In 2024, the carbon removal industry experienced maturation on nearly every front: technologies progressed and some costs came down. New buyers entered the market, showcasing new purchasing models, various stakeholders went all in on standardizing MRV, and startups raked in private and public funding.
But of course, the industry also faced some serious setbacks and reality checks, as developers and buyers alike came to terms with just how soon 2030 emissions targets are coming due — and how far off carbon removal remains from IPCC targets.
Market evolutions
There’s no denying that the CDR industry has had a hard time expanding its buyers beyond the core group of major tech companies that have been its backbone to date. In fact, according to data collected by CDR.fyi, the number of new buyers entering the market is slowing down.
However, 2024 also saw efforts to diversify the market. The federal government made its first foray into the world of CDR purchasing, through the Department of Energy’s $25 million procurement pilot. (The fate of that program and others under a second Trump administration, however, remains uncertain.)
And as the usual tech companies continued to make purchases, they started getting creative with deal structure in ways that acknowledge their impending goal deadlines. For example, Microsoft’s “portfolio in a portfolio” deal with Deep Sky, and Google’s $100 per ton deal with Holocene.
Meanwhile, as in all sectors, artificial intelligence had a major impact, thanks to emissions increases related to data center usage. Morgan Stanley predicted in September that companies will have to up their CDR purchases 20-fold by 2030 in order to meet their decarbonization goals while keeping up in the AI race.
But the market is also expanding beyond the pure capture and storage model, into end uses across transportation and heavy industry. Both aviation and maritime companies are exploring fuels made with captured carbon dioxide. And industrial users are considering applications ranging from chemicals to concrete. (CarbonDirect lead Julio Friedmann said on an episode of the Catalyst podcast that he sees the latter as “a gigaton market”.)
Delivery reality checks
For most CDR pathways — but in particular for direct air capture and direct ocean capture — the learning curve to commercialization is proving steep. Even as projects around the world started to put steel in the ground, the stark gap between the industry’s current output and its mid-century ambitions were on full display.
In June, the buzzy marine carbon removal startup Running Tide went under, after both selling tons to Microsoft and Shopify, and landing a rare permit to test its process off the Icelandic coast. In the end, the company said, it couldn’t raise the $1 billion it needed to get out of the research and development stage and on to commercialization.
The company’s demise also highlighted a few of the industry’s biggest challenges: the high capital requirements for scaling novel approaches, the difficulty of proving new removal methods at commercial scale, and just how far the industry still has to go on measurement and trust building.
And even for those companies and organizations with plenty of cash, the path from demonstration to commercial scale remains treacherous.
Frontier, the advance market commitment led by Stripe, had a record year in terms of applications received for its pre-purchase and offtake tracks. But delivery of tons has yet to fully materialize. As of 2024, only a tiny fraction of the nearly 600,000 tons Frontier has contracted have been delivered. All 1,716 tons have come via Frontier’s pre-purchase track, and the vast majority of that from biomass-based approaches.
While the current delivery numbers are sobering, Frontier is expecting a significant ramp up in delivery over the next few years. As Frontier’s Hannah Bebbington put it to Latitude Media in September, “delivery is a muscle that we are learning how to flex, as are our suppliers.”
Expected, and unexpected setbacks
On the technology and development front, the CDR industry continued to face high prices — but there were also some less anticipated hurdles this year.
Climeworks is one of the earliest direct air capture companies, and is considered to be the furthest along the path to commercial scale. But the company is still struggling with price, despite showcasing meaningful tech progress when it unveiled its Mammoth facility in Iceland in August. Those improvements included a 20% reduction in capital costs per ton and a 90% carbon recovery rate compared to Orca, Mammoth’s predecessor plant, CFO Andreas Aepli said in an interview on Catalyst.
Listen to Andreas Aepli’s entire interview on Catalyst:
But building Mammoth still cost “low triple-digit millions” and the plant’s removal costs are still near $1,000 per ton.
And carbon removal may also be bumping up against a challenge that goes beyond how much cash they can raise: some projects are competing with data centers for clean power.
Project Bison, the world’s largest planned DAC project, was put on pause this summer after its developer CarbonCapture was unable to secure enough electricity. That was due, CEO Adrian Corless wrote at the time, to “intense competition from data centers.”
The company initially believed they’d have access to several hundred megawatts by 2027, VP of business development Patricia Loria told Latitude Media. A further interconnection study changed that timeline to 2030, with the need to build out expensive substations and transmission. “That’s when, for us, it just didn’t make sense to stay there,” Loria said.
It’s an ironic tension that may well play out in 2025: as their AI-driven emissions increase, the hyperscalers who have traditionally supported the carbon removal industry may well have to buy even more tons in order to meet their stated climate goals. But tons available for delivery are still limited, and power-hungry AI data centers may make it harder for carbon removal projects to expand.
Kajsa Hendrickson, director of policy at Carbon180, said most CDR startups are currently focused on project finance first, and everything else, including access to power, second. But that’s a priority list that may well shift, she added, as the power problem becomes more acute.
It’s a state of affairs that puts startups hoping to scale at risk, but also puts Microsoft and other buyers “in a bit of a pickle,” Henderson said. “It’s a pickle that we’re going to have to have regulation for, and have to work out at the federal level to address, because that’s not something companies are generally incentivized to make a decision on.”
