It was the hottest thing in climate tech. Now it’s trapped in the valley of death

A year ago, direct air capture—technology that pulls CO2 from the air—seemed ready to quickly scale in the U.S.

Project Cypress, a massive undertaking in Louisiana designed to capture more than a million tons of CO2 each year, won $50 million in funding from the Department of Energy in early 2024. In Texas, another major direct air capture hub also won funding. Together, the projects were eligible for as much as $1.1 billion from the DOE, part of $3.5 billion Congress set aside for DAC hubs in the 2021 Bipartisan Infrastructure Law.

Climeworks, a pioneer in the industry and one of the partners on the Louisiana project, was hiring a U.S. team, scaling up a new plant in Iceland, and signing large deals to sell carbon removal to companies like British Airways and Morgan Stanley. Heirloom, another tech company working on the Louisiana hub, closed a $150 million Series B round of funding. CarbonCapture, another startup in the space, raised $80 million. Multiple other DAC projects also won DOE grants.

The situation is different now. In one round of cuts, according to a leaked list, the DOE might revoke around $50 million in grants to 10 different direct air capture projects. (The cuts are part of more than $7.5 billion in cancellations for what the administration calls “Green New Scam” funding.) A second leaked spreadsheet suggests that the flagship hubs in Louisiana and Texas might also be at risk. Earlier this year, Heirloom laid off some workers and reportedly canceled a planned project. Climeworks also had a round of layoffs.

At the same time, a few projects are moving forward, and one key tax credit is still in place. Government support isn’t the only thing keeping the industry afloat. But the technology is still in the so-called valley of death—the stage when it still hasn’t reached large-scale commercial deployment—and funding cuts would be a major blow. Even as other countries offer incentives, it could slow down the industry globally.

“I think it could slow down substantially,” says Eric O’Rear, associate director at the economic and policy research firm the Rhodium Group. “If you look at it from a policy perspective, the U.S. was really dominating this space.”