Case study: Direct air capture (DAC) economics & deployment — a startup-to-enterprise scale story

When Climeworks AG commissioned its Orca plant in Hellisheidi, Iceland in September 2021, it became the world's first commercial-scale direct air capture (DAC) facility, removing 4,000 tonnes of CO2 per year at an estimated cost of $600 to $800 per tonne. By 2025, the company had grown from a 14-person ETH Zurich spinout to a 500-employee enterprise operating its second-generation Mammoth plant at 36,000 tonnes per year, with contracted offtake agreements exceeding $1 billion in cumulative value. Climeworks' trajectory from laboratory prototype to industrial-scale carbon removal offers a detailed roadmap for how DAC ventures navigate the economics of a technology that starts far above market clearing prices and must engineer its way down.

Why It Matters

The Intergovernmental Panel on Climate Change estimates that 5 to 16 gigatonnes of CO2 removal per year will be needed by 2050 to limit warming to 1.5 degrees Celsius, with DAC expected to contribute 0.5 to 5 gigatonnes of that total (IPCC, 2023). As of early 2026, global DAC capacity stands at approximately 50,000 tonnes per year across all operating facilities, meaning the industry must scale by a factor of 10,000 to 100,000 within 25 years. The EU has set a target of 50 million tonnes of annual carbon dioxide removal by 2050 under the Carbon Removal Certification Framework, with DAC identified as a key technology pathway. Understanding how first-mover companies navigate the transition from pilot to megatonne scale is critical for policymakers designing support frameworks, investors sizing capital commitments, and corporate buyers structuring procurement portfolios.

Key Concepts

Direct air capture uses chemical processes to extract CO2 directly from ambient air at roughly 420 parts per million concentration. Two primary technology families dominate: solid sorbent systems, which use amine-functionalized materials that bind CO2 at ambient temperature and release it when heated to 80 to 120 degrees Celsius, and liquid solvent systems, which use aqueous potassium hydroxide solutions to capture CO2 and regenerate the solvent at 300 to 900 degrees Celsius using a calcium caustic recovery loop. Climeworks employs the solid sorbent approach, using modular collector units containing filter structures coated with amine sorbents that cycle between adsorption and desorption phases every 1 to 3 hours.

The captured CO2 can be permanently stored through geological sequestration (injected into basalt formations where it mineralizes within 2 years, as practiced in Iceland through the Carbfix process) or utilized in products such as synthetic fuels, building materials, or carbonated beverages. Permanent geological storage currently commands the highest prices in voluntary carbon markets because it offers near-permanent removal with verifiable monitoring.

KPI	Orca (2021)	Mammoth (2025)	Projected Megatonne (2030+)
Capture capacity (tCO2/yr)	4,000	36,000	1,000,000+
Cost per tonne (USD)	$600-800	$400-500	$200-300
Energy consumption (kWh/tCO2)	2,000-2,500	1,500-1,800	1,000-1,200
Sorbent lifetime (cycles)	3,000-5,000	5,000-8,000	10,000+
Uptime (%)	70-75	85-90	92-95
Capex per tonne annual capacity	$1,200-1,500	$800-1,000	$400-600

The Climeworks Scaling Story

From ETH Lab to First Revenue (2009 to 2017)

Climeworks was founded in 2009 by Jan Wurzbacher and Christoph Gebald as a spinout from ETH Zurich, where they had developed a novel solid sorbent material for CO2 capture. The company spent its first eight years in what Wurzbacher has described as the "technology valley of death": too early for project finance, too capital-intensive for traditional venture capital, and producing a product (atmospheric CO2) that had no established market at the price point they could offer.

The breakthrough came from an unexpected direction. Rather than waiting for carbon markets to mature, Climeworks identified niche applications where captured CO2 commanded prices far above commodity levels. In 2017, the company commissioned its first commercial plant in Hinwil, Switzerland, a 900-tonne-per-year facility co-located with a municipal waste incineration plant that provided waste heat. The captured CO2 was sold to a nearby greenhouse operator at approximately $300 per tonne, a price that was uncompetitive in carbon markets but economically viable for agricultural CO2 enrichment. This first commercial installation generated revenue, proved operational reliability, and provided critical engineering data that informed subsequent plant designs.

Orca: Proving Geological Storage (2021 to 2023)

The Orca plant represented a fundamental strategic shift: from CO2 utilization to permanent geological storage. Located adjacent to the Hellisheidi geothermal power plant in Iceland, Orca drew on two critical advantages. First, Iceland's abundant geothermal energy provided low-carbon heat and electricity at $0.03 to $0.05 per kWh, reducing the energy cost component that typically represents 40 to 60% of total DAC operating expense. Second, the Carbfix consortium had demonstrated that CO2 injected into basaltic rock formations at Hellisheidi mineralizes into stable carbonate minerals within 2 years, providing a permanent storage pathway with robust monitoring through tracer analysis and well sampling.

Climeworks sold carbon removal credits from Orca to corporate buyers including Microsoft, Shopify, and Stripe at prices of $600 to $1,000 per tonne under long-term agreements. These advance purchase commitments, totaling over $100 million by 2023, served a dual purpose: they provided revenue certainty that supported project financing, and they created a reference market that demonstrated corporate willingness to pay premium prices for high-permanence carbon removal. The company structured these agreements as 10-year offtake contracts with price adjustment mechanisms tied to cost reduction milestones, creating alignment between buyer commitments and supplier investment in scaling.

Orca's operational performance revealed both achievements and challenges. The plant achieved its nameplate capacity of 4,000 tonnes per year within 14 months of commissioning, faster than projected. However, sorbent degradation rates exceeded initial estimates by 15 to 20%, requiring filter replacement at 3,000 to 4,000 cycles rather than the designed 5,000 cycles. The company invested $18 million in sorbent R&D between 2022 and 2024, resulting in a second-generation amine formulation that extended cycle life to 5,000 to 8,000 cycles and reduced sorbent costs by approximately 30%.

Mammoth: Industrial Modularization (2024 to 2025)

The Mammoth plant, commissioned in phases beginning mid-2024 at a site adjacent to Orca, represented a ninefold increase in capacity to 36,000 tonnes per year. The design philosophy centered on modularization: rather than building a single large process unit, Climeworks deployed standardized collector modules manufactured in European factories and assembled on-site. Each collector module captures approximately 50 tonnes of CO2 per year and can be installed in 2 to 3 days, compared to the 4 to 6 weeks required for custom-engineered Orca collector units.

This modular approach yielded several scaling advantages. Manufacturing shifted from one-off fabrication to series production, with collector modules produced at a rate of 10 to 15 units per week at facilities in Germany and Switzerland. Supply chain costs fell as standardized components allowed bulk procurement of sorbent materials, heat exchangers, and control systems. Installation time for the complete Mammoth facility was 9 months, compared to 15 months for the significantly smaller Orca plant.

The cost reduction from Orca to Mammoth was significant but uneven across cost categories. Capex per tonne of annual capacity declined from approximately $1,200 to $1,500 at Orca to $800 to $1,000 at Mammoth, driven primarily by manufacturing learning and supply chain optimization. Operating costs declined from $250 to $350 per tonne to $180 to $250 per tonne, with energy costs relatively stable (Iceland's geothermal tariffs did not change materially) but maintenance, labor, and sorbent replacement costs falling with improved materials and operational experience. The all-in cost per tonne of captured and permanently stored CO2 moved from $600 to $800 at Orca to $400 to $500 at Mammoth.

Financing the Scale-Up

Climeworks' funding trajectory illustrates how DAC companies must assemble capital from diverse sources as they move through development stages. The company raised $30 million in Series D funding in 2020, followed by a $650 million equity round in 2022 led by Partners Group and GIC, making it the largest private funding round in the DAC sector at that time. In 2024, the company secured an additional $635 million in a combination of equity and project-level debt, with the European Investment Bank providing $200 million in concessional lending under the InvestEU Green Transition facility.

Public funding played a catalytic role at each stage. The Swiss Federal Office of Energy provided early-stage R&D grants totaling CHF 4 million between 2010 and 2015. The EU Innovation Fund awarded Climeworks EUR 110 million in 2023 for the development of a planned 100,000-tonne-per-year facility, and the company received additional support through Horizon Europe grants for sorbent development. In total, public funding has represented approximately 15 to 20% of Climeworks' cumulative capital deployment, functioning as de-risking capital that enabled private investors to commit at each subsequent stage.

What's Working

Advance market commitments from corporate buyers have proven essential for bridging the gap between current DAC costs and eventual market equilibrium prices. Frontier, a consortium of buyers including Stripe, Alphabet, Meta, McKinsey, and Shopify, committed $1 billion to permanent carbon removal purchases between 2022 and 2030. Climeworks has secured the largest single allocation from this fund, providing revenue visibility that underpins project-level financing. This model demonstrates that demand aggregation by creditworthy buyers can substitute for mature commodity markets during a technology's pre-competitive phase.

Iceland's geological and energy advantages have created a first-mover location with unique cost characteristics. The combination of geothermal energy at $30 to $50 per MWh, basalt formations suitable for mineral carbonation, and a supportive regulatory environment (Iceland's carbon tax is EUR 75 per tonne and rising) has created conditions where DAC projects can operate profitably at current cost levels when selling credits above $500 per tonne. The Icelandic government has streamlined permitting for carbon storage projects, with injection permits issued within 6 to 9 months compared to 2 to 4 years in most European jurisdictions.

Modular manufacturing has collapsed the traditional relationship between facility size and construction time. Climeworks' factory-built collector modules reduce on-site construction risk, allow parallel manufacturing and site preparation, and create a pathway to continuous cost reduction through manufacturing learning curves. The company reports a 12 to 15% reduction in unit manufacturing cost for each doubling of cumulative production volume, consistent with learning rates observed in solar PV and battery manufacturing.

What's Not Working

Energy cost remains the single largest barrier to DAC cost reduction outside of Iceland's geothermal sweet spot. A DAC plant operating on European grid electricity at EUR 80 to 120 per MWh faces energy costs of $150 to $250 per tonne of CO2 captured, before any capital or operating costs. The EU's planned DAC deployments in Southern Europe, using solar thermal or waste heat from industrial processes, face intermittency challenges that reduce annual operating hours from 8,000 (achievable in Iceland) to 4,000 to 6,000, increasing the capital cost burden per tonne.

Sorbent supply chain constraints threaten to bottleneck scaling. The amine-functionalized sorbent materials used in solid sorbent DAC systems are currently produced by a small number of specialty chemical manufacturers. Climeworks' projected demand for its planned megatonne-scale facilities would require a tenfold increase in global production capacity for specific amine compounds. The company has invested in vertical integration of sorbent manufacturing, but scaling chemical production facilities from pilot to industrial scale introduces its own timeline and capital requirements.

Carbon removal credit markets remain thin and fragmented, with no standardized contracts, delivery verification protocols, or secondary market liquidity. Buyers face significant counterparty risk (what happens if a DAC company fails to deliver contracted removal volumes?) and measurement uncertainty. The EU Carbon Removal Certification Framework, adopted in 2024, provides a regulatory foundation but implementing acts defining monitoring, reporting, and verification requirements for DAC are not expected until 2027. This regulatory gap creates uncertainty for project developers seeking to finance facilities based on future credit revenues.

Key Players

Established: Climeworks AG (Zurich, solid sorbent DAC, 40,000+ tCO2/yr operating capacity), Carbon Engineering (now 1PointFive, a subsidiary of Occidental Petroleum, liquid solvent DAC, building 500,000 tCO2/yr Stratos plant in Texas), Global Thermostat (New York, solid sorbent DAC, partnering with ExxonMobil on pilot deployments)

Startups: CarbonCapture Inc. (Los Angeles, modular solid sorbent DAC targeting $200/tonne by 2028), Heirloom Carbon Technologies (San Francisco, limestone-based passive DAC, DOE-funded), Verdox (Boston, electrochemical DAC using electroswing adsorption, lower energy pathway)

Investors: Frontier Fund (Stripe-led $1B advance market commitment), Partners Group ($650M Climeworks equity lead), European Investment Bank (concessional lending for EU DAC projects), US Department of Energy (funding four regional DAC hubs at $3.5B through the Bipartisan Infrastructure Law), Breakthrough Energy Ventures (Series A and B investor across multiple DAC startups)

Action Checklist

• Map available low-carbon energy sources (geothermal, waste heat, dedicated renewables) at prospective DAC sites and model energy cost scenarios at $30, $60, and $100 per MWh
• Structure advance purchase agreements with price reduction milestones tied to capacity deployment, using Frontier-style commitments as templates
• Assess sorbent supply chain risks by identifying at least two qualified suppliers for critical amine compounds and establishing strategic inventory positions
• Engage with the EU Carbon Removal Certification Framework consultation process to shape MRV requirements for engineered removal
• Model project economics using modular deployment assumptions with learning curve cost reductions of 12 to 15% per doubling of cumulative capacity
• Evaluate geological storage sites using Carbfix mineralization data as a baseline, prioritizing basalt and ultramafic formations with demonstrated injection capacity
• Develop permitting strategies that align with national carbon storage regulations, noting the 6 to 48 month range in permit timelines across EU member states

FAQ

Q: What is the current cost per tonne of CO2 for direct air capture? A: Costs vary significantly by technology and location. Climeworks' Mammoth plant in Iceland operates at $400 to $500 per tonne for capture and permanent geological storage, benefiting from low-cost geothermal energy and favorable geology. Carbon Engineering's (1PointFive) Stratos plant in Texas targets $400 to $600 per tonne at its initial 500,000 tCO2/yr scale. Industry consensus projections estimate costs of $200 to $300 per tonne by 2030 to 2035 at megatonne scale, though this depends on energy costs, sorbent improvements, and manufacturing learning. For comparison, the current EU Emissions Trading System price is approximately EUR 65 to 80 per tonne, meaning DAC remains 3 to 8 times more expensive than market carbon prices.

Q: How does Climeworks' modular approach compare to Carbon Engineering's large-scale plant design? A: The two companies represent fundamentally different scaling philosophies. Climeworks uses factory-manufactured collector modules (approximately 50 tCO2/yr each) that can be deployed incrementally, allowing capital investment to be staged and manufacturing learning to be captured continuously. Carbon Engineering, through its 1PointFive partnership with Occidental Petroleum, is building single large facilities (500,000 tCO2/yr) using liquid solvent technology derived from industrial gas processing. The large-plant approach potentially achieves lower unit costs at full scale through economies of scale but requires larger upfront capital commitments ($800 million to $1.2 billion per plant) and longer construction timelines (3 to 4 years). The modular approach reduces deployment risk but may sacrifice some thermodynamic efficiency advantages available at larger scale.

Q: What role does public funding play in DAC deployment? A: Public funding has been decisive in moving DAC from laboratory to commercial scale. The US Department of Energy's $3.5 billion Regional DAC Hubs program (Bipartisan Infrastructure Law) is funding four large-scale facilities. The EU Innovation Fund has allocated over EUR 500 million to DAC and carbon removal projects. In Climeworks' case, public funding represented 15 to 20% of cumulative capital but functioned as catalytic risk capital that unlocked 4 to 5 times its value in private investment. The 45Q tax credit in the United States provides $180 per tonne for DAC with geological storage (increased from $50 by the Inflation Reduction Act), fundamentally changing project economics for US-based facilities. For EU-focused deployments, the Carbon Removal Certification Framework and national subsidy programs in Germany, Denmark, and Sweden are emerging as the primary public support mechanisms.

Q: What are the main risks for investors in DAC projects? A: Key risks include technology risk (sorbent degradation, energy consumption exceeding projections), offtake risk (dependence on voluntary carbon market demand at premium prices), regulatory risk (changes in carbon removal certification or tax credit frameworks), and execution risk (construction delays, supply chain bottlenecks for specialized components). Climeworks has mitigated these through long-term offtake contracts with investment-grade buyers, diversified public and private funding sources, and modular deployment that limits single-project exposure. Investors should model scenarios where carbon removal credit prices decline 30 to 50% from current levels and assess whether project economics remain viable under EU ETS convergence scenarios.

Sources

• IPCC. (2023). AR6 Synthesis Report: Climate Change 2023. Geneva: Intergovernmental Panel on Climate Change.
• Climeworks AG. (2025). Mammoth Plant: Commissioning Report and First-Year Operational Performance. Zurich: Climeworks AG.
• Frontier. (2025). Advance Market Commitment for Carbon Removal: 2024 Annual Report. San Francisco: Frontier Climate.
• European Commission. (2024). Regulation (EU) 2024/XXX establishing a Union certification framework for carbon removals. Brussels: European Commission.
• US Department of Energy. (2024). Regional Direct Air Capture Hubs: Program Status and Implementation Update. Washington, DC: DOE Office of Clean Energy Demonstrations.
• IEA. (2025). Direct Air Capture: A Key Technology for Net Zero. Paris: International Energy Agency.
• Carbfix. (2025). Mineral Carbonation at Scale: 10 Years of CO2 Injection in Icelandic Basalt. Reykjavik: Carbfix ehf.
• Partners Group. (2024). Climate Infrastructure Investment: Lessons from the Climeworks Scale-Up. Baar: Partners Group AG.