Direct Air Capture Industry Expands 873% Despite Federal Cuts

Carbon capture technology attracts $2.3 billion in private investment as global capacity surges nearly tenfold despite federal setbacks

Three Key Facts

• Global DAC capacity surges 873% from 59,000 tCO₂/year in 2024 to 569,000 tCO₂/year in 2025, marking rapid industry acceleration
• $2.3 billion invested in DAC firms represents 30% of total private equity investments in carbon dioxide removal, with 78 buyers securing 2.5 million tons of CO₂ offtake agreements
• US federal support retreats $3.7 billion as Department of Energy cancels suite of decarbonization technology demonstrations this month, including carbon capture initiatives

Introduction

The direct air carbon capture industry reaches a pivotal inflection point as global capacity expands nearly ninefold while US federal backing diminishes. This month, the Department of Energy cancelled $3.7 billion in decarbonization technology demonstrations, creating uncertainty for American DAC developers.

Despite federal policy headwinds, the sector attracts substantial private investment and corporate demand. DAC technology extracts carbon dioxide directly from ambient air, offering a critical tool for achieving net-zero emissions targets across industries struggling with hard-to-abate emissions.

The technology’s commercial viability now hinges on cost reduction and permanent storage solutions, with mineralization emerging as the preferred method for long-term carbon sequestration.

Key Developments

Swiss startup Climeworks demonstrates the sector’s maturation with its “Mammoth” facility at Iceland’s Hellisheiði Geothermal Park. The installation represents a significant scale-up from the company’s pilot project, utilizing geothermal energy for carbon capture operations and basalt rock formations for permanent mineralization.

The facility operates through an injection well managed by Carbfix, eliminating the need for extensive pipeline infrastructure. This integrated approach addresses logistical challenges that plagued earlier projects like the $1 billion “FutureGen” initiative.

Industry momentum builds through diverse technological approaches, with 165 DAC developers pursuing various capture and storage methods. Three major projects enter construction phases, with facilities expected online throughout 2024 and 2025.

Mineralization technology gains prominence as the preferred storage solution. The process involves injecting captured CO₂ into igneous and metamorphic rock formations, where it permanently converts to stable minerals through natural chemical reactions.

Market Impact

The DAC market commands significant valuation growth, with estimates ranging from $97.56 million to $2.81 billion in 2024 depending on measurement criteria. Projections indicate compound annual growth rates between 13% and 61.15% through 2030.

Carbon credit pricing reflects the technology’s premium positioning, with DAC credits averaging $443.28 per ton of CO₂. This premium compensates for the technology’s permanence and verification advantages over nature-based solutions.

Corporate adoption accelerates as companies including Morgan Stanley, TikTok, and Mitsui OSK secure offtake agreements with Climeworks. These partnerships provide revenue certainty for DAC operators while enabling corporations to meet net-zero commitments.

Investment flows concentrate in the sector, with private equity allocating 30% of carbon removal investments to DAC companies. Government incentives, including the US 45Q tax credit, enhance project economics despite recent federal program cancellations.

Strategic Insights

Cost reduction emerges as the critical factor determining mass market adoption. Current DAC costs range from $250 to $600 per ton of CO₂, but industry targets focus on achieving sub-$100 pricing to unlock broader commercial viability.

Energy efficiency improvements drive operational cost reductions, with facilities increasingly powered by renewable energy sources. This integration reduces both operational expenses and the carbon footprint of DAC operations.

Permanent storage through mineralization differentiates DAC from temporary carbon solutions. CleanTechnica analysis indicates this approach addresses concerns over long-term storage security that have hindered underground sequestration projects.

Geographic advantages favor locations with suitable geology and renewable energy access. Iceland’s combination of basalt formations and geothermal energy creates optimal conditions for integrated DAC-mineralization operations.

Expert Opinions and Data

The Intergovernmental Panel on Climate Change recognized direct air capture as complementary technology supporting broader climate management measures in its 2018 assessment. This endorsement provides regulatory foundation for industry development.

The US Geological Survey estimates underground storage capacity at up to 3,000 metric gigatons of carbon dioxide, though previous projects faced economic and logistical challenges. Mineralization approaches circumvent these obstacles through permanent conversion rather than containment.

Breakthrough Energy’s Catalyst programme and X-Prize initiatives catalyze innovation through targeted funding and competitive frameworks. These programs accelerate technological development and commercialization timelines.

Industry data reveals 30 DAC developers have secured offtake agreements totaling 2.5 million tons of CO₂ with 78 unique buyers. This market validation demonstrates growing corporate demand for verifiable carbon removal solutions.

Conclusion

Direct air carbon capture transitions from experimental technology to commercial reality, driven by substantial private investment and corporate adoption despite reduced federal support. The sector’s rapid capacity expansion and focus on permanent mineralization storage positions DAC as a viable solution for hard-to-abate emissions.

Cost reduction remains the primary challenge, with industry efforts concentrated on achieving sub-$100 per ton pricing through energy efficiency improvements and technological innovation. Success in this endeavor will determine whether DAC achieves mass market adoption or remains a premium carbon removal solution.