The US Department of Energy announced today that it’s providing $1.2 billion to develop regional hubs that can draw down and store away at least one million metric tons of carbon dioxide per year, as a means of combating climate change. 

The move represents a major step forward in the effort to establish a market for removing the planet-warming greenhouse gas from the atmosphere, using what are known as direct-air capture (DAC) machines.

The first recipients will include Occidental Petroleum’s proposed carbon removal project in Kleberg County, Texas, dubbed the South Texas DAC Hub, as well as a partnership between Battelle, Climeworks and Heirloom to develop facilities in southwestern Louisiana, known as the Project Cypress DAC Hub. Those two projects will split about $1.1 billion, with about $100 million more going toward 19 feasibility or front-end engineering studies for earlier stage projects across the country.

Friday’s announcement represents the first tranche of $3.5 billion in funding allocated under the Bipartisan Infrastructure Law to set up at least four regional direct-air capture hubs. All told, those projects could boost the global capacity for carbon removal by 400-fold, according to an estimate by Carbon180, a nonprofit that advocates for the removal and reuse of carbon dioxide.

“If we deploy this at scale, this technology can help us make serious headway toward our net-zero emissions goals, while we are still focused on deploying, deploying, deploying more clean energy at the same time,” says Jennifer Granholm, the US secretary of energy, who revealed the details of the program during a call with reporters on Thursday.

But the inclusion of Occidental Petroleum, a fossil fuel giant, may prove a controversial pick. Occidental’s CEO, Vicki Hollub, said at an oil and gas conference in March that direct-air capture technology will help to “preserve our industry over time,” lending weight to fears among environmental groups that carbon removal could extend the social license for oil companies to continue operating for decades.

Direct-air capture plants generally rely on large fans to draw in ambient air, then trap carbon dioxide molecules using liquid solvents or solid sorbents. It is distinct from, but often confused with, carbon capture technology that prevents emissions from leaving a power plant or industrial facility. 

Given how much planet-warming carbon dioxide the world has already pumped into the atmosphere, a growing body of research finds that nations may need to draw down billions of tons of carbon dioxide per year to keep climate change in check. And that’s all on top of radical cuts in greenhouse gas emissions. 

How much the world will need to remove will depend on how much more we add, and how the climate responds. But by some estimates, nations may have to collectively pull down some 10 billion tons a year by midcentury to have a good shot at keeping the planet from warming beyond 2 ˚C. 

That’s a daunting figure. It would take 10,000 DAC hubs with the capacity of the ones funded on Friday to get reach it. Researchers and startups are exploring a wide variety of potential ways of dramatically increasing carbon removal, including engineering plants that suck up more CO2, spreading carbon dioxide-trapping minerals in our soils and seas, and burying or sinking biomass. But the approaches vary widely in terms of reliability, durability, scalability, environmental dangers, technical risks and costs.

The advantage of the direct-air capture factories that the Department of Energy is supporting is that the carbon removal is reliable and easily quantifiable. The captured greenhouse gas can, in turn, be permanently and safely stored by injecting it into deep geological wells, so long as it’s done properly. 

The big problem, however, is it’s expensive. It costs at least hundreds of dollars to remove and store a ton of carbon dioxide today. Even if removal costs drop to $100 per ton, as hoped, sucking down 10 billion tons amounts to a $1 trillion annual proposition.

“It’s a dollar figure that only federal governments can pay,” says Jack Andreasen, manager, carbon management policy at Breakthrough Energy. 

The Department of Energy estimates that the US alone will need to remove from the air, or capture from plants, some 400 million to 1.8 billion metric tons of carbon dioxide annually for the nation to reach its net-zero emissions by 2050 goals.

Given these costs and scales, the carbon removal sector isn’t likely to ever fully stand up on its own, because there’s little commercial value in it, particularly when the end use is burying it underground. 

Some removed carbon dioxide could be re-used in products, like fuels, chemicals and cement, but nothing like 10 billion tons a year. So carbon removal will need to be supported as a public good, a largely government-funded, incentivized or mandated enterprise to mitigate the dangers of climate change.

That’s why, separately, the Department of Energy also confirmed this week that it’s taking steps to spend $35 million on carbon removal purchases, potentially from the DAC hubs it’s helping to establish and other sources that are “consistent with the objectives” of its programs. While the federal procurement effort is small today, industry sources hope it could be the starting point for a much larger program.

It “sets up the future where the United States government could be one of the largest purchasers of carbon dioxide in the world,” Andreasen says.

The same notice of intent also revealed upcoming funding opportunities for additional approaches to carbon removal, including those that rely on biomass, minerals and the oceans to capture the greenhouse gas.

In effect, the federal government is helping to support the buildout of the direct-air capture industry and acting as a customer for it, both of which will be crucial for developing the sector, says Sasha Stashwick, director of policy at Carbon180.

“It’s just a massive opportunity to define what successful carbon removal projects look like, and really generate the momentum that we know we need,” she says.

Other, earlier stage projects that received up to $3 million under the Department of Energy’s direct-air capture hubs program included: a General Electric research effort to evaluate the feasibility of a project in the greater Houston area; a Northwestern University initiative to use nuclear power to support carbon removal in the Midwest; and a Fervo Energy proposal to establish direct-air capture facilities in southwestern Utah powered through geothermal energy.

Battelle, an Ohio-based nonprofit research and development company, will oversee the development of the major direct-air hub in Louisiana. Switzerland-based Climeworks and California-based Heirloom, which have taken different technical approaches to carbon removal, will act as technology providers for the project.

Occidental will work with  Squamish, British Columbia-based Carbon Engineering, one of the first carbon removal businesses, to develop a hub in Texas. The companies have already begun developing a separate carbon removal project in the oil-rich Permian Basin in Texas, which will use the greenhouse gas to help free up more fossil fuels from existing wells, a controversial practice known as enhanced oil recovery. 

Environmental groups have criticized this use, noting that pulling down carbon dioxide only to release more fossil fuel slows progress on climate change and sustains oil and gas companies. They also fear that the DAC hubs can harm communities and the environment, if the wells leak or the associated infrastructure also supports carbon capture projects that extend the life of fossil fuel power plants. Such facilities, which continue to emit other pollutants, are often located near, poor marginalized communities.

After the plan to create direct-air capture hubs was announced last year, the Climate Justice Alliance called the program a “​​dangerous gamble that puts frontline communities at further risk.”

“To have any significant effect on global CO2 concentrations, [direct-air capture] would have to be rolled out on a vast scale, demanding very large amounts of water and energy, and raising environmental justice concerns about the toxic impacts of the chemical absorbents used in the process,” the group said in an earlier statement. “Once you’ve expended huge amounts of energy to remove the carbon, you are still stuck with the problem of what to do with it, which brings us back to the inherent issues of storage or re-use.”

Such fears have been reinforced by recent statements from oil and gas industry executives. Occidental’s Hollub said at the March conference that direct-air capture technology, “gives our industry a license to continue to operate for the 60, 70, 80 years that I think it’s going to be very much needed.”

Similarly, Exxon Mobil’s CEO, Darren Woods, called the technology “the holy grail,” in a CNBC piece.

But Department of Energy officials stressed that the carbon dioxide pulled down at both of the newly funded hubs will be permanently stored underground, and said that the broader goal of the Biden administration is to rapidly shift away from fossil fuels and drive down the nation’s climate emissions.

The department has also emphasized from early on that developers of funded projects will be required to engage with communities, identify and address potential environmental harms, and develop local workforces. The two projects are expected to create about 4,800 jobs.

“These hubs are going to help us prove out the potential of this game-changing technology so that others can follow in their footsteps,” Granholm says. “To us, this is ‘Bidenomics’ in action, making smart investments in our industries, making smart investments in our workers, our communities, to build America’s clean energy economy from the middle out and the bottom up.”