Explainer: Climate biotech: carbon-negative processes — the concepts, the economics, and the decision checklist

In 2024, the carbon dioxide removal market achieved a 78% year-over-year growth, reaching 8 million tonnes of purchased removals—yet the sector received only $836 million in equity capital, representing a fraction of the $100–400 billion needed by 2030 to reach net-zero targets (McKinsey, 2024). This stark financing gap underscores both the massive opportunity and the critical bottlenecks facing climate biotech. Within this landscape, carbon-negative biotechnology processes—those that leverage engineered organisms to capture, convert, and sequester atmospheric CO₂—have emerged as one of the most promising pathways to achieve gigatonne-scale removal while generating economic value through bio-based products.

Why It Matters

The climate crisis demands solutions that go beyond emissions reduction to active carbon removal. The Intergovernmental Panel on Climate Change (IPCC) has made clear that limiting global warming to 1.5°C requires removing 5–16 gigatonnes of CO₂ annually by 2050. Traditional approaches—forests, soil carbon, enhanced weathering—face scalability constraints. Climate biotech offers a distinct value proposition: engineered biological systems that can operate at industrial scale, convert waste carbon into valuable products, and achieve carbon negativity while generating revenue streams.

The synthetic biology market, which underpins much of climate biotech, reached approximately $19–24 billion in 2024 and is projected to grow at 15–22% CAGR through 2033 (Grand View Research, 2024). Within this broader market, carbon-negative applications—biofuels, biochemicals, biomaterials—represent a rapidly expanding segment driven by regulatory mandates, corporate net-zero commitments, and evolving carbon markets.

For investors and operators, understanding climate biotech requires grasping three interconnected dynamics: the science of biological carbon conversion, the economics of scaling from laboratory to commercial production, and the regulatory and market structures that determine whether carbon-negative claims translate into monetizable value.

Key Concepts

Biological Carbon Capture and Utilization (Bio-CCU): Unlike geological carbon capture and storage (CCS), which sequesters CO₂ underground, Bio-CCU uses living organisms—bacteria, algae, fungi, or engineered microbes—to capture carbon and convert it into useful products. The carbon remains embodied in materials, chemicals, or fuels, creating economic value while displacing fossil-derived alternatives.

Metabolic Engineering and Synthetic Biology: At the core of climate biotech lies the ability to redesign cellular metabolism. Companies engineer microorganisms to uptake CO₂ or CO (carbon monoxide from industrial off-gases) and convert them through novel biochemical pathways into target molecules—ethanol, ethylene, polyhydroxyalkanoates (PHAs), and other platform chemicals.

Life Cycle Assessment (LCA) and Carbon Accounting: For a process to be genuinely "carbon-negative," the total greenhouse gas emissions across the entire value chain—from feedstock acquisition through production, distribution, use, and end-of-life—must result in net atmospheric CO₂ reduction. Rigorous LCA is essential, as upstream emissions (energy inputs, transportation, land use changes) can erode or eliminate carbon benefits.

Additionality and Measurement, Reporting, and Verification (MRV): Carbon markets demand proof that claimed reductions are "additional"—that is, they would not have occurred without the intervention. MRV systems provide the data infrastructure to track carbon flows, verify claims, and generate tradeable credits. The quality of MRV directly determines access to premium carbon credit markets.

Techno-Economic Analysis (TEA): TEA evaluates whether a process can achieve cost-competitiveness with incumbent fossil-based alternatives. Key parameters include feedstock costs, conversion efficiency, capital expenditure (CapEx), operating expenditure (OpEx), and product yield. For climate biotech, the critical question is whether carbon credit revenues can bridge the gap to cost parity.

Sector-Specific KPI Benchmarks

Metric	Target Range	Current Industry Average	Notes
CO₂ Conversion Efficiency	>70%	40–60%	Varies by organism and pathway
Product Yield (g/L)	>100 g/L	30–80 g/L	Critical for economic viability
Carbon Intensity Reduction	>70% vs. fossil	30–60%	Dependent on energy source
CapEx ($/tonne CO₂ capacity)	<$300	$400–800	Pilot-to-commercial scale gap
Levelized Cost of Carbon Removal	<$100/tonne	$200–600/tonne	DOE Carbon Negative Shot target
Time to Commercial Scale	<5 years	7–12 years	"Valley of Death" challenge

What's Working and What Isn't

What's Working

Gas Fermentation at Commercial Scale: LanzaTech has demonstrated that biological conversion of industrial waste gases can operate commercially. With six plants operational globally, the company has proven that engineered bacteria can continuously process CO-rich off-gases from steel mills and other industrial sources into ethanol. The resulting ethanol feeds into supply chains for sustainable aviation fuel (SAF), consumer products, and chemicals. The technology's modularity enables deployment across diverse industrial contexts without requiring massive centralized infrastructure.

Strategic Corporate Partnerships: Companies like Cemvita Factory have secured partnerships with major industrial players—Oxy Low Carbon Ventures, Mitsubishi Heavy Industries, Sumitomo—that provide not just capital but also access to CO₂ feedstocks, integration sites, and offtake agreements. These partnerships de-risk technology scale-up by ensuring market access before production begins.

Government Catalytic Funding: The U.S. Department of Energy's Carbon Negative Shot initiative, with its target of $100/tonne CO₂ removal at gigatonne scale, has channeled significant resources into bio-based approaches. In 2024, DOE invested $100 million in pilot-scale biomass and mineralization testbeds, and funded seven Biomass with Carbon Removal and Storage (BiCRS) projects specifically focused on biological pathways. These public investments validate technology while attracting private co-investment.

Premium Carbon Credit Markets: The emergence of high-quality, durable carbon removal registries—Puro.earth (backed by Nasdaq), Isometric, and others—has created differentiated markets where bio-based carbon removal can command premium pricing. Biochar, a bio-derived carbon sink, dominated certified engineered carbon removal credits in 2024.

What Isn't Working

The "Missing Middle" Financing Gap: Climate biotech faces a structural financing problem. Venture capital funds early-stage research; project finance supports proven infrastructure. But the pilot-to-commercial transition—requiring $50–500 million in risk capital—falls into a gap where neither VC nor traditional lenders are comfortable. The average time between Series A and B rounds has stretched to 26 months (from 11 months in 2021), reflecting this capital scarcity.

Feedstock Competition and Supply Chain Fragility: Many bio-CCU processes depend on consistent, low-cost feedstocks—industrial off-gases, biomass residues, or direct CO₂ streams. Competition for these feedstocks is intensifying as multiple climate tech sectors pursue similar inputs. Supply chain disruptions, as seen during COVID-19 and subsequent geopolitical events, expose vulnerabilities in just-in-time biological manufacturing.

Scale-Up Failures and Biology Risk: Biological processes that perform excellently at bench scale frequently encounter unexpected challenges at pilot and commercial scale. Contamination, strain stability, reactor design, and downstream processing all present risks that are difficult to model. Several high-profile synthetic biology companies have written down assets or pivoted strategies after scale-up failures.

Carbon Credit Quality Concerns: The voluntary carbon market has faced credibility crises, with investigations revealing that many nature-based offsets failed to deliver claimed reductions. While bio-based removal is generally more measurable than avoided deforestation, scrutiny has increased across all carbon credit categories, and buyers are more cautious.

Key Players

Established Leaders

LanzaTech (NASDAQ: LNZA): The most commercially advanced gas fermentation company, with six operational plants converting industrial waste gases into ethanol. In 2024, announced a first-of-its-kind integrated CCUS project in Norway with Eramet, targeting 24 kilotonnes/year of ethanol production from manganese smelter gases. Full-year 2024 revenue of $49.6 million.

Ginkgo Bioworks (NYSE: DNA): The leading cell programming platform, providing foundational tools and services for synthetic biology applications across sectors. Ginkgo's platform enables other companies to engineer organisms for carbon-negative applications without building biology capabilities from scratch.

Novozymes (merged with Chr. Hansen): Global leader in industrial enzymes and microbial solutions with deep expertise in fermentation at scale. The combined entity provides both the biological components and the manufacturing know-how for industrial biotechnology.

Emerging Startups

Cemvita Factory: Houston-based synthetic biology company engineering "xtremophiles" to convert CO₂ and methane into ethylene, polymers, and chemical intermediates. Partnership with Oxy targets converting 1.7 million tonnes/year of captured CO₂ into 1 billion pounds/year of bioethylene.

Living Carbon: Develops genetically enhanced trees with photosynthesis boosted by up to 27%, accelerating carbon capture in forestry operations. Backed by Lowercarbon Capital, with 4–5 million seedlings deployed in 2023–2024.

Mango Materials: California-based company converting waste methane into biodegradable PHA bioplastics using methanotrophic bacteria, creating a circular carbon pathway from greenhouse gas to compostable materials.

Key Investors and Funders

Breakthrough Energy Ventures: Bill Gates-backed fund with $2+ billion focused on climate technologies with gigatonne-scale potential, active in synthetic biology and carbon removal.

Lowercarbon Capital: Climate-focused VC led by Chris Sacca, with investments spanning Living Carbon, thermal batteries, and carbon-negative processes. Known for aggressive early-stage bets on frontier technologies.

Carbon Direct Capital: Specialized carbon removal investor that provided $40 million to LanzaTech in Q2 2024, representing sophisticated capital specifically targeting carbon-negative businesses.

U.S. Department of Energy: Through programs like the Carbon Negative Shot and Bioenergy Technologies Office, DOE has deployed hundreds of millions in grants, loans, and cooperative agreements supporting bio-based carbon removal.

Examples

LanzaTech's Norway CCUS Project: In October 2024, LanzaTech and Eramet announced plans to integrate carbon capture, utilization, and storage at Eramet's manganese smelter in Porsgrunn, Norway. The project will convert up to 30% of furnace CO₂ emissions into fuel-grade ethanol (24 kilotonnes/year), with potential emissions reduction of approximately 200 kilotonnes CO₂. Operations are targeted for 2028, with Brookfield Asset Management holding right of first refusal for project financing. This demonstrates how bio-CCU can integrate into existing heavy industrial infrastructure.
Cemvita-Oxy Bioethylene Demonstration: Cemvita Factory's partnership with Oxy Low Carbon Ventures represents a potential breakthrough in carbon-negative chemicals. The project aims to convert 1.7 million tonnes/year of captured CO₂ from a cogeneration power plant into 1 billion pounds/year of bioethylene—a foundational chemical for plastics, textiles, and packaging. If successful at scale, this would represent one of the largest bio-CCU facilities globally and demonstrate the viability of replacing fossil-derived platform chemicals.
Living Carbon's Enhanced Forestry: Rather than engineering industrial microbes, Living Carbon applies synthetic biology to trees themselves. By introducing genes that enhance photosynthetic efficiency, the company's seedlings capture carbon faster than conventional trees. With millions of enhanced seedlings planted across U.S. forestry operations in 2023–2024, Living Carbon demonstrates that bio-CCU can extend beyond fermentation tanks to landscape-scale interventions. The approach combines biological innovation with existing forestry infrastructure and carbon credit markets.

Action Checklist

Conduct rigorous life cycle assessment (LCA) of your process to verify carbon-negative claims across the full value chain, including energy inputs and upstream emissions
Develop detailed techno-economic analysis (TEA) identifying the carbon credit price or cost reduction pathway needed to achieve unit economics viability
Secure feedstock supply agreements with industrial partners to ensure consistent, low-cost access to CO₂, CO, or biomass inputs
Engage early with carbon credit registries (Puro.earth, Isometric, Verra) to understand certification requirements and design MRV systems accordingly
Structure pilot projects with clear stage-gate milestones that de-risk scale-up and attract follow-on financing
Build relationships with strategic corporate partners who can provide both capital and offtake commitments
Monitor regulatory developments (IRA tax credits, EU Carbon Border Adjustment Mechanism, SEC climate disclosures) that affect the economics and compliance value of carbon-negative processes

FAQ

Q: How do carbon-negative bioprocesses differ from traditional carbon capture and storage (CCS)? A: Traditional CCS captures CO₂ from point sources and injects it underground for permanent geological storage. Carbon-negative bioprocesses capture carbon (often from waste streams or the atmosphere) and convert it through biological pathways into useful products—chemicals, fuels, materials. This creates economic value from carbon rather than treating it purely as waste, potentially improving project economics. However, the carbon embodied in products may eventually return to the atmosphere (e.g., when biofuels are combusted), so permanence varies by application.

Q: What is the current cost range for biologically-based carbon removal, and how does it compare to other approaches? A: Biologically-based carbon removal costs currently range from $200–600 per tonne of CO₂, depending on the pathway and scale. This compares to $400–1,000+ for direct air capture (DAC), $50–150 for biochar, and $10–50 for nature-based solutions like reforestation (though with varying permanence). The DOE's Carbon Negative Shot targets $100/tonne for gigatonne-scale removal. Bio-CCU pathways may achieve lower costs faster than DAC because they can generate product revenue alongside carbon credits.

Q: What are the primary risks for investors in climate biotech? A: Key risks include: (1) Scale-up risk—biological processes often fail to maintain performance from lab to commercial scale; (2) Financing risk—the "missing middle" between VC and project finance creates capital gaps; (3) Market risk—carbon credit prices and quality standards are evolving rapidly; (4) Technology risk—competing approaches (DAC, enhanced weathering, electrochemical) may achieve cost curves faster; (5) Regulatory risk—policy changes (IRA modifications, carbon pricing) can alter project economics.

Q: How should companies structure carbon credit claims for bio-CCU products? A: Carbon credit claims require robust MRV systems that track carbon flows throughout the value chain. Companies should: (1) Use conservative LCA assumptions and third-party verification; (2) Clearly distinguish between emissions avoided (displacing fossil products) and carbon removed (atmospheric CO₂ converted to durable products); (3) Select appropriate registries (Puro.earth for engineered removal, Verra for broader offset markets); (4) Disclose permanence—how long carbon remains sequestered before potential release. Regulatory standards are tightening, and greenwashing claims face increasing legal and reputational risks.

Q: What government incentives support carbon-negative biotech in the United States? A: Key incentives include: (1) Section 45Q tax credits for carbon capture, expanded under the Inflation Reduction Act to $85/tonne for geological storage and $60/tonne for utilization; (2) DOE grant programs including Carbon Negative Shot ($100 million in 2024 for pilot testbeds) and BiCRS projects; (3) USDA programs supporting sustainable agriculture and bio-based products; (4) State-level incentives, particularly California's Low Carbon Fuel Standard which provides credits based on carbon intensity reductions. The IRA's manufacturing credits also benefit domestic bio-based production facilities.

Sources

McKinsey & Company. "A blueprint for scaling voluntary carbon markets to meet the climate challenge." 2024. [Cited for carbon removal market projections and financing gap estimates]
U.S. Department of Energy. "Carbon Negative Shot: Technological Innovation Opportunities for CO₂ Removal." November 2024. [Cited for DOE funding, targets, and BiCRS project details]
PwC. "State of Climate Tech 2024." 2024. [Cited for climate tech investment trends and sector analysis]
Grand View Research. "Synthetic Biology Market Size & Share Report, 2033." 2024. [Cited for market size projections]
LanzaTech. "LanzaTech and Eramet announce plans for first-of-a-kind integrated CCUS project in Norway." October 31, 2024. [Cited for company-specific project details]
Puro.earth. "Carbon Removal Market Report 2024." 2024. [Cited for carbon credit market dynamics and biochar dominance]
International Energy Agency (IEA). "Annual venture capital funding investment in selected carbon dioxide removal technologies, 2019-2024." 2024. [Cited for investment data]
Greentown Labs. "Meet Cemvita Factory, Whose Microbes Are Tackling One Gigaton of CO2." 2024. [Cited for company strategy and partnership details]