China has recently tested its first direct air capture (DAC) system, a significant milestone in CO2 removal technology. With its strengths in mass production, China could play a major role in reducing the costs of these technologies. Meanwhile, the United States is investing billions in support, and companies like Climeworks are reporting progress. However, the challenges remain substantial.
China’s breakthrough in direct air capture
China’s newly tested DAC system, called the CarbonBox, is installed in a shipping container and aims to filter 600 tons of CO2 from the air annually. The country has previously achieved significant cost reductions in solar and battery production through subsidies, raising hopes that similar success could be achieved with DAC technologies.
ⓘ Direct Air Capture (DAC) technology is an innovative method for removing carbon dioxide (CO2) directly from the atmosphere. This process involves using large fans to draw in ambient air, which then passes through a chemical solution or solid sorbent that selectively binds to CO2 molecules. The captured CO2 is then separated from the sorbent or solution through a process involving heat or pressure changes, resulting in a concentrated stream of CO2. This CO2 can either be stored deep underground in geological formations or utilized in various industrial applications, such as the production of synthetic fuels or building materials. DAC is considered a crucial technology for mitigating climate change because it addresses legacy emissions and can potentially achieve net-negative emissions. However, the technology is currently expensive and energy-intensive, which presents challenges for large-scale deployment. Researchers and organizations are actively working on improving the efficiency and reducing the costs associated with DAC to make it a viable solution for global carbon management.
Cory Combs, an energy expert at Trivium China, is optimistic about China’s role in advancing DAC technologies. He believes that as costs and investment risks decrease, investment in DAC could increase in China. Despite this, the central government has not yet focused heavily on DAC. However, with its emphasis on innovation-driven growth, future subsidies and support for DAC technologies might be possible.
Julia Attwood, a specialist in industrial decarbonization at BloombergNEF, agrees that China’s mass production capabilities could help reduce costs for new DAC filters and equipment. Yet, DAC technology differs significantly from solar panels and batteries, meaning China’s mass production strengths may not be as impactful. High operational costs, due to the technology’s significant energy consumption, are a major hurdle. Thomas Schöb, project coordinator of the DACStorE research project at Forschungszentrum Jülich, notes that energy costs could account for 30-50% of total costs. Automating and standardizing DAC manufacturing could lead to significant cost reductions, though the potential may be lower than for batteries and solar modules.
Developments in DAC technology
DAC companies in Europe and the US are also making progress. In June 2024, the US company CarbonCapture introduced a modular DAC system similar to the CarbonBox, with plans to start mass production in Arizona. Swiss company Climeworks has reported a breakthrough with new filter material that captures twice as much CO2, uses half the energy, and lasts three times longer than current technology. The company aims to reduce costs per ton of filtered and stored CO2 to $400-$600 by 2030, compared to today’s costs, which are still double this amount.
Despite these advancements, DAC technology faces significant challenges due to its high costs. Currently, companies like Microsoft, JP Morgan Chase, Meta, Klarna, and Stripe purchase DAC carbon credits voluntarily but in limited quantities. Experts argue that a price of $400 per ton is too high for large-scale CO2 compensation. The economic viability target for DAC has been set at $100 per ton for many years, but reaching this target soon seems unlikely.
US funding and support
The US government’s funding and tax incentives could provide a boost to DAC technology in the coming years. The Biden administration has allocated $3.5 billion in funding, contingent on companies meeting specific milestones. Originally intended to support four regional DAC hubs, only two promising sites have been identified so far. Some of the funding is being withheld or used for basic research until additional sites are found.
The two DAC hubs in Texas and Louisiana could eventually receive up to $1.2 billion in government funding, though the money is distributed in phases. The Louisiana site, aimed at filtering one million tons of CO2 annually by 2030, has so far received only $50 million. The project is still in its early stages, with companies needing to gain local support and secure operational permits.
Additionally, the Inflation Reduction Act (IRA) provides a tax credit of $180 per ton of CO2 removed from the atmosphere. These support programs position the US as a leader in DAC political support, according to the International Energy Agency. However, analysts from the Rhodium Group warn that even with billions in funding, the scale of political support needed for a significant DAC industry would need to be about 20 times greater than current levels.
