3 ways to protect carbon removal in its decisive moment
"One thing hasn't changed, and that's the need to get to work"
From fading political support to limited buyers to spooked funders, the carbon removal industry is facing difficult times. To increase the odds of survival, stakeholders in the space will need to discover and leverage non-climate benefits, find the right political messaging, and engage in lean business practices. Simultaneously pursuing each of these pillars will help CDR become more resilient and find allies who can help protect gains and enable progress.
Perilous Times
There is no denying it: the carbon dioxide removal (CDR) industry and society in general are facing an increasingly difficult political and economic situation. While climate tech has been classified by some as a long-term bull market, there are numerous warning signs and doomsayers using words like “winter” and “consolidation.” Many federally funded projects are currently facing uncertain futures, and lawsuits are flying. The U.S. Department of Energy probationary layoffs, in which I was personally affected, could be just an early signal of many more painful cuts and issues to come.
Those in the carbon dioxide removal community know that we have no choice but to continue promoting carbon removal and scaling our technologies for the good of the climate but also for all the other economic and social benefits that CDR can provide. Any progress lost now also translates to more daunting year-over-year growth requirements down the line.
Companies, NGOs, and concerned citizens are scrambling to strategize and position themselves appropriately to protect progress to date, continue advancing CDR where possible, and prevent the unnecessary loss of personnel or innovations that would have survived under normal circumstances and are necessary to enable further growth. We probably should have been working on such strategies for the past year in anticipation of tougher times. Regardless, we now find ourselves in a decisive moment where our individual and collective actions could determine whether CDR becomes a serious global industry or remains a fringe area of climate tech.
After numerous discussions and some deep reflection, I settled on three pillars that CDR companies and other stakeholders should pursue to protect the industry. If we are smart and a bit lucky, these actions may also make carbon removal more resilient and resistant to shocks going forward.
1. Lean Into Non-Climate Benefits
Non-climate benefits of CDR processes may be the most important topic within carbon removal right now. They have implications for the core definition of CDR (as it relates to system boundaries), financial additionality, and the political, economic, and social viability of the industry. There is significant complexity involved in these topics, and there may be cases where science and the precautionary principle are at loggerheads with economic realities and realpolitik.
These benefits can be loosely classified into four areas. There may be overlaps and missing aspects in this conceptualization.
Job Creation and Economic Growth: One of the key benefits of CDR is the creation of meaningful jobs with a focus on manufacturing and plant operation, both directly at facilities and indirectly throughout the value chain. Putting tangible co-products aside, CDR credits can be easily be sold across the country and world to enable revenues and GDP growth via domestic consumption or export.
Industrial Integration: CDR pathways are tremendously diverse and touch a wide range of industries and sectors including energy, steel, concrete, chemicals, mining, manufacturing, agriculture, forestry, water treatment, and even data centers. More CDR could mean more jobs, opportunities, efficiencies, and ideally revenues in these industries. Leaning into intersections with hot areas like critical minerals through mineralization pathways and AI data centers through waste heat utilization and cooling provision could be especially powerful. Notably, the Carbon Removal Alliance recently featured this concept in their high-level roadmap for catalyzing CDR.
Energy Security/Abundance/Dominance: CDR processes can complement, rather than detract from, the energy industry. Key examples are bioenergy with carbon capture and storage, hydrogen co-production, advancement of technologies compatible with biofuels and e-fuels, provision of new demand sources for renewable or fossil energy, and enhanced oil and methane recovery. CDR is also necessary for enabling net-zero operation of certain legacy transportation and energy systems that may entail residual emissions, such as aviation or point-source carbon capture systems that capture less than 100% of the CO2 generated.
National Security and Competitiveness: There are some (admittedly niche) defense applications for CDR technologies as discussed in Carbon-Based Commentary’s prior piece on carbon security. These include distributed fuel production with direct air capture, advances in metal organic frameworks, production of graphite, and surveillance with oceanic monitoring, reporting, and verification systems. Direct defense applications aside, China has blown past the U.S. in terms of production of solar cells, batteries, and electric vehicles—dubbed the “New Three” technologies that will promote high-quality economic growth in the country—and the U.S. seriously needs to ask if we want CDR to go this way as well.
Many of these benefits are manifested as co-products or co-benefits. Examples include having a CDR process that also produces low-carbon hydrogen or remediates toxic alkaline waste. Some CDR developers will argue that their processes do not inherently offer such benefits. While I firmly believe, perhaps obnoxiously, that we need to apply the “all-of-the-above” thinking that folks love in the energy world to CDR in a way that advances all processes regardless of co-benefits to achieve ambitious scaling goals, CDR developers that do not actively seek these benefits now may find themselves at a serious disadvantage.
Leaning into non-climate benefits can entail a new way of thinking, especially for pure-play CDR companies, but it is one that carries significant rewards. Investors respond positively to operations with additional revenue streams that are less dependent on volatile voluntary or compliance carbon markets. Buyers may be pleased with marketing benefits derived from process co-benefits to local communities in which projects are operating. Communities may appreciate benefits above and beyond job creation. Corporate partners may be more excited to offer assistance and resources if there is more in it for them in terms of integration and additional revenue. And so on.
Strategically crafting processes from the beginning to be supportive of more stakeholders and more entangled in the economy will make them more resilient and win more allies who can provide support through challenging times. Additional work is still required to resolve key questions on system boundaries and financial additionality, and solutions that bridge gaps, like pay-for-practice and insetting, will likely mirror the extent of underlying nuances. Those across the space may find themselves more on the permissive side of the spectrum as the desperation to keep CDR alive sinks in. Despite this, maintaining high quality, transparency, and scientific rigor remain paramount given that the industry is based on trust.
2. Use Proper Political Messaging
The month after the new presidential administration in the U.S. came into power, a Loan Programs Office loan for a sustainable aviation fuel refinery in Montana was approved despite widespread freezes and delays across DOE. Based on reporting from Canary Media, this was possible due to advocacy from one of Montana’s Republican senators. It is likely not a coincidence that this senator, Steve Daines, sits on the Senate Committee on Energy and Natural Resources.
It is not clear if this tactic will be completely generalizable, but finding the right messengers who have sway with the new administration can’t hurt. Gaining the trust and support of such messengers will require adjustments to framings (e.g., “American scientific and industrial leadership”) and actions. Despite media narratives to the contrary, no political party is a monolith. Politicians around the country at local, state, and federal levels have all manner of different concerns, and it is incumbent on those seeking assistance to understand what those needs are and how their projects or companies could help address them.
Skilled government relations firms and trade groups can be quite helpful in helping navigate these dynamics, especially given the numerous sensitivities inherent in politics and Washington culture. Direct contact and establishment of personal relationships with staffers without intermediaries can also be helpful and even come across as more authentic. When interacting with politicians at any level, it is best to come prepared, approach the conversation in good faith, have a concise message and set of asks, and balance one’s desires as a constituent with tactical proposals for how a given project might be able to help the politician achieve their stated goals. Engaging with career staffers and new leadership at offices within DOE and other relevant federal agencies should be part of this strategy as well.
If done properly, this kind of engagement may help protect existing funding, create new funding opportunities, or simply reduce the probability of bans and moratoria that have been popping up around the carbon world. Considering funding pauses and uncertainty for new funding opportunities, a prudent strategy is to apply for new funding, assuming it does not require a disproportionate amount of effort, but ensure that the survival of the company or even project does not hinge on receiving it.
There are political realities that simply will not be overcome in the near term, such as passing the Carbon Dioxide Removal Investment Act/45BB tax credit in this Congress, and it is best to not waste time or get one’s hopes up for proposals that are highly improbable if not outright impossible. With that said, there are tactical reasons to introduce legislation or seed ideas even if they won’t pass now.
In any of this work, it is important to balance gaining support with not becoming a target and with not alienating key parties, i.e., the left, which will be key to the long-term success of CDR. Pulling this off successfully will involve walking a vanishingly small tightrope.
3. Engage in Lean Business Practices
The classic cliché “when the going gets tough, the tough get going” applies here. Depending on how old you are, the more modern “grindset” meme may as well.
Credit buyers and investors could be getting spooked by the broader political situation. Philanthropists, like Breakthrough, are stepping back. Greenhushing is a thing. Preserving cashflow is key for young companies to not become insolvent, and long runways may be required to survive the tough years ahead.
We are fortunate that CDR has recently seen some substantial raises, such as Spiritus’s $30M Series A and Capture6’s $27.5M Series A, which should provide some of this runway. If there is miraculously some cash available for M&A activity, then some innovations and personnel may be able to be preserved through planned consolidation of companies. While not necessarily driven by hardship, the recent acquisition of ReCarbn by Skytree could be a good example of this.
If additional raises and M&A are not possible, then organizations will need to protect themselves through good old-fashioned frugality and smart business practices. This might look like establishing an internal culture of frugality and eliminating non-critical expenditures, even if there are millions of dollars in the bank, as long as it does not detract from broader company goals. Preserving cash flow by paying suppliers as late as socially permissible but getting paid as soon as possible can help minimize the risk of a shortfall when applied across all transactions.
Cash can also be preserved by only making hires that are absolutely necessary to drive core near-term and medium-term KPIs. Investing in existing talent to prevent critical deficiencies at pivotal moments is just as important. Getting creative with business models, as discussed above, and being ready to adapt to rapidly changing conditions and funding landscapes will also help.
Above all else, grinding for investment and sales will be key. This will be a stressful time for CEOs and business development teams. Mentally preparing and focusing on mental health will be key to making it through. Organizations will depend on champions among their buyers and investors to make it through, and gaining and maintaining these through personal relationships is paramount. In exchange for this support, demonstrating tangible progress is expected. At least for DAC, some folks are now calling this the “show me” phase.
I have noted to several folks that “the party’s over.” We have overindulged on bonbons. If the industry can come together and be lean for a while, then maybe we will earn another snack time.
Call to Action
These pillars overlap in various ways. If CDR companies can be leaner and gain sufficient revenues from co-products, then additional public funding may not be quite as fundamental in the near term. Ironically, successfully finding and promoting non-climate benefits of a process may assist in the political angle. Stakeholders across the industry must seek ways to enact these pillars simultaneously and in a complementary fashion.
If the CDR industry can survive the tough times over the next few years, then hopefully it will be able to make it through anything. One thing hasn’t changed, and that’s the need to get to work.
Well written, Grant!