MIT Technology Review’s What’s Next series explores various industries, trends, and technologies to provide an initial glimpse into the future. You can peruse the remainder of the series here.
In the early 2020s, a relatively obscure aquaculture firm in Portland, Maine, secured over $50 million by proposing a strategy to utilize nature to counteract climate change. The firm, Running Tide, claimed it could submerge sufficient kelp to the ocean floor to capture a billion tons of carbon dioxide by this year, according to one of its initial clients.
However, the business ceased its operations last summer, representing the largest failure thus far in the emerging carbon removal industry.
Its closure was the clearest indication of increasing difficulties and diminishing hopes for a sector that has generated hundreds of startups in recent years. Several other firms have also closed down, downsized, or shifted strategies lately. Investment from ventures has waned. Meanwhile, the overall industry hasn’t achieved substantial progress toward that billion-ton goal.
The excitement phase has ended and the sector is sliding into the challenging business trough that follows, cautions Robert Höglund, cofounder of CDR.fyi, a public-benefit organization delivering data and analysis on the carbon removal field.
“We’re beyond the peak expectations,” he remarks. “And with that, we might witness numerous companies go out of business, which is typical for any sector.”
The unresolved question is: If the carbon removal industry is entering a difficult but unavoidable consolidation phase, what will follow?
The peculiar aspect of carbon removal is that it has never been a highly rational business concept: It involves atmospheric cleaning, essential for the broader societal objective of combating climate change. Yet, it does not generate a service or product that either individuals or organizations strictly require—or are particularly keen to finance.
So far, several businesses have voluntarily engaged to purchase tons of carbon dioxide that firms plan to eventually extract from the atmosphere. However, whether they are driven by genuine climate concerns or pressures from investors, workers, or consumers, corporate altruism will only push an industry so far.
Most analysts contend that the future of carbon removal, whether it drifts along or grows into a substantial force in mitigating climate change, hinges greatly on whether governments globally opt to fund an enormous amount—or compel polluters to do so.
“Private-sector procurements will never achieve the goal,” asserts Erin Burns, executive director of Carbon180, a nonprofit that advocates for carbon capture and reuse. “We require policy; policy is essential.”
What’s the issue?
The carbon removal industry commenced scaling up in the early years of this decade, driven by escalating climate studies emphasizing the necessity to significantly reduce emissions and absorb vast quantities of carbon dioxide to maintain global warming in check.
Specifically, nations may need to continuously eliminate up to 11 billion tons of carbon dioxide annually by around mid-century to have a viable chance of preventing the planet from exceeding a 2 °C rise above pre-industrial levels, according to a UN climate panel report in 2022.
A plethora of startups emerged to initiate technology development and construct the infrastructure needed, experimenting with varying methods such as submerging seaweed or establishing carbon-dioxide-sucking plants.
They quickly drew in clients. Companies like Stripe, Google, Shopify, Microsoft, and others started agreeing to pre-purchase tons of carbon removal, aiming to bolster the fledgling sector and mitigate their own climate emissions. Venture funding also surged into the area, peaking in 2023 at close to $1 billion, as per data provided by PitchBook.
From the outset, participants in the emerging field aimed to create a clear distinction between traditional carbon offset initiatives, which research indicates often exaggerate climate advantages, and “durable” carbon removal that can be trusted to absorb and securely store the greenhouse gas for extended periods. There’s undeniably a significant price disparity: While procuring carbon offsets through projects that promise forest conservation or tree planting may cost a few dollars per ton, a ton of carbon removal could range from hundreds to thousands of dollars, depending on the methodology.
That elevated price presents substantial obstacles. Eliminating 10 billion tons of carbon dioxide yearly at, for instance, $300 a ton translates to a staggering global expense of $3 trillion annually.
This brings us back to the essential inquiry: Who should or would pay the costs to establish and maintain all the factories, pipelines, and wells necessary to capture, transport, and sequester billions upon billions of tons of carbon dioxide?
Market status
The market continues to expand, as firms voluntarily acquire tons of carbon removal as part of their climate initiatives. Indeed, sales hit an unprecedented high in the second quarter of this year, primarily due to several substantial purchases by Microsoft.
However, industry insiders worry that demand isn’t escalating swiftly enough to sustain a considerable proportion of the startups that have emerged or even the initiatives currently in progress, jeopardizing the momentum needed to scale the industry to the necessary size by mid-century.
So far, the numerous companies that have emerged in recent years have reported deals to sell approximately 38 million tons of carbon dioxide extracted from the atmosphere, according to CDR.fyi. That amount is roughly equal to the carbon emissions generated by the US every three days.
And they have only managed to deliver around 940,000 tons of carbon removal. The US emits that equivalent of carbon dioxide in less than two hours. (Not every transaction is publicly disclosed or made known to CDR.fyi, so the actual figures may be somewhat higher.)
Another concern is that a limited number of major players continue to represent the bulk of overall purchases, leaving the stability and trajectory of the market reliant on their decisions and fortunes.
Notably, Microsoft has committed to acquiring 80% of all the carbon removal obtained to date, as per CDR.fyi. The second-largest purchaser is Frontier, a coalition consisting of companies such as Google, Meta, Stripe, and Shopify, pledging to invest $1 billion.
MIT Technology Review by CDR.fyi.
Indicators of distress
Meanwhile, the enthusiasm from investors regarding carbon removal is waning. For the 12-month period ending in the second quarter of 2025, venture capital investments in the sector plummeted more than 13% compared to the same timeframe last year, based on information provided by PitchBook. This tightening of funding will increasingly challenge companies that aren’t generating revenue to survive.
Other organizations that have already ceased operations include the carbon removal marketplace Nori, the direct air capture company Noya, and Alkali Earth, which aimed to utilize industrial by-products to capture carbon dioxide.
Moreover, other firms are facing challenges. Climeworks, one of the earliest companies to establish direct-air-capture (DAC) facilities, announced it would be laying off 10% of its workforce in May, as it confronts obstacles on multiple fronts.
The company’s ambitions to partner in the creation of a significant facility in the US have been at least postponed as the Trump administration has withheld tens of millions of dollars in funds allocated in 2023 under the Department of Energy’s Regional Direct Air Capture Hubs initiative. It now seems the government might revoke the funding outright, alongside potentially tens of billions of dollars worth of additional grants previously designated for various other US carbon removal and climate technology projects.
“Market speculation has emerged, and Climeworks is preparing for all eventualities,” stated Christoph Gebald, one of the company’s co-CEOs, in a prior statement to MIT Technology Review. “The demand for DAC is escalating as the world falls short of its climate objectives, and we’re striving to reach the gigaton capacity that will be required.”
Nonetheless, acquisitions from direct-air-capture projects declined nearly 16% last year and account for merely 8% of all carbon removal transactions to date. Purchasers are increasingly leaning towards categories that promise quicker and cheaper results, particularly including biochar burial or installing carbon capture technology at bioenergy facilities. (For more information, read about this carbon removal approach known as BECCS, here.)
CDR.fyi recently characterized the atmosphere for direct air capture pessimistically: “The sector has expanded rapidly, but the initial excitement is gone: Investments and sales are declining, while implementation is postponed across nearly every company.”
“Most DAC firms,” the organization remarked, “will either fail or be acquired.”
What lies ahead?
Ultimately, most analysts agree that carbon removal isn’t likely to gain significant traction unless governments exert their influence and regulations. This could involve making direct purchases, subsidizing these sectors, or compelling polluters to bear the costs—for example, by integrating carbon removal into market-based emissions reduction frameworks like cap-and-trade systems.
Increased governmental backing seems to be forthcoming. For instance, the European Commission recently suggested permitting “domestic carbon removal” within its EU Emissions Trading System post-2030, incorporating the sector into one of the largest cap-and-trade systems. The framework mandates power plants and other polluters in member states to progressively reduce their emissions or financially compensate for them over time, as pollution caps become stricter and the price of carbon increases.
This could incentivize additional European firms to invest in direct-air-capture or bioenergy facilities to reduce carbon dioxide as a strategy for fulfilling their climate responsibilities.
There are also signs that the International Civil Aviation Organization, a UN body that sets standards for the aviation sector, is contemplating the inclusion of carbon removal into its market-driven mechanism for diminishing the industry’s emissions. This could take various forms, including permitting airlines to acquire carbon removal to counterbalance their conventional jet fuel consumption or mandating the use of carbon dioxide sourced through direct air capture in a portion of sustainable aviation fuels.
In addition, Canada has vowed to allocate $10 million for carbon removal and is formulating a protocol to facilitate direct air capture in its national offsets initiative. Additionally, Japan plans to integrate several categories of carbon removal in its emissions trading framework.
Despite the prior administration’s attempts to retract funding for carbon capture projects, the US continues to support carbon dioxide storage, whether sourced from power stations, ethanol plants, direct-air capture systems, or other facilities. The so-called 45Q tax credit, valued at up to $180 per ton, was among the scant forms of governmental support for climate tech sectors retained in the 2025 budget reconciliation legislation. In fact, subsidies aimed at utilizing carbon dioxide for other applications increased.
Even amid the current political landscape in the US, Burns remains optimistic that local or federal lawmakers will persist in creating policies that promote select types of carbon removal in regions where they are most beneficial, as these projects can foster economic advancement and job creation in addition to their climate advantages.
“I genuinely believe there are numerous models for how carbon removal policies can be structured that go beyond mere tax incentives,” she asserts. “Moreover, I think this particular political situation provides a rare opportunity to examine what those regionally tailored and pathway-specific policies might resemble.”
The challenges ahead
However, even if more countries allocate funds or implement regulations necessary to propel the durable carbon removal industry forward, there are escalating worries that a sector conceived as an alternative to questionable offset markets could begin to mirror their issues.
Compelling incentives are directing the industry in that direction.
Financial stress is increasing on suppliers to deliver carbon removal quantities. Corporate clients are pursuing the swiftest and most economical means to achieve their climate objectives. Furthermore, organizations that establish standards and accredit carbon removal projects often profit more as purchase volumes rise, creating evident conflicts of interest.
Some of the same carbon registries that have long endorsed carbon offset initiatives have begun to establish standards or award credits for various forms of carbon removal, including Verra and Gold Standard.
“Trustworthy assurance that a project’s stated carbon savings equate to a real reduction, elimination, or prevention of emissions is vital,” remarked Cynthia Giles, a senior advisor to the EPA under President Biden, together with Cary Coglianese, a law scholar at the University of Pennsylvania, in a recent opinion piece in Science. “However, extensive studies across various contexts show that auditors chosen and compensated by the organizations being audited often yield results skewed to benefit those entities.”
Noah McQueen, the head of science and innovation at Carbon180, has emphasized the imperative for the industry to address mounting credibility challenges, noting in a recent LinkedIn post: “Growth is important, but growth without integrity is not growth at all.”
In a discussion, McQueen indicated that resolving this dilemma would necessitate developing and enforcing standards to genuinely ensure that carbon removal projects deliver the environmental benefits promised. He added that to build trust, the industry must gain support from the local communities where these projects are implemented and avoid the environmental and health repercussions that power generation and heavy industry have historically imposed on marginalized populations.
Achieving success will demand that governments play a more significant role in the sector than solely providing subsidies, contends David Ho, a professor at the University of Hawaiʻi at Mānoa, who specializes in ocean-based carbon removal.
According to him, there should be an extensive, multinational research initiative to identify the most efficient methods for capturing atmospheric carbon with minimal environmental or social detriment, comparing it to a Manhattan Project (minus the nuclear components).
“If we are committed to addressing this, let’s make it a government endeavor,” he asserts, “so we can test all possibilities, determine what is effective and what is not, without the pressure to satisfy your venture capitalists or focus on developing [intellectual property] to sell yourself to a fossil fuel firm.”
Ho emphasizes a moral responsibility for the world’s historically largest climate polluters to construct and finance the carbon capture and storage framework required to reduce billions of tons of greenhouse gases. This is vital because the poorest and hottest nations, which have contributed the least to climate change, will still encounter the most severe consequences from worsening heatwaves, droughts, famines, and rising sea levels.
“It should be regarded as waste management for the waste we plan to impose on the Global South,” he argues, “as they are the people who will endure the greatest hardships due to climate change.”
Correction (October 24): An earlier version of this article referred to Noya as a carbon removal marketplace. It was a direct air capture company.
