In recent years, the technology sector has actively promoted the development of carbon dioxide filtration technologies aimed at mitigating the effects of greenhouse gas emissions. Numerous high-profile funding announcements for direct air capture (DAC) projects have been made by companies eager to invest in these initiatives.
This trend aligned with the Biden administration’s commitment to combat climate change through federal investments in regional DAC hubs. However, the political landscape has changed with the election of Donald Trump, who has labeled climate change as a hoax and has advocated for increased fossil fuel extraction. Recent moves by the Trump administration include significant cuts to federal support for at least 10 DAC hubs.
This development raises concerns for American tech firms, which are grappling with the growing carbon footprint associated with their AI ambitions. The evolving regulatory environment could undermine their reliance on domestic carbon removal solutions to achieve sustainability targets.
Major corporations such as Amazon and Microsoft have already made substantial investments in carbon removal initiatives.
Tech giants like Microsoft and Amazon have pledged significant resources toward carbon removal efforts in the U.S. Erin Burns, executive director of Carbon180, an advocacy group focused on carbon removal, stated, “I imagine they’ll allocate the funds they’ve committed. The real question is whether those investments will be made in U.S.-based projects or abroad.”
Last week, the U.S. Department of Energy announced the cessation of approximately $7.5 billion in funding for 223 clean energy and climate programs. A list of affected grantees revealed that funding for several DAC hubs was discontinued.
Among the impacted projects was a grant awarded to California-based startup CarbonCapture for an engineering study for a new DAC facility in Louisiana. Microsoft had previously signed an agreement with the firm to capture carbon emissions in line with its carbon-negative target.
Following the announcement, CarbonCapture declared plans to relocate its initial commercial pilot from Arizona to Alberta, Canada. This decision, as conveyed by CEO Adrian Corless, was influenced by the shifting landscape for DAC projects in the U.S. after the recent elections, particularly in light of Trump’s 2026 budget proposal which called for a halt to funding for carbon removal technologies.
When contacted by Technology News, Corless noted that, while they had not received formal confirmation of the grant cancellation, the information released suggested they could not proceed with the Louisiana project without funding. CarbonCapture was also involved in other DAC initiatives in California and Illinois that experienced similar cuts.
He emphasized the setbacks these funding cuts would impose on the U.S.’s standing in carbon removal efforts, stating, “This will undoubtedly hinder the leadership position we’ve built in this area over the past four years.”
Microsoft was set to be among the first clients for a federally financed DAC hub in Louisiana being developed by other companies. In 2022, the Biden administration initiated a $3.5 billion program aimed at establishing regional DAC facilities nationwide. Notably, some advanced projects backed by oil and gas firms such as Chevron and Occidental Petroleum were spared from the funding cuts.
Captured carbon can be utilized in enhanced oil recovery methods to extract additional reserves. Occidental had indicated during earnings discussions that its carbon removal initiatives could potentially lead to the extraction of tens of billions of additional barrels of oil after discussions with the presidency regarding the economic advantages of carbon removal.
An Occidental subsidiary, 1PointFive, is working on a significant project at King Ranch, which also received funding as one of the initial DAC hubs during the Biden administration. Additionally, Amazon secured a deal with 1PointFive to purchase 250,000 metric tons of carbon removal in 2023.
Smaller DAC firms, which often depend more on federal support than established fossil fuel entities, now face significant challenges in the current environment. “Unless you possess substantial financial resources like Occidental, it’s going to be incredibly challenging to advance projects,” notes Corless.
The funding cuts by the Trump administration compound existing hurdles faced by the emergent carbon removal sector, including concerns over the feasibility and sustainability of DAC technologies due to their high energy demands. CarbonCapture, for instance, terminated another project in Wyoming over difficulties in securing prompt electricity for the facility.
Meanwhile, tech companies like Microsoft, Amazon, and Google, which have turned to DAC in their quest to lower carbon emissions, have seen their overall footprints increase despite intentions to combat climate change. The expansion of data centers laden with advanced, energy-hungry hardware to accommodate AI capabilities has deepened this dilemma. Environmentalists remain skeptical of DAC, fearing it may serve as a superficial solution rather than addressing the essential need to cut emissions at the source.
Conversely, some climate advocates argue that carbon removal is vital given the extent of carbon pollution already produced and essential for addressing climate change. As the Trump administration continues to roll back various environmental protections — even instructing the Department of Energy to refrain from using the term “climate change” — the urgency for carbon management is likely to intensify.
The recent cuts from the DOE are perceived as another partisan maneuver against Democrat-majority states, which house many of the affected projects, amid ongoing budget disputes and a potential government shutdown. The House budget proposal for fiscal year 2026 aimed to eliminate $1 billion from the DAC hubs initiative.
However, the impact of the cuts is also felt in Republican-leaning states, as highlighted by reports. The withdrawn CarbonCapture grant was officially categorized as a California project, even though it was intended for Louisiana. The cuts extended beyond DAC, affecting various initiatives, including those focused on hydrogen fuel, turbine, and battery manufacturing.
Burns encapsulated the situation, asserting, “It hinders American innovation in numerous sectors. We are relinquishing a significant competitive advantage that we have.”