf of Mexico

• A lot of geologic storage potential: A recent study of the Gulf Coast Miocene, a thin layer of geology along the coast, found 125 billion tons of potential CO2 storage1 — that’s enough storage for three years of global emissions at 2023 levels. There is certainly more.

As important as storage is, America is full of good sites — by one estimate, the Lower 48 has 5x more storage than all of Europe2. The DOE didn’t need to pick one, let alone two, projects in the Gulf Coast. It had a whole continent to choose from. So what’s going on here?

I think the DOE doubled-up on the Gulf Coast area not only because of its geology, but because of its people.

GOOD PEOPLE ARE AT A PREMIUM

Building these big DAC facilities will require a lot of people, with a few key skills at a premium:

• Industrial construction for the basic infrastructure to get the plants operational

• Chemical engineering to manage and improve DAC processes

• Geology to develop and monitor storage sites

All of these skills are present in droves in Texas and Louisiana from 150 years of oil and gas and petrochemical operations.

And these DAC hubs should have no problem hiring, because there appears to be a cultural shift happening. Many folks with traditional oil and gas backgrounds are looking to make a transition into greener industries — I have met some younger folks myself3, but this is larger than a few individuals. Many early researchers in carbon capture (and especially storage) had long O&G careers before pivoting to carbon capture.

The thing that’s exciting about DAC is — unlike windmills or solar panels — it has enough in common with oil and gas that motivated folks at all levels can make the transition. This is particularly true for storage:

… storing CO2 is the ‘mirror image’ of extracting oil from the ground, according to carbon capture expert Howard Herzog. Liquid CO2 behaves a lot like the hydrocarbons that are the basis for crude oil, which means that many of same skills involved in extracting oil — geology, fluid dynamics, chemical engineering — will propel CO2 storage too.

I like this attempt by the DOE to convert human capital from fossil fuel creation to emissions destruction. It’s worth remembering that in the 2000s and 2010s the industrial belt of the Midwest was hollowed out by competition from China and Germany. While this meant cheaper goods from abroad, it also contributed to a weak recovery from the 2008 financial crisis and the polarization of the American political system.

The Biden Administration is trying to avoid a similar fate in the Gulf Coast energy belt. As fossil fuel jobs slowly ebb away from Texas and Louisiana, they can be replaced by DAC jobs.

The timing matters too. We don’t want these skills to degrade over the next ~15 years, only to find that in 2040 we need to start putting a massive amount of CO2 underground immediately. Now is the best time to start teaching the next generation of geologists the ins and outs of the empty wells in Texas and Louisiana.

It’s worth noting that the DOE could have taken a more partisan approach to these grants. The Gulf Coast is ground zero for global warming, with Texas alone emitting as much greenhouse gases as Italy and France combined. Left-leaning environmentalists would have preferred that the administration nix applications for this region, or lock out oil and gas companies altogether.

But the DOE is better than that. There’s something poetic and optimistic about giving the biggest emitting region in the world the opportunity to become the leading hub for negative emissions.

$1.2B IS A LOT, AND YET…

It’s very easy to confuse big dollar figures with progress. Cypress and the South Texas DAC Hub combined are promising to capture up to 2 million tons of CO2 per year. It’s reasonable to question whether this will actually happen, partly because scaling is hard, and because government policies might get in the way.

American industrial policy has had its share of problems. Recent problems with CHIPS, the big semiconductor package, show that it’s not as simple as throwing money at a problem and expecting results. To take a climate tech example, there’s Solyndra, which took half a billion dollars in loan guarantees from the DOE in 2009, only to fail two years later.

There are a few ways industrial policy can go wrong:

• Governments ignore skill gaps

• Governments are bad at picking winners and letting go of losers

• Projects lack focus

• Other countries retaliate, creating a ‘subsidy war’

Industrial policy will have a huge impact on the early development of DAC, so I plan to cover this in more detail in another article. In brief, I’m a lifelong skeptic of industrial policy, but I have to admit that DAC, at least in America, is a good candidate for funds. It’s a worthy goal, and an industry that can’t really get off the ground without some government investment.

DAC is also less likely than other industries to suffer from the standard policy pitfalls:

• Skill gaps: The reason I wrote this article is to applaud the Department of Energy for paying close attention to what skills are needed to do DAC well, and then choosing the Gulf Coast because it is full of folks with those skill sets. I doubt this will look like CHIPS, where semiconductor manufacturing companies are complaining about a shortfall of ~90,000 workers, with minimal chances for skilled workers to emigrate.

• Picking winners and losers: The DOE is not putting all its eggs in one basket. They have picked three DAC technologies (air, water, and limestone-based). And they have also picked two different business models, with Oxy’s end-to-end integration vs. Battelle, Climeworks, Heirloom, and others partnering.

• Lack of focus: This is where I’m most worried. This region has a history of using incendiary political tactics to delay carbon capture projects. And the DOE is packing many goals alongside capturing CO2. Job creation, diversity, and community engagement are all good things, but they have real tradeoffs. They will cause delays. Getting ‘community engagement’ is important, but in our litigious society this process often squashes big projects before they break ground.

• Retaliation: This is an extremely rare case where American policymakers should welcome retaliation. It would mean more countries investing in DAC, so America would have to shoulder less of the burden of taking CO2 out of the sky. We all share the same atmosphere.

FINAL THOUGHTS

I’m optimistic that these grants will accelerate DAC. There are just so many winning factors here — a worthy goal, geologic storage, skilled professionals, and great companies. All of this should lead to real-world progress, even if the projects run into engineering or NIMBY obstacles.

And, even though I am a skeptic of industrial policy, I recognize that if you add government dollars to other winning factors, it can pay massive dividends. People like to forget that EV pioneer Tesla was part of the same loan guarantee program as Solyndra.

Businesses and individuals are beginning to realize that DAC produces the highest quality carbon offsets. DAC providers may not be able to meet a new wave of demand without these large plants. Perhaps a spark of supply from the government will lead to a bonfire of consumer demand. Maybe not, but it’s a risk worth taking, even with hard-earned tax dollars.

Perhaps this is just the beginning of government investment. Barring major setbacks, these grants will lead to between 1 and 4 million tons of CO2 captured per year, way more than has been captured with DAC so far. But this is also <0.01% of annual global emissions. We’re going to have to take out not millions of tons, but tens of billions to make a dent.

No matter how fast demand for DAC carbon offsets grows, governments in big economies — America, EU, China, India, and others — will play a crucial role in developing scaled and cheap carbon removal.

I predict that one of these countries will launch something like an Apollo Program for carbon removal4 by the mid-2030s. It will be expensive. But cutting our emissions to 0, the other strategy for stopping runaway global warming, is unrealistic.

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TLDR:

• Storing CO2 underground is a better long-term option than using CO2 for fuels, fertilizer, etc. These ‘utilization’ markets are too small

• The best storage caverns are large, >800m underground, and have a caprock that seals in CO2

• Three rock formations are proven to work for CO2: empty oil wells, salty underground lakes called aquifers, and basalt formations created by cooling lava

Many observers of carbon capture say the ‘exciting’ part of the process is the technology that actually captures CO2 out of the sky, while storage is considered less interesting. As Matt Yglesias has written:

The “hole in the ground” part of carbon capture technology is clearly not the interesting part. What’s interesting is the efforts to capture carbon dioxide in the first place.

I couldn’t disagree more with this — I think geologic storage is mind-boggling and mysterious. Imagining how we compress a few million tons of gas into a liquid, and pump it into a giant, dark cavern half a mile underground is a bit like wrapping my head around the distance between the Earth and the Moon. There are numbers, there are words to describe it, but our minds balk at the depth, darkness, and scale of it all.

You can have different reactions to the mystery of CO2 storage. You can get bored and move on. You can be curious and want to learn more (keep reading if you’re in this group). Or, you can be intimidated by the awe-inspiring engineering and conclude that storage must incredibly dangerous, then use incendiary political tactics to hold up storage projects.

Folks in that last camp are often well-meaning environmentalists, but they misunderstand the science and end up holding back progress on the climate transition. Storage is important, safe, and we need to do it.

WHY STORAGE MATTERS

We need both Direct Air Capture (DAC) and Emissions’ Source Carbon Capture to manage the climate transition. If you think that moving to renewables energy alone will keep global temperatures low, I’d suggest you check out Terraform Now’s The Case for Carbon Capture.

TLDR: carbon capture is the best technology we have to get rid of historic greenhouse gas emissions, and is a good insurance policy against higher-than-expected future emissions, which are very likely.

More than 99% of the CO2 we capture via DAC or Emissions’ source tech will need to be locked away permanently, and right now storing CO2 underground is the most mature technology for permanent storage.

One thing that makes geologic storage so attractive is how much of it there is. There is plenty of space underground to store all of our historic and future emissions underground:

As I wrote in Terraform Now’s Carbon Capture Primer:

The high-end estimate of geologic storage that can safely store CO2 is ~16 trillion tons. The amount of CO2 humans emitted since 1850, plus the amount we will emit from 2023 until 2050 is ~2.1 trillion tons — so storage capacity could outpace the CO2 we need to capture by ~8x.

If you want to be pessimistic and believe the low-end storage estimates, it will be a very long time before we need to worry about running out of storage. Today we are only capturing 45 million tons of CO2 per year, less than 0.001% of the ~1.9 trillion ton low-end estimate.

So there’s a lot of space to put CO2 underground — that’s great! But burying it underground seems like a crude solution, and many people are figuring out ways to use CO2 for something productive — fertilizing crops, carbonating soft drinks, etc. Unfortunately, none of these so-called ‘utilization’ markets is big enough to scale with carbon capture. In total about ~300 million tons of CO2 are used per year, and even though that sounds like a lot, it’s <1% of global CO2 emissions.

None of these use cases are growing quickly. As you can imagine, things like fertilizer are mature markets growing at no more than 3% per year. To believe in utilization, you have to believe that new ways to use are going to grow very fast in the coming years decades.

I’m bullish on one new use case for CO2, recycled fuels, also called drop-in fuels. Companies like Porsche are combining CO2 and industrial by-products to create fuels that can be used in existing cars and trucks. These fuels are ‘drop-in’ because we don’t have to change anything about the cars and trucks, we can just replace the fuel.

Recycled fuels are gaining some momentum, but even if they are widely adopted, recycled fuels are unlikely to ever consume more than 5% or 10% of the CO2 that we capture1. You can make same arguments for other new use cases — from carbon-infused cement to mass-produced graphene.

So, storage is the best option because, barring miraculous new use cases for CO2, it is the only option that can scale with the amount of CO2 we’re going to want to capture. So how are we actually going to store it all?

STORAGE OPTIONS

The geography of storage sites will decide the location of large DAC facilities. These can be built anywhere, since they are sucking CO2 from the atmosphere, but building them on top of good geologic storage sites cuts out transportation cost and a multi-year permitting process for pipelines.

Geologists look for a few things in a storage site:

• Empty space: caverns, arteries, and pockets where CO2 can settle. One big cavern is better than many small ones, because there large fixed costs of developing a storage site

• Sealing rock: solid layers of rock between the cavern and the surface keeps CO2 from leaking out. Often called a caprock when drilling oil, for CO2 storage many different formations will work

• Deep underground: caverns should be at least 800 meters deep. This creates enough pressure to keep CO2 in liquid form, keeps CO2 away from drinking water, and reduces leakage to the surface

Generally speaking, there are three types of rock that have all of these things: old oil and gas wells, salty underground lakes called aquifers, and basalt formations created by cooling lava. There are a bunch of other formations that scientists are trying, but these three are proven options that can meet the needs of a scaled up carbon capture industry all on their own.

FIRST WE’LL FILL UP THE OIL & GAS WELLS

Believe it or not, some oil companies already have experience pumping CO2 down wells. In 2022 they pumped ~80 million tons of CO2 into oil wells that are almost dry. The pressure from incoming CO2 pushes the last bits of oil up and out of the well, and during this pumping process, the CO2 stays trapped underground2.

More broadly, storing CO2 is the ‘mirror image’ of extracting oil from the ground, according to carbon capture expert Howard Herzog. Liquid CO2 behaves a lot like the hydrocarbons that are the basis for crude oil, which means that many of same skills involved in extracting oil — geology, fluid dynamics, chemical engineering — will propel CO2 storage too.

And it’s good that these skills exist, because making old oil & gas wells into usable storage caverns is not easy. For example, old oil projects have not one, but many wells leading to a single cavern. Every single well, big or small, has to be stopped up to prevent seapage to the surface.

There are over one million open wells in Texas alone, so this is no small task. Not only do all these wells have to be plugged, but regulating bodies like the EPA have to be 100% confident that they are plugged. Convincing regulators might be a bigger challenge than the engineering challenge of filling in the wells.

Another way in which storage is a mirror image of oil drilling has to do with pressure. When we take oil out of the ground, we take advantage of a difference in pressure — the pressure in the oil-filled cavern is higher than the pressure on the surface, and so the oil wants to escape up into the pipe and to the surface.

When engineers want to store CO2 underground, they reverse this pressure difference. There must be more pressure in the pipe than in the cavern, so that the CO2 comes out of the pipe quickly to spread throughout the cavern. The caverns are very far underground, which means a lot of rock putting pressure on the cavern, so the pipeline pressure has to be quite high — between 100-150 bar, or 100-150x the pressure of our atmosphere.

But wait, you might ask — I thought that these were empty caverns, so intuitively we wouldn’t need much pressure to ensure that the CO2 is spreading out. Well, these caverns are empty of oil, but they aren’t empty altogether. There’s leftover salty, briny water that forms large underground lakes that we call aquifers.

DEALING WITH AQUIFERS

This leftover, briny water is very hard to deal with. It’s salty to the point of being poisonous, and when it seeps up to the surface or into our drinking water it’s bad news for crops and people. After taking out the oil, the reduced pressure in some of these caverns make them a bit unstable, prone to leakage or even collapse, which could cause an earthquake.

For the purposes of storing CO2, though, this instability might be a good thing, since pumping CO2 back down the wells re-pressurizes them to where they were before we removed the oil. Since the oil and water sat in those caverns at that higher pressure for millions of years, we can be fairly confident that CO2 and water at similar pressures won’t escape.

However, the number of old oil wells we can fill up is limited. Ultimately, we’re going to want to find other briny aquifers that never had oil in them. Geologic surveys tell us that there are a lot of briny aquifers without oil. These have much, much more capacity than empty oil wells.

Beginning sometime in the 2030s, as carbon capture scales up, briny aquifers will be an excellent place for us to put CO2. By the time we have moved from old wells to untouched aquifers, we’ll have an solid grasp on the behavior of CO2 in the briny deep because we’ll have dealt with similar situations in the old wells. By then there will probably be a whole sub-profession within geology that deals with the interaction between different types of briny water, rocks, and and CO2.

We might call these future storage professionals Plume Engineers, because tracking the paths the CO2 takes through the cavern, known as plumes, will be the trickiest part of storing CO2 in aquifers. Some plumes will be simple. For example, in some aquifers the CO2 will dissolve into the briny water, making the heavier CO2 infused water drift to the bottom of the aquifer. This circulates more water to the top of the aquifer to take on more CO2.

Other plumes will behave in more complex ways, depending on their exact chemistry, geology, pressure differentials, and shape of the cavern. A plume may go sideways into capillaries that are parallel to the pipe, or up into pockets above the cavern called catchment areas. Whatever paths the CO2 takes, it should be continually monitored and storage plans may change based on where the primary plumes are in the cavern.

BASALT FORMATIONS

After lava comes flowing out of volcanos, it interacts with the atmosphere and begins to cool off. With Earth’s atmosphere (and Earth’s magma), this interaction creates a rock known as basalt, which is full of many little air pockets:

Basalt storage involves filling those air pockets with liquid carbon dioxide. What makes this approach so exciting is that the CO2 will solidify and become part of the rock itself, a process known as mineralization. Carbfix, a company that has pumped almost 100,000 tons of CO2 into basalt formations, has a great primer on this process:

Carbonated water is acidic. The more carbon you can pack into water, the more acidic the fluid will become. Carbfix's carbonated water reacts with rocks underground and releases available cations such as calcium, magnesium and iron into the water stream. Over time, these elements combine with the dissolved CO2 and form carbonates filling up the empty space (pores) within the rocks.

So water erodes the rock and pulls off elements that naturally combine with CO2 to form carbonates. These are very sticky, and fuse into the basalt pores.

This approach is has folks excited for many reasons:

• CO2 fuses with basalt much faster than early models predicted

• CO2 (in the form of carbonates) is stored for thousands of years with virtually no chance of breaking out

• The basalt + carbonate is stronger than basalt on its own. This makes the formation more stable, a bit like re-pressurizing old oil wells

• Learning how mineralization works at scale is useful because it will have other applications, like infusing CO2 into cement

ALL THE OPTIONS

While it’s tempting to rank these storage options from best to worst, that’s actually not useful. What we really want is many storage options — they all have their advantages, and we should learn how to scale all of them.

One really great thing about having many options for storing CO2 is that these different geologic formations — old O&G wells, aquifers, and basalt fields — are spread out in different parts of the world. As we’ll see next week, that means that just about every part of the globe has access to storage, which will make it easier to scale up carbon capture.

The opinions in this article are my own and do not reflect the position of my employer, Bain & Company