• Startups like Equatic and Climeworks develop ways to remove carbon dioxide from the atmosphere.
• Carbon removal helps businesses meet ESG goals and offset emissions through a carbon credits system.
• This article is part of "Transforming Business," a series on the must-know leaders and trends impacting industries.

Out on a barge in Los Angeles, a team of engineers is hard at work tweaking the designs of a collection of machines with multiple tubes attached to tanks filled with air and different minerals.

The team works for a startup called Equatic, which uses a process called sea electrolysis to remove carbon dioxide from the atmosphere. Seawater runs through an electrolyzer, which separates the water into an acid and a base. Rock minerals neutralize the acid, and the base mixes with CO2 from the atmosphere. This results in carbonates that can safely return to the ocean.

Carbon removal technologies, like those developed by Equatic, can transform businesses by helping them reduce their legacy carbon footprint. For many companies with environmental, social, and governance goals, investing in carbon removal through the purchase of carbon credits helps them offset their emissions and get closer to their goal of being "net zero." For rapidly developing industries like artificial intelligence that massively consume energy, implementing carbon removal could help offset emissions in the long term.

The idea of Equatic emerged in the research labs at the University of California, Los Angeles, with a team led by its cofounder Gaurav Sant, a sustainability professor at the school.

Sant said that his team began thinking about how to activate and expand the capacity of oceans, which already naturally absorb CO2 from the atmosphere. Processes such as sea electrolysis have been used for decades, though scaling ocean carbon removal technology has started only in the past few years. Sant said his experience as a cement chemist helped him consider ways to reduce carbon emissions.

"There was very little attention that was being paid truthfully to reducing the carbon intensity of cement production and concrete construction," Sant said. "The journey started with low-carbon cement and low-carbon concrete, and from there, it sort of went into a bunch of other things."

For startups that want to break into the industry and market their product's integrity, they must make carbon removal measurable. At the development plant in Los Angeles, Equatic engineers measure the machinery's ability to remove carbon and produce hydrogen. They then quantify carbon removal results. They also publish their findings in peer-reviewed scientific research papers.

Equatic is developing the world's largest ocean-based carbon removal plant in Singapore, a demonstration project in partnership with the country's National Water Agency. The plan for the new plant is to remove 4,000 tons of CO2 annually and create 300 kg of carbon-negative hydrogen a day, according to its website. If these projects succeed, Equatic intends to take its idea to a commercial scale.

For Climeworks, a Zurich carbon removal startup, scaling has taken place gradually over the past fifteen years. The company uses direct air capture technology at its plants to suck CO2 out of the air and then later mineralize it into a solid rock form and store it underground.

"What carbon removal can offer to businesses is making sure that CO2 in the atmosphere, or climate in general, is not a barrier to growth," Jan Wurzbacher, the CEO of Climeworks, said.

The carbon credits market has shortcomings

While these companies plan to scale commercially, startups like Equatic sell carbon credits to businesses and individuals who want to reduce their carbon footprint. Two of Equatic's customers are Boeing and Stripe. Climeworks counts Microsoft, Boston Consulting Group, and Shopify as clients.

The carbon credits market is highly unregulated, dotted with stories of credits sold but followed by incomplete actions and scams. An investigation by The Washington Post found that some carbon credit ventures reaped profits from protected public lands in the Brazilian Amazon forests and failed to share profits with locals. Essentially, these ventures gave the impression that they would reduce emissions but used lands they had no rights to, possibly invalidating the credits they said they would offset for companies such as Netflix, Salesforce, and Boeing.

"Some 'cheaper' carbon credits that you can buy are not easily verifiable," said Indroneil Ganguly, an environmental and forests sciences professor at the University of Washington.

Critics of carbon credits argue that this system allows businesses to continue polluting. Some businesses, such as Occidental Petroleum, invest in carbon removal and use the process to extract more fossil fuels. While telling businesses to cut emissions would be ideal, Wurzbacher said that cutting them entirely or converting to more sustainable practices could be costly and not immediate.

Carbon removal can be expensive

Even at the rapid scaling rate of these carbon removal startups, their emissions removal is only a small drop in the sea. In 2022 alone, the global aviation industry emitted 800 megatons of CO2. In comparison, Climework's first commercial plant in Iceland, called Orca, can remove 4,000 tons a year, the company says. Climeworks said its larger Mammoth plant would be able to remove 36,000 tons.

The biggest hurdle for carbon removal startups like Equatic and Climeworks is cost. A plus side of Equatic's sea electrolysis process is that it creates hydrogen, which can be used as a clean energy source and lower the technology's costs.

"So you push the price down, right, and that's what stimulates the market," Edward Sanders, the CEO of Equatic, said.

What's more, carbon removal is a voluntary purchase and an elastic good, meaning that it depends on the desire of individuals or businesses to participate, and the demand can shift significantly with price.

"The way in which we are going to get the necessary volumes is going to be at a price point they can accept and still manufacture the goods they are making and clear the services they do," Sanders said.

The cost to permanently remove 1 ton of CO2 right now is between $600-$1,000. Scaling up existing technology requires more laborers and building very specific machinery, Wurzbacher said. Both Climeworks and Equatic have received grants from the US Department of Energy, including a grant for Climeworks to subsidize its expansions in Louisiana and Texas.

This year, Climeworks expanded beyond permanent carbon removal and began offering a new solutions branch of its business. If the direct air capture method is too expensive for customers, Climeworks finds a portfolio of other options they can use, such as reforestation and biomass storage.

The incoming Trump administration raises questions about the future of carbon removal and whether companies will be motivated to cut emissions. 

Both Climeworks' and Equatic's respective CEOs said that while timelines and execution could change, these solutions still had bipartisan support and political momentum. Also, carbon removal itself is inherently adaptive.

"The nice thing about direct air capture," Wurzbacher said, "is that you can basically do it anywhere in the world and have your customers at a very different place."

• The Biden administration on Wednesday approved California's ban on gas cars by 2035.
• Trump has promised to revoke California's authority to set strict limits on tailpipe pollution.
• It's a high-stakes fight over the future of electric vehicles and tackling the climate crisis.

The stage is set for another battle between President-elect Donald Trump and California over the state's aggressive push for electric vehicles that could affect the rest of the country.

The Environmental Protection Agency on Wednesday said California can go ahead with its ban on the sale of new gas-powered cars by 2035. The approval is an attempt to safeguard the state's strict limits on tailpipe pollution from Trump's promise to revoke them and roll back other federal incentives for electric vehicles.

The stakes are high for automakers because what happens in California can dictate companies' broader EV strategies and the pace of the country's shift away from fossil fuels. The state accounts for some 11% of the US auto market and is also the top EV market in the country. In the first half of 2024, EVs and hybrids accounted for nearly 40% of sales in California.

On top of that, 11 other states and Washington D.C. have adopted rules similar to California's as they seek to reduce the country's largest source of greenhouse gas emissions. The rules require automakers to sell a growing number of zero-emissions vehicles over time. In 2026, at least 35% of new cars, pickup trucks, and SUVs must be electric in California and five other states, while other states' targets kick in in 2027.

Automakers largely support easing emissions regulations

While Trump will face legal challenges in trying to roll back California's rules, he could find some automakers on his side.

The Alliance for Automotive Innovation, a lobbying group representing most new vehicle manufacturers in the US, has already asked Trump to ease emissions regulations but keep federal tax incentives that keep EVs affordable.

John Bozzella, president of the alliance, said Wednesday that the waiver was an expected development and the Trump administration will likely revoke it next year.

"We've said the country should have a single, national standard to reduce carbon in transportation," Bozzella said in a statement. "But the question about the general authority of California to establish a vehicle emissions program – and for other states to follow that program – is ultimately something for policymakers and the courts to sort out."

Trump, some Republican lawmakers, and groups linked to fossil fuel interests have repeatedly attacked EVs on the campaign trail, falsely claiming that Americans would be forced to abandon their gas-powered vehicles.

Those attacks come as the EV market deals with a marked slowdown in demand, forcing many companies to reasses their long-term plans for battery-powered cars and, in some cases, add more hybrids to the mix. A pullback in production has made it harder for many companies to meet long-term emissions requirements. Automakers including General Motors, Ford, and Stellantis have laid off thousands of workers.

Auto market analysts, environmental lawyers, and policy experts told Business Insider that they expect the shift to zero-emissions vehicles to continue regardless of who's in the White House — albeit at a slower pace if Trump and Congress overturn tax incentives to buy EVs and investments in charging infrastructure.

"Whatever the Trump administration does this time, automakers' concerns about stability will come up again because all of these manufacturers have said zero-emissions vehicles are the future," Sean Donahue, an attorney who's represented the Environmental Defense Fund in litigation over California's emissions waiver, said.

He added that there's pressure from regulators in other countries to address the climate crisis. US automakers also don't want to fall far behind competitors in countries like China, where affordable EVs have taken off.

California looks to 'Trump-proof' its regulations

Even if Trump does revoke California's emissions waiver, Gov. Gavin Newsom is already trying to "Trump-proof" the state, including its EV and climate policies.

Newsom said he would restore rebates for consumers who buy EVs if Trump ends the federal $7,500 tax credits enacted in the Inflation Reduction Act. This month, the state's energy commission approved a $1.4 billion investment in EV charging and hydrogen fuel stations over the next four years. The commission said the funding could help build nearly 17,000 new public chargers for passenger vehicles — on top of the 152,000 available now.

Newsom also convened a special legislative session to bolster California's defenses against Trump's attacks. Lawmakers could pass $25 million in new funding for the California Department of Justice so the state can file litigation against the Trump administration. That will likely happen if Trump revokes the state's tailpipe pollution waiver.

Karoline Leavitt, a spokeswoman for the Trump transition team, said that Trump plans to stop what he says are attacks on gas-powered cars.

"When he takes office, President Trump will support the auto industry, allowing space for both gas-powered cars AND electric vehicles," she said in an email.

Ann Carlson, a professor of environmental law at the University of California at Los Angeles, told Business Insider that she expects the Trump administration to face an uphill legal battle.

She said the EPA has approved California's authority to set strict rules for tailpipe pollution for decades because the state's air quality is so bad. Otherwise, areas including Los Angeles and the Central Valley wouldn't comply with federal air pollution laws and could be penalized.

"The sanction is the withholding of federal highway funds," Carlson — who recently served as chief counsel to the National Highway Traffic Safety Administration — said. "It's quite draconian. So California has a pretty good argument that it needs these waivers to meet federal law."

The Supreme Court last week agreed to consider a lawsuit that oil and gas producers filed against the EPA over its waivers allowing California to set stricter limits on tailpipe pollution than the federal government. However, SCOTUS will only decide whether fossil fuel makers have standing to sue over what they say is bureaucratic overreach and won't consider whether California's waiver is legal.

James Di Filippo, a principal policy analyst at the research firm Atlas Public Policy, said automakers will likely continue to walk back their EV investments while the legal battles play out. Companies could seek another compromise with California to restore more certainty as they plan new vehicle models for years to come.

"If they're uncertain about a regulatory outcome, they'll default to a less intense push," he said.