Can direct air capture really scale carbon removal in the energy transition?

What is direct air capture technology and why is it central to the net-zero debate?

Direct air capture (DAC) refers to engineered systems that remove carbon dioxide directly from the atmosphere using chemical sorbents or liquid solvents. Air is passed through filters or solutions that bind CO₂, which is later released at high purity for permanent storage or industrial use. The appeal is straightforward: DAC represents one of the few scalable pathways to achieve net-negative emissions, essential if the world is to meet mid-century climate goals.

Captured CO₂ can be injected into saline aquifers for geological storage, used to make synthetic fuels, or even locked into building materials like concrete. Because DAC plants can in theory be built anywhere, the technology offers flexibility for countries with high emissions but limited local storage geology.

Still, the field remains young and polarizing. Climeworks’ Orca facility in Iceland, currently the world’s largest operating DAC plant, captures about 36,000 tonnes of CO₂ annually. After adjusting for the electricity consumed, net removal is closer to 28,000 tonnes. Global DAC capacity today remains in the tens of thousands of tonnes annually, while climate models suggest the world will need to pull down billions of tonnes each year by 2050. The mismatch highlights both the promise and the monumental challenge of scaling DAC.

How do costs, scaling hurdles and energy demands shape the DAC controversy?

The price tag is DAC’s biggest Achilles heel. Current costs range from US$600 to US$1,000 per tonne of CO₂ captured. The U.S. Department of Energy has set a target of US$100 per tonne, but getting there will require technological breakthroughs and long-term subsidies. The high costs stem from the energy-intensive process of scrubbing CO₂ from ambient air and regenerating sorbents.

Critics argue that if DAC is powered by fossil energy, it risks being a net emitter rather than a climate solution. Advocates counter that aligning DAC with renewable power or nuclear baseload generation could deliver genuinely net-negative outcomes.

Environmental justice groups have raised a deeper concern: the risk that DAC serves as an expensive distraction, diverting capital away from cheaper and proven decarbonization strategies such as renewables, energy efficiency, and electrification. For them, DAC could become a “license to pollute,” extending fossil fuel reliance under the guise of offsetting.

Why are oil companies investing in DAC and what does this mean for credibility?

Fossil fuel giants are emerging as key DAC backers, sparking both optimism and skepticism. Occidental Petroleum acquired Carbon Engineering and is building the Stratos facility in Texas, designed to capture up to 500,000 tonnes of CO₂ per year once fully operational. While detractors frame this as greenwashing, supporters note that oil companies bring the capital, infrastructure, and geological know-how needed to deploy DAC at scale.

Occidental’s carbon management arm, 1PointFive, has already signed a deal to supply Palo Alto Networks with 10,000 tonnes of verified carbon removal credits over five years. The CO₂ will be injected into saline formations for permanent storage. This demonstrates the emergence of a market for high-integrity carbon credits, where corporate buyers are willing to pay for verifiable removals rather than avoided emissions.

The tension remains: is this genuine transition or a way for oil companies to keep drilling while polishing their ESG credentials? The answer may depend on independent verification of lifecycle emissions and the transparency of credit accounting.

What role do government incentives and policy frameworks play in scaling DAC?

Without subsidies, DAC would remain a boutique technology. Policy has been decisive in jump-starting the sector. The U.S. Inflation Reduction Act boosted the 45Q tax credit for carbon capture, offering US$180 per tonne for DAC projects that store CO₂ underground. The Department of Energy has also committed funding for multiple DAC hubs, each designed to reach up to one million tonnes of annual capacity within the next decade.

Climeworks and its peers are lining up new plants in Europe, North America, and the Middle East, betting on government incentives and corporate demand for carbon credits. But reaching gigaton scale would require not just dozens but thousands of such facilities, with trillions in cumulative investment. Proponents argue DAC will complement, not replace, aggressive decarbonization. Critics fear it will provide political cover for “business-as-usual” fossil dependence.

How do investors view Occidental and other DAC players in terms of stock performance and sentiment?

Investors in publicly traded firms such as Occidental Petroleum increasingly weigh direct air capture as part of a broader energy transition strategy. Occidental has signaled its ambition to position itself not only as a leading producer in the Permian Basin but also as a long-term player in carbon management. Analysts often highlight the company’s strong production profile while cautioning that its reliance on oil markets exposes it to volatility and steep decline curves.

For many, DAC represents Occidental’s hedge against these traditional risks. By investing in large-scale projects like the Stratos facility, the company is reframing itself as a carbon solutions provider rather than a pure upstream oil operator. The investment case rests on whether government incentives and carbon credit markets can deliver stable revenue streams to offset the high costs of capture.

Private players such as Climeworks and Carbfix remain outside public markets but draw close investor attention. They rely heavily on venture funding, government support, and corporate pre-purchase agreements for high-integrity carbon removal credits. As the policy environment evolves and demand for durable offsets grows, these companies could become attractive acquisition targets for larger energy firms seeking to diversify.

Why is expert opinion split between urgency and skepticism on DAC’s future?

Experts broadly agree that no single tool will deliver net-zero emissions. Nature-based solutions like reforestation are essential but reversible, while DAC offers permanent storage if deployed correctly. Climate models point to the need for billions of tonnes of removals by mid-century, which implies that some form of engineered removal will be unavoidable.

Yet realism tempers the enthusiasm. DAC is expensive, energy-hungry, and logistically daunting. Policymakers must treat it as a last-resort solution for hard-to-abate sectors, not as a substitute for cutting emissions at source. The credibility of oil company involvement will depend on rigorous third-party verification, transparent reporting, and proof that captured CO₂ stays locked away for centuries.

From an investor’s perspective, DAC is high-risk but potentially high-reward. From a policymaker’s perspective, it is a necessary insurance policy against climate overshoot. From a public perspective, the question is whether DAC can be trusted to deliver real climate benefit rather than buying time for polluters.