After four years of unprecedented federal support, the budding carbon removal industry faces a critical test of its staying power. 

The sector has grown dramatically under the Biden administration, with hundreds of new startups entering the market, and billions of dollars in public and private investment. Recent weeks have seen evidence of that momentum: Heirloom raised $150 million in private capital. Salesforce signed a $5 million deal to buy carbon removal via Swedish CDR platform Milkywire. Google is buying 200,000 tons of removal via enhanced rock weathering, and Microsoft announced a first-of-a-kind buying strategy.

Many CDR developers are young enough that they have only ever known the highly supportive policy world of the last four years. But as a second Trump administration draws nearer, developers and buyers alike are about to navigate new and more complex operating conditions.

While key tax incentives appear secure, industry leaders and experts worry that newer federal programs crucial for scaling the technology could slow or stall in coming years. A slow-down, the fear is, could potentially hamper efforts to expand beyond a small pool of tech company buyers into a broader market.

It’s a “big test” for the carbon removal industry, explained Erin Burns, who leads the nonprofit organization Carbon180.

“The political coalitions that have gotten us this far, in a lot of ways are pretty untested,” Burns said. “Carbon removal was able to have all these political wins on other people’s coattails….People are broadly supportive of carbon removal, but it’s rarely people’s top priority.”. 

So moving into the next four years, Burns expects that the industry is going to experience “a bit of whiplash.” The key question now, she added, is whether policy wins secured in an exceedingly CDR-friendly climate can be translated into more durable political coalitions.

Federal program fates

Not all parts of the sector are equally vulnerable though. The companies for whom the next four years are most impactful, said Carbon Direct chief scientist Julio Friedmann, are those in the process of scaling from pilot to demonstration. 

“That’s the hard thing, and getting that risk capital for what is functionally a pre-commercial undertaking is very, very hard to do,” Friedmann said, pointing to the Direct Air Capture Hubs in particular. “They have a whole bunch of money from the government; great….Is that the same thing as final investment decision? No.”

Burns said the DAC Hubs program, which has $3.5 billion to help get DAC technologies to commercial scale, is her number one concern under the Trump administration. The program has already selected two massive projects to receive funding: Project Cypress, a collaboration between Climeworks and Heirloom in Louisiana, and the South Texas DAC Hub, led by Occidental subsidiary 1PointFive.

“This is something that has been so catalytic, and it’s super new,” Burns explained. “It’s really big, and a lot of the implementation lives with [the Office of Clean Energy Demonstrations], which is so new that I think it’s much easier politically to disband some of this.”

Jack Andreasen, who oversees Breakthrough Energy’s carbon management portfolio, said he’s less worried about the whole program being raked back than he is about the pace of promised dollars getting out the door.

“Rgardless of how an administration feels about an individual technology, you’re going to see a slowdown, because folks are going out, folks are coming in, and it takes time to ramp up and understand where programs are,” Andreasen said. Whether offices are appropriately staffed at all is another question: “If you don’t have people to run a program, no matter how bipartisan its support is, it’s not going to move in a timely manner.”

The real concern, he added, isn’t whether money is moving faster or slower than one administration intended. Instead, it’s “is it moving at the speed in which DAC companies need it to move to remain solvent?”

On the other end of the risk spectrum are the 45Q tax credit and research and development efforts, which all industry experts Latitude Media spoke to agreed are likely insulated from administration handovers. As Burns pointed out, authorization for the first ever carbon removal R&D programs happened in 2019, under the last Trump administration.

Buyers-side impacts

Somewhere in the middle of that risk scale is the Carbon Dioxide Removal Purchase Pilot Prize, which designates $35 million from the Bipartisan Infrastructure Law for the federal government to vet and purchase removal credits.

The impact of an administration change on that program is likely to be felt relatively quickly, Burns said, because of inevitable staffing changes.

“There’s so much flexibility around something like that, that who administers it matters,” she said. 

A key impact of the prize, beyond the companies receiving the relatively modest funding, was that it constituted due diligence for companies who don’t have the resources of Stripe or Microsoft. “We were all banking on an expansion of voluntary purchases there,” Burns said.

One of the industry’s core challenges remains its heavy reliance on a very small group of corporate buyers. Around 60 companies, primarily tech firms, make up the bulk of voluntary carbon removal purchases.

Despite the commitments of those companies, mid-century removal targets remain far off. According to a recent report by Carbon Direct, projected demand for 2030 currently sits at between 30 million and 50 million tons per year; less than 5% of the amount needed to hit IPCC scenarios.

Expanding beyond those core buyers is already proving challenging. According to data collected by CDR.fyi, the number of new buyers entering the market is slowing down. As co-founder Robert Höglund told Latitude Media, “the group of early-innovator buyers may be drying out, and the next group of CDR buyers won’t buy unless explicitly told so.”

And it’s unclear what, if any, federal policies incentivizing CDR purchasing the incoming administration will support.

Part of that challenge, added Burns, is that companies who don’t have the same public decarbonization goals as tech giants may not want to spend the immensely high prices currently required for durable carbon removal.”

"Are they going to be comfortable or have the appetite to spend $600 per ton…if no one’s making them?” asked Burns. “I don’t know.”

Opportunities for optimism

Though there are plenty of areas of potential concern, the industry is still hopeful about its trajectory in the coming years.

That’s thanks in large part to the “whole of government” approach to CDR taken by the Biden administration, Friedmann said. That approach has helped the industry “make the case to everybody inside and outside the U.S. that CDR is part of the solution set,” he said. “It allowed us to build international partnerships and coalitions that we might not have otherwise built.”

Andreason agreed.“If you see a less friendly CDR attitude in the United States, that investment is just going to go elsewhere,” he said. “Some of this is less an administration issue and more of an opportunity that other folks are also seizing on.”

Domestically, Friedmann points to bright spots like efforts to reform permitting processes, and what he describes as a Republican “bias to building things” — which could include CDR. 

There are also bipartisan efforts on the Hill. In November, for example, Senators Michael Bennet and Lisa Murkowski introduced the Carbon Dioxide Removal Investment Act, which would create a new production tax credit “designed to jumpstart the United States’ carbon dioxide removal industry.”

And of course, there’s the impact and role of the tech industry. Elon Musk himself has committed $100 million for a carbon removal prize, and early buyers like Google, Microsoft, and Meta are scrambling to mitigate increased emissions resulting from their AI ambitions. So while the overall number of buyers may not be growing as quickly as the industry would like, Friedmann said “the tech companies show no signs of slowing down [CDR purchases]."

In fact, those existing buyers are buying more — demand has grown by more than sixfold in the last two years, he noted.

“I think they have been surprised that their scope three emissions continue to go up because of [data center builds,]” he said. “But they’ve not been dismayed, and they’ve not retreated.” (In a separate conversation with Latitude Media, Microsoft declined to comment on whether it would purchase even more carbon removal in light of the AI boom.)

Top priorities under Trump 2.0

In the wake of the election, CDR companies are already working quickly to shore up as much support as possible, said Vikrum Aiyer, who leads policy efforts at Heirloom.

“We are all systems go,” he told Latitude Media. “The best thing that we can do is to…equip DOE nominee Chris Wright and EPA nominee [Lee Zeldin] with the resources and the support for them to understand…how investments in carbon management will amount to investments in America’s energy security.”

Heirloom’s knowledge sharing efforts will comprise a handful of different focuses. On the 45Q tax credits, Aiyer said that ensuring that carbon removal doesn’t get sacrificed in the scuffle around extending Trump tax credits will require lobbying the House Ways and Means Committee and the Senate Finance Committee, to “articulate the importance of it.” That said, Heirloom is confident in the staying power of the tax credit, he added.

On the DAC Hubs, for which Heirloom has been awarded up to $600 million for Project Cypress in Louisiana, the key will be how efficiently the program operates under a new administration, he said. (Only $50 million of that $600 million has been awarded.)

Heirloom is building in places like Shreveport, Louisiana — the district of House Speaker Mike Johnson — where the company is bringing hundreds of jobs, he added. “We’re going to be able to continue to defend that position in a new administration,” he said. “We have to educate [lawmakers], we have to work with them, we have to understand how our investment in these areas maps to their goals.”

Heirloom will also focus on state and local initiatives. “One impact [of a second Trump administration] is that state governments within the U.S. are going to get more active within this space,” Aiyer said.

He pointed to things like Calilfornia’s cap and trade mechanism, and a failed effort in Washington to repeal a tax on pollution. “That’s going to be a new frontier for the CDR industry, as to how demand gets generated and compelled by a state government outside of the private markets,” he said.

Burns, for her part, has a suggestion for CDR companies with lobbying budgets: the purchasing prize. “If I’m a carbon removal company and I’m thinking about where to lobby, getting the purchases out the door and getting that program in a good place is one of the top priorities for sure,” she said.

More broadly, it’s important for the CDR industry to avoid panicking and rushing to make itself “as palatable as possible to Republicans,” she added. “It’s difficult to navigate non-traditional political norms, but it also gives you interesting opportunities to build unlikely allies and coalitions.”

And Freidmann feels similarly: “This is not a sky is falling moment — the landscape will unquestionably change, but the fundamentals have not changed.”