Direct air capture: A carbon removal frontier for climate entrepreneurs

Significant technological and cost challenges remain, but long-term support is also forthcoming from corporate and governments.

The market for pulling carbon dioxide directly from the air is seeing important shifts in 2025 – most notably, growing purchases from corporate – via carbon credits, for example, and sustained long-term government support. Startups have made progress on their commercialisation routes.

Direct air capture (DAC)—the technology that uses chemical, electrochemical, and physical processes to extract CO₂ from the atmosphere—has moved from laboratory experiments to commercial realities, creating opportunities for entrepreneurs willing to navigate its challenges.

The economics are shifting in entrepreneurs’ favour. The global DAC market, valued at roughly $66 million in 2024, is projected to reach $3 billion by the end of the decade. In India alone, the market is expected to grow from $3.2 million in 2024 to $52 million by 2030, representing annual growth of nearly 60 per cent. These figures suggest real commercial potential rather than speculative hype.

In July, Climeworks, one of the leading DAC startups, raised $162 million in funding, taking its total to $1 billion. Climeworks has deployed its solid sorbent-based modules in Iceland. It has established partnerships, including one with Carbfix for processes such as in-situ mineralisation, and Svante for structured adsorbents that it used to halve the energy requirement of its modules.

Recent advances have addressed the technology's central weakness: cost. Dutch startup Carbyon has demonstrated a machine that captures three tonnes of CO₂ annually using just one kilogram of sorbent material, achieving speeds 200 times faster than older systems. American company Heirloom and others are pushing solid sorbent technologies that require lower temperatures and less energy, targeting costs below $100 per tonne by mid-century.

Such improvements matter because current capture costs range between $600 and $1,000 per tonne — too high for most applications.

Three factors are creating commercial openings for new entrants. First, corporate demand is rising. Technology giants like Microsoft, Google and Stripe are purchasing removal credits at scale to meet Net Zero commitments. Microsoft alone accounted for 64 per cent of all durable carbon removal purchases in 2024. These buyers are signing long-term contracts worth millions of tonnes, providing the revenue certainty that makes projects financeable.

Second, government support is substantial. The US offers tax credits of up to $180 per tonne captured through its 45Q program, along with $3.5 billion for regional DAC hubs. Canada, Japan and the EU are implementing similar incentives. India’s government has identified carbon removal as one of ten priority sectors for its domestic offset mechanism.

Third, the competitive landscape remains open. Over 130 DAC facilities are in development globally, but operational capacity totals less than 20,000 tonnes annually. The industry has not yet consolidated around dominant players, leaving room for technical innovation and regional specialists.

Yet obstacles remain formidable. Energy requirements are immense—DAC facilities must run on renewable power to deliver genuine climate benefits, but they face competition from data centres and other industries for limited clean electricity supplies. Infrastructure needs are daunting: scaling to one billion tonnes annually would require pipelines and storage capacity comparable to the global refining industry.

For entrepreneurs, the most promising opportunities lie in three areas. Companies developing novel sorbent materials that reduce energy consumption can capture value through licensing or direct deployment. Firms that integrate DAC with existing industrial processes — such as providing captured CO₂ to manufacturers of building materials or synthetic fuels — can create multiple revenue streams. Regional specialists in markets like India can meet the local demand for carbon credits, where biomass feed-stock is abundant and renewable energy is expanding.

The market for carbon removal through direct air capture still has significant potential. It remains early enough for new entrants to establish positions. Companies that can demonstrate reliable capture at lower costs, secure off-take agreements with corporate buyers, and navigate the policy landscape will find receptive investors and customers.