Figure 1: CO2 capture by direct air capture, planned projects and in the Net Zero Scenario, 2020-2030. Graphic: IEA.

An inability to get global greenhouse gas (GHG) emissions under control since the signing of the Kyoto Protocol in December 1997 has put the planet behind the proverbial eight-ball.

As of now, if humankind is to limit global warning to 1.5 C above pre-industrial levels to avoid increasingly severe and potentially cataclysmic climate impacts, the consensus among climate scientists/forecasters is that large-scale carbon dioxide removal (CDR) like direct air capture (DAC) — for stored carbon and carbon-based uses, rather than carbon-neutral synthetic fuels — will be required.

DAC is the high hanging fruit among the three CDR options due to substantially higher costs than bioenergy with carbon capture and storage (BECCS) and nature-based solutions (NBS) such as planting trees. But given these two alternate options are capped by physical limitations, DAC is the one on the margin for removing CO2 from the atmosphere to achieve a net zero emissions trajectory.

It will be tough for the fledgling DAC industry to achieve the levels of capacity needed to thwart excessive climate change in the coming decades. Fortunately, the industry is at last achieving liftoff, largely due to government support, especially in the U.S.

In Part 1 of this multi-part series I will discuss the current state of the global DAC industry relative to potential need, the different technologies and their associated costs, and how America’s 2022 Inflation Reduction Act (IRA), building on previous government and private sector support, appears a gamechanger for DAC.

State of play

Based on modelling by the International Energy Agency (IEA) for its Net Zero Emissions by 2050 Scenario (NZE), DAC will need to remove almost 60 million tonnes per year (t/y) of CO2 emissions from the atmosphere by 2030 and a whopping 980 million t/y by 2050.

In contrast, as of last September, there were only 18 small-scale DAC plants with a combined capacity of less than 0.01 million t/y, according to Sara Budinis, an energy analyst at the IEA, in a report. And of these plants, only two were sequestering the CO2 they captured.

On the bright side, the first commercial scale DAC plant broke ground in the Permian Basin region of Texas in April, a 500,000 t/y project by 1PointFive, an arm of U.S. independent Occidental Petroleum, in partnership with Squamish, B.C.-based DAC technology heavyweight Carbon Engineering. The Notrees project is scheduled to come online in 2024.

“Plans for a total of eleven DAC facilities are now in advanced development,” says Budinis in the September 2022 IEA report. “If all of these planned projects were to go ahead, DAC deployment would reach around 5.5 million tonnes CO2 by 2030; this is more than 700 times today’s capture rate, but less than 10 per cent of the level of deployment needed to get on track with the Net Zero Scenario.” In addition, the IEA sees another 38.7 million t/y of DAC capacity in early stages of the development pipeline (see Figure 1).

“This level of deployment [60 million t/y] is within reach, but will require several more large-scale demonstration plants to refine the technology and reduce capture costs,” says Budinis.

Technologies and costs

On that note, there are two technological approaches currently being used to capture CO2 from the air, liquid and solid DAC (L-DAC and S-DAC, respectively), while emerging — and potentially revolutionary — technologies in relatively early stages of development include electro-swing adsorption (ESA) and membrane-based DAC (m-DAC), according to Budinis.

“S-DAC and L-DAC innovation efforts are mostly focused on innovative sorbents and solvents, and optimized processes and layouts” to improve efficiencies and bring down costs, she says.

Carbon Engineering uses a liquid chemical technology to capture CO2 from the air, which is regarded as well suited for large-scale DAC plants. In contrast, Zurich-based Climeworks, widely viewed as Carbon Engineering’s major competitor, uses a solid amine absorbent in small-scale, modular DAC plants instead.

As a result, the cost of capturing CO2 from the air is presently lower for Carbon Engineering’s technological approach, but some experts have argued mass production could drive the cost of Climeworks’ approach lower in the longer term.

“While S-DAC could be powered by a variety of low-carbon energy sources (e.g. heat pumps, geothermal, solar thermal and biomass-based fuels), the current high-temperature needs of today’s L-DAC configuration does not allow that level of flexibility and could at best operate using low-carbon fuels such as biomethane or renewables-based electrolytic hydrogen,” says Budinis. L-DAC presently uses natural gas to create the high levels of heat needed for this technology, the emissions of which must also be captured and sequestered.

Both Carbon Engineering and Climeworks keep their current costs close to their chests, but based on the cost of the subscription service Climeworks offers to companies and individuals, their emission reduction cost is well north of US$600/t and possibly as high as US$1,000/t — the average price paid is about US$800/t, according to BloombergNEF.

In contrast, Occidental is estimating the cost of sequestering a tonne of CO2 from 1PointFive’s Notrees project in the Permian Basin — using Carbon Engineering’s technology, as previously mentioned — at US$400-500/t. And for the cost to decline to US$200-250/t for yet to be sanctioned projects to come online over the 2025-30 period, and with the potential to drop below US$150/t in subsequent decades.

Based on a survey of DAC technical experts by researchers at the University of Milan in 2021, if the cost drops below US$150/t, DAC could account for 1,700 million t/y of CO2 removal by 2050 — although this finding has a high level of uncertainty.

IRA as gamechanger

The several “countries and regions that have taken an early lead in supporting DAC research, development, demonstration and deployment include the United States, the European Union, the United Kingdom, Canada and Japan,” says Budinis.

At the same time, private investment has been increasing, with a US$650 million investment in Climeworks in 2022, the largest ever for a DAC company. A number of companies — including Airbus, Microsoft, Shopify and Swiss RE — also have been purchasing future DAC removal credits to offset their CO2 emissions on the voluntary carbon market.

But it was not until the U.S. government significantly ramped up financial support for DAC by passing the IRA in August 2022 that commercial-scale projects achieved liftoff.

“The IRA significantly improved the economics of commercial-scale DAC projects in the U.S.,” Peter Findlay, principal analyst, CCUS at Edinburgh-based Wood Mackenzie, tells the Bulletin. “This is essential for getting these early stage, high-cost projects off the ground to allow learning by doing to help drive down costs for future DAC projects.”

The IRA increased the so-called 45Q tax credit for DAC with carbon storage to US$180/t from US$50/t, and the credit for DAC with enhanced oil recovery (EOR) to US$130/t, from US$35/t. Prior to these enhancements, DAC was treated no differently than conventional CCS projects — which saw only a US$35/t increase to US$85/t for the former and a US$25/t bump to US$60/t for the latter. These credits are available for 12 years once a plant achieves startup.

As a result, Occidental now estimates it can achieve total revenue of US$400–630/t from its Notrees and subsequent projects through 2030, compared to an estimate of US$250–400/t in March 2022. In addition to 45Q tax credits, revenues come from state Low Carbon Fuel Standard (LCFS) credits and sales into voluntary or compliance offset markets.

Since passage of the IRA, 1PointFive/Occidental has increased the number of large-scaled projects it is planning to bring online by 2035 to 100 — each with a capacity of 1 million t/y, with Notrees the exception — compared to 70 previously, and possibly as many as 135 plants depending on public incentives and demand for carbon credits.

In addition, Los Angeles-based CarbonCapture indicated it had moved forward its Project Bison DAC facility in Wyoming, when announcing the project in September, because of enhanced tax credits in the IRA. The company is targeting 10,000 t/y of CO2 removal by the end of this year, scaling up to 5 million t/y by 2030 given its modular platform.