Trend watch: Climate biotech: carbon-negative processes in 2026 — signals, winners, and red flags

Forty-five percent of Fortune 500 companies have committed to net-zero targets, creating unprecedented demand for credible carbon removal solutions—yet the climate biotech sector delivering carbon-negative processes raised approximately $17.8 billion in 2023 alone, revealing both the scale of opportunity and the flood of capital chasing solutions that may or may not work at scale. For US sustainability leads navigating this landscape, distinguishing genuine carbon-negative innovation from measurement theater has become a core competency with direct implications for emissions accounting, procurement decisions, and long-term decarbonization strategy.

Why It Matters

The arithmetic of climate stabilization increasingly demands not just emissions reduction but active carbon removal. The IPCC's pathways to 1.5°C require 6-10 gigatonnes of carbon dioxide removal (CDR) annually by 2050. Current global removal capacity (excluding land use) measures in single-digit megatonnes. This gap—three orders of magnitude—defines the opportunity for climate biotech and the urgency driving investment.

Biological approaches to carbon removal offer potential advantages over purely mechanical systems. Living organisms self-replicate, potentially reducing marginal costs as systems scale. Biological processes can operate at ambient temperatures and pressures, avoiding the energy penalties of high-temperature industrial systems. Engineered biology can produce valuable co-products (proteins, materials, chemicals) that offset removal costs and create positive unit economics.

However, biological systems also introduce complexity. Living organisms respond to environmental variations; maintaining consistent performance outside laboratory conditions is notoriously challenging. Scale-up from bench to industrial often reveals metabolic bottlenecks invisible at smaller scales. Measurement of actual carbon fixation—versus theoretical potential—requires sophisticated monitoring that many early-stage ventures lack.

For US sustainability leads specifically, the policy environment is unusually favorable. The Inflation Reduction Act provides substantial tax credits for carbon removal ($180/tonne for direct air capture with geological storage under 45Q). The Department of Energy's Regional Direct Air Capture Hubs program is deploying $3.5 billion. Corporate advance purchase commitments (Frontier, NextGen CDR) provide demand signals for nascent technologies. This combination of policy support, corporate demand, and venture capital creates conditions for rapid scaling—but also for value destruction if capital flows faster than technological readiness warrants.

Key Concepts

Biological Carbon Fixation Pathways

Climate biotech leverages multiple biological mechanisms for capturing and converting atmospheric or waste CO₂:

Photosynthetic Enhancement improves natural carbon fixation through engineered crops, algae, or cyanobacteria with enhanced RuBisCO efficiency (the enzyme limiting photosynthetic carbon uptake). Companies like Living Carbon engineer trees with increased growth rates and reduced decomposition, theoretically accelerating forest carbon sequestration.

Methanotrophy converts methane (a potent greenhouse gas) to biomass or products. String Bio in India uses methanotrophic bacteria to produce single-cell protein from industrial methane emissions—simultaneously mitigating methane emissions and creating carbon-negative protein with 20x lower water use than soy.

Gas Fermentation uses engineered microorganisms to convert industrial waste gases (CO, CO₂, syngas) into chemicals, fuels, or proteins. LanzaTech's commercial facilities produce ethanol from steel mill emissions; Nanjing Gasgene Biotech converts industrial off-gas to chemicals and protein using CRISPR-engineered organisms.

Mineralization Enhancement accelerates natural weathering processes where silicate rocks absorb CO₂ as they break down. Companies like Lithos Carbon spread volcanic rock on agricultural land, combining enhanced weathering with soil health benefits. Biological processes (microbial activity, plant root exudates) can accelerate weathering rates.

Biochar Production pyrolyzes biomass into stable carbon that can be sequestered in soils for centuries. Carbon Cell (UK) produces compostable foam from carbon-negative biochar combined with natural binders, creating construction materials with embedded carbon removal.

Pathway	CO₂ Removal Mechanism	Permanence	Co-Products	TRL Level
Photosynthetic enhancement	Accelerated biomass growth	Decades (forest cycles)	Timber, biomass	5-7
Methanotrophy	CH₄ → biomass conversion	Variable (product-dependent)	Protein, lipids	6-8
Gas fermentation	CO/CO₂ → chemicals/protein	Variable (product-dependent)	Ethanol, protein, materials	7-9
Enhanced weathering	Mineral carbonation	Millennia	Soil amendments	6-7
Biochar	Pyrolysis stabilization	Centuries	Soil amendment, materials	7-8

Carbon Accounting for Biological Systems

Measuring carbon removal from biological processes presents unique challenges that sustainability leads must understand:

Additionality: Would this carbon fixation happen anyway? Engineered organisms in contained bioreactors have clear additionality; enhanced forest growth on existing forestland faces more complex accounting.

Permanence: How long does sequestered carbon remain out of the atmosphere? Biochar in soil offers centuries of stability; carbon in single-cell protein that's consumed and metabolized may re-enter the atmosphere within days.

Leakage: Does the intervention displace emissions elsewhere? Biofuels that reduce agricultural land availability may drive deforestation, negating nominal carbon benefits.

Measurement Uncertainty: Biological systems exhibit inherent variability. Unlike industrial point sources with measurable exhaust streams, biological carbon fixation requires statistical approaches accounting for environmental variation, sampling error, and model uncertainty.

Credible carbon removal claims require third-party verification against established standards. The Puro.earth standard, Verra's methodology for biochar, and emerging frameworks for enhanced weathering provide benchmarks—but standards are evolving rapidly, and sustainability leads must track developments to ensure claims remain defensible.

What's Working

Gas Fermentation Reaching Commercial Scale

LanzaTech's commercial gas fermentation technology has graduated from proof-of-concept to industrial deployment. The company's facilities in China and Belgium convert steel mill emissions to ethanol, with additional projects in development. The carbon arithmetic works: by capturing waste CO₂ that would otherwise vent to atmosphere and converting it to products that displace fossil-derived alternatives, net emissions are genuinely reduced.

The commercial validation matters beyond LanzaTech specifically. It demonstrates that biological conversion of industrial waste gases can operate at scale, with consistent feedstock quality, predictable output, and economically viable unit operations. This paves pathways for second-generation companies targeting higher-value outputs or different gas compositions.

Methane-to-Protein Creating Carbon-Negative Food

String Bio's technology converts methane from industrial sources (landfills, wastewater, agricultural waste) to single-cell protein suitable for animal feed. The dual climate benefit—destroying a potent greenhouse gas while producing food with minimal land and water use—creates compelling economics even before carbon credit value.

The company's expansion across India and Australia in 2024-2025 demonstrates market traction. With protein demand growing globally and traditional sources (soy, fishmeal) facing sustainability constraints, methane-derived protein offers a rare "and" solution: addressing food security while delivering climate benefits.

Biochar Moving Beyond Soil Amendment

Early biochar applications focused on agricultural soil amendment—valuable but limited by soil application rates and farmer adoption. Emerging applications in construction materials (Carbon Cell's compostable foam), water filtration, and industrial absorbents expand addressable markets while maintaining carbon removal benefits.

The UK's Carbon13 accelerator funded six climate ventures in 2024 including Carbon Cell, signaling investor recognition that biochar's value extends beyond agriculture. By embedding stable carbon in durable products, these applications may offer more predictable permanence than soil-applied biochar subject to erosion and microbial activity.

What's Not Working

Scale-Up Failures

The gap between laboratory performance and commercial viability continues claiming ventures. Metabolic engineering that functions in controlled bioreactors frequently fails when exposed to industrial conditions: variable feedstock composition, contamination, temperature fluctuations, and the economic realities of continuous rather than batch operation.

Several well-funded ventures have retreated from aggressive scaling timelines as pilot operations revealed unexpected challenges. The pattern is consistent: organisms optimized for growth rate underperform on carbon fixation efficiency; high-productivity strains prove unstable over extended operation; contamination management consumes resources that business plans allocated elsewhere.

For sustainability leads, the implication is skepticism toward capacity projections from pre-commercial ventures. Demand references from operating facilities; discount projections lacking demonstrated scale-up track records.

Measurement Theater in Carbon Accounting

The rush to claim carbon-negative credentials has outpaced measurement capability for some ventures. Common problems include:

Theoretical carbon fixation claims based on stoichiometry rather than measured sequestration
Boundary definitions excluding energy inputs, supply chain emissions, or end-of-life product fates
Permanence claims unsupported by long-term stability data
Comparisons to arbitrary baselines inflating removal claims

High-profile instances of credit invalidation (particularly in voluntary carbon markets for forestry offsets) have heightened scrutiny across all biological carbon removal pathways. Sustainability leads incorporating biotech-derived removal into emissions accounting face reputational and regulatory risk if claims prove indefensible.

The antidote: demand third-party verification against recognized standards, with measurement methodologies disclosed and subject to audit. Avoid providers unable to articulate uncertainty bounds on removal claims.

Economic Challenges at Current Carbon Prices

Most carbon-negative biotech processes cannot achieve positive unit economics from carbon credit value alone at current prices ($20-80/tonne in compliance markets; highly variable in voluntary markets). Economic viability typically requires either:

Co-product value: Protein, chemicals, materials, or energy products generating revenue beyond carbon credits
Policy support: Tax credits (45Q), grants, or subsidized offtake
Premium voluntary pricing: Advance purchase commitments from corporate buyers at prices ($100-600/tonne) that exceed commodity carbon credit values

For ventures dependent on eventual carbon price increases to achieve viability, the investment thesis rests on policy assumptions that may or may not materialize. Sustainability leads should preference approaches with multiple revenue streams over pure removal plays.

Key Players

Established Leaders

LanzaTech (USA) — Commercial gas fermentation converting industrial emissions to ethanol and other chemicals; operating facilities in China, Belgium, and India with additional projects in development. Strategic partnerships with major industrials including ArcelorMittal for steel mill emissions capture.

Ginkgo Bioworks (USA) — Synthetic biology platform enabling custom organism engineering for multiple applications including industrial biotechnology. While not directly a climate company, Ginkgo's platform underpins many climate biotech ventures through organism design and optimization services.

Novozymes/Novonesis (Denmark) — Industrial enzyme producer with growing climate portfolio including biofuels, biomaterials, and biological carbon capture applications. Deep manufacturing expertise enabling scale-up of biological processes.

Emerging Startups

String Bio (India) — Methane-to-protein biotech producing carbon-negative single-cell protein with 20x lower water use than soy. Expansion across India and Australia in 2024-2025 demonstrates market validation for alternative protein with climate co-benefits.

Lithos Carbon (USA) — Enhanced rock weathering deploying volcanic rock on agricultural land for atmospheric CO₂ removal. Verification methodology developed with academic partners; offtake agreements with major carbon removal buyers.

Nanjing Gasgene Biotech (China) — Gas fermentation using CRISPR-engineered organisms to convert industrial off-gas to chemicals and proteins. Represents Chinese capability development in climate biotech.

Future By Insects (UK) — World's first carbon net-negative insect protein for animal feed, integrating microalgae production with insect farming. Carbon13 portfolio company demonstrating integration of climate benefits with alternative protein.

Key Investors & Funders

Breakthrough Energy Ventures — Bill Gates-backed fund with significant climate biotech portfolio; patient capital thesis suited to long development timelines of biological systems.

Lowercarbon Capital — Climate-focused fund investing across pathways from fusion to methane reduction; active in emerging biotech approaches to carbon removal.

SOSV/IndieBio — Biotech accelerator providing $250-500k pre-seed investments; has backed numerous climate biotech ventures including those targeting industrial biotechnology and carbon capture.

Prelude Ventures — Growth-stage climate investor with portfolio spanning food, energy, and industrial decarbonization; active in biotech-enabled climate solutions.

Examples

LanzaTech's ArcelorMittal Partnership (Belgium): The commercial facility at ArcelorMittal's Ghent steel works converts carbon monoxide from blast furnace off-gas to ethanol through gas fermentation. Producing approximately 80 million liters of ethanol annually, the project demonstrates industrial-scale biological carbon capture integrated with heavy industry. The ethanol displaces fossil-derived fuel, creating genuine emissions reduction rather than merely theoretical carbon fixation.
Lithos Carbon Agricultural Deployment (2024-2025): Lithos spreads crusite (processed basalt) on agricultural land across the US Midwest, where natural weathering processes—accelerated by microbial activity and plant root exudates—absorb atmospheric CO₂ as the rock breaks down. The company's verification methodology, developed with Yale and other academic partners, enables quantification of carbon removal with uncertainty bounds that satisfy rigorous buyers like Frontier Climate and Microsoft. The co-benefits for soil health provide additional value to farmer partners.
String Bio's Methane-to-Protein Expansion (India/Australia, 2024-2025): The company's facilities convert methane from waste streams (landfill gas, agricultural waste, wastewater) to single-cell protein approved for animal feed. Each kilogram of protein produced captures approximately 2.5 kg CO₂-equivalent through methane destruction while avoiding land use, fertilizer, and water impacts of conventional protein sources. The dual-value proposition—climate mitigation plus food security—attracts investment and offtake commitments from both climate and agricultural buyers.

Action Checklist

Inventory your emissions profile to identify where biological carbon removal most credibly addresses residual emissions—typically hard-to-abate sources where reduction alone cannot achieve net-zero
Evaluate co-product alignment with procurement needs; biotech processes producing materials, chemicals, or food ingredients may deliver removal credits as a byproduct of commercial supply relationships
Assess measurement capabilities of potential suppliers; require third-party verification, disclosed methodologies, and uncertainty quantification before incorporating removal claims into emissions accounting
Track policy developments including 45Q credit guidance, DOE hub allocations, and emerging EPA methodology approvals that affect which removal pathways qualify for compliance value
Develop internal expertise in biological carbon accounting; distinguish permanent removal from temporary carbon storage to avoid over-claiming reductions
Engage with advance purchase commitments (Frontier, NextGen CDR, First Movers Coalition) that aggregate corporate demand and provide standardized due diligence on removal suppliers

FAQ

Q: How should we evaluate carbon-negative claims from biotech ventures that don't have commercial-scale operations yet? A: Prioritize ventures with pilot-scale data from realistic conditions—not just laboratory demonstrations. Request third-party technical assessments of scale-up feasibility. Examine the gap between current performance and commercial projections; gaps exceeding 10x warrant significant skepticism. Preference ventures with co-products providing economic viability independent of carbon credit value, reducing pressure to overstate removal claims.

Q: What permanence thresholds matter for biological carbon removal in corporate emissions accounting? A: Context-dependent, but general guidance: SBTi recognizes removals with 100+ year permanence for neutralization claims. Shorter-duration storage (carbon in products that eventually decompose) may qualify for different accounting treatment but typically cannot offset claimed "net-zero" status. Biochar (centuries), mineralization (millennia), and geological storage of biogenic CO₂ (geological timescales) offer highest-permanence biological pathways. Be cautious of ventures claiming removal credit for carbon in food, fuel, or other products with short atmospheric residence times.

Q: How do 45Q tax credits apply to biological carbon capture? A: Direct air capture using biological processes (e.g., engineered organisms capturing atmospheric CO₂) can qualify for 45Q credits if paired with geological sequestration or specific utilization pathways. Point-source capture from biogenic sources (e.g., ethanol fermentation CO₂) also qualifies, creating value for facilities capturing their own process emissions. Credit values reach $180/tonne for DAC with geological storage. Critical requirement: Treasury guidance specifies verification requirements that many early-stage biotech ventures cannot yet satisfy.

Q: Should we prioritize biotech-derived carbon removal over mechanical DAC in our carbon removal procurement? A: Portfolio approach recommended. Mechanical DAC offers predictable operation but high costs ($400-1000/tonne current). Biotech approaches may achieve lower costs if scaled successfully but carry greater technology risk. For near-term commitments (through 2030), consider mechanical DAC for certainty of delivery while investing in advance purchase agreements with promising biotech approaches that may deliver lower-cost removal post-2030. Diversification across pathways reduces exposure to any single technology failure.

Q: What red flags indicate potential measurement theater in climate biotech ventures? A: Watch for: (1) Carbon claims based on theoretical stoichiometry without measured verification; (2) Boundary definitions excluding energy inputs, upstream emissions, or downstream fate of carbon-containing products; (3) Permanence assertions without long-term stability data or third-party verification; (4) Comparisons to arbitrary baselines that inflate removal claims; (5) Resistance to disclosure of measurement methodologies; (6) Credit issuance through unestablished or self-created registries without independent governance.

Sources

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World Economic Forum. "Waste to value: the 11 startups leading on carbon capture and utilization." April 2025. https://www.weforum.org/stories/2025/04/uplink-carbon-capture-utilization-startup/
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