The carbon capture, usage, and storage (CCUS) industry aims to remove carbon from the air and either store it underground or convert it into useful products from fuel to fertilizer to concrete. The technology has received a pittance from investors compared to renewable energy or electric vehicles. It also remains contentious among some climate change experts activists who have called it a “scam,” “boondoggle,” or a “dangerous distraction” promoted by oil and gas companies resisting the replacement of fossil fuels.
But after years of projects that failing to meet expectations, April is shaping up to be the best month on record for the technology.
On April 4, the UN’s main climate body forcefully defended the need for CCUS in its latest climate report. “Carbon dioxide removal is essential to achieve net zero” greenhouse emissions, said Diána Ürge-Vorsatz, vice-chair of the group that wrote the report, on a call with reporters. Over the following two weeks, private investors pledged nearly $2 billion to fund carbon capture startups or buy carbon capture credits. By contrast, last year the biggest buyer of carbon capture credits Stripe spent just $15 million on carbon removal while CCUS startups raised $2.3 billion over the entire year.
Over the next decade, the $2 billion pledged for CCUS projects this month are expected to remove millions of tons of carbon from the atmosphere, which is a fraction of the 10 billion tons of carbon a year the National Academy of Sciences estimates we’ll need to remove by 2050 to meet UN climate goals. But even though these investments won’t directly remove much carbon, they can have a big impact by helping early-stage startups develop their technology, bring down their costs, and develop a more viable market for carbon capture.
On April 5, Swiss carbon capture startup Climeworks announced it had raised $650 million from investors—the biggest funding round ever raised by a carbon capture company. Climeworks runs the world’s biggest direct-air capture plant, which sucks 4,000 tons of carbon out of the atmosphere each year and injects it deep into the ground in Iceland. The startup said it will use the money it raised to build a new plant capable of removing 40,000 tons of carbon a year.
On April 12, tech companies including Stripe, Alphabet, Meta, and Shopify announced they would buy $925 million worth of carbon removal offsets over the next eight years. The companies will invest the money in a Stripe-owned company called Frontier, which will use the cash to buy offsets from promising CCUS startups. Taken together, the Frontier commitment represents the biggest carbon removal purchase ever.
On April 14, the venture capital firm Lowercarbon Capital announced it had raised a $350 million fund, which it would invest exclusively in carbon capture startups.
The biggest impact of these investments won’t be the amount of carbon they capture, but the effect they have on carbon capture prices. The cost of CCUS varies widely, depending on whether a project aims to extract carbon from a pollution source such as the smokestack of a natural gas plant, or whether it aims to capture carbon from the atmosphere, where carbon dioxide exists in much lower concentrations. But one thing is broadly true about all carbon capture schemes: They’re still too expensive to be commercially viable.
As carbon capture companies scale up their operations and improve their technology, projected costs are falling. For example, the first large-scale CCUS system at a coal plant—the Boundary Dam project, installed in Canada in 2014—promised to remove carbon at a price of $110 per metric ton. The second such project, the Petra Nova system installed in the US in 2017, brought the price down 35% to $65 per metric ton.
Petra Nova shut down in 2020 after capturing a fraction of the carbon emissions it promised to and suffering frequent outages. The project was supposed to make money by selling captured carbon to oil companies to help them improve their drilling operations, but when oil prices fell at the start of the pandemic, the business collapsed.
To avoid the worst impacts of climate change, CCUS startups will have to improve the reliability of their technology and bring costs down even further.