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The layoff at Climeworks, a pioneer in carbon removal technology, highlights the challenges faced by the industry amidst a climate policy rollback by the Trump administration and a broader market slowdown for high-integrity carbon credits. The company has decided to cut 106 jobs due to unfavorable market conditions and the need to become profitable. This move comes despite a growing number of governments setting net-zero targets, which initially created a surge of interest in carbon capture technologies.
Climeworks' direct-air capture (DAC) process is energy-intensive and costly, with the company charging $1,000 per ton of CO2 removed, significantly higher than the current price of CO2 allowances on the European Emissions Trading System. The uncertainty surrounding government support and the nascent nature of the market for carbon removal services have made it difficult for companies like Climeworks to scale up operations and achieve cost reductions necessary to compete with fossil fuels.
The company had been set to begin construction on a 1 million-ton capacity DAC plant in Louisiana following a $50 million government grant, with the potential for an additional $500 million in funding during construction. However, the Trump administration's stance on climate change and the future of such programs remains uncertain.
This situation underscores the fragility of the carbon removal industry, which is heavily reliant on government incentives and voluntary corporate purchases of carbon credits. Venture capital investments in DAC startups have declined by about 46% year-on-year in the first quarter of 2025, reflecting the current market sentiment. Experts predict that only a handful of companies with the most competitive technologies may survive in the long run.