Direct Air Capture: Navigating Bankability and Scalability in a Maturing Carbon Capture Sector

The commercialization of Direct Air Capture (DAC) technology has entered a critical phase in 2025, marked by a shift from speculative optimism to pragmatic execution. While the sector's potential to address climate change remains undeniable, investors and developers are now grappling with stark realities: high costs, policy uncertainties, and the daunting challenge of scaling from pilot projects to gigaton-level deployment. Occidental Petroleum (Oxy), a pivotal player in the space, has underscored these challenges through its recent strategic moves and executive remarks, offering a window into the broader industry's struggles and opportunities.

Oxy's Strategic Moves and Industry Insights

Oxy's leadership has been vocal about the structural limitations of current DAC financing models. Anthony Cottone, president of Oxy's carbon removal unit 1PointFive, highlighted a critical misalignment between the long-term revenue needs of lenders and the short-term commitments of voluntary carbon market buyersOxy Executive Says Direct Air Capture Model Isn’t Bankable Now^[1]. This “asymmetric risk” has rendered DAC unbankable for startups, a problem Oxy is addressing by vertically integrating its value chain. The company's STRATOS project, the world's largest DAC facility, is a case in point. With 94% completion and commissioning underway, STRATOS aims to capture 500,000 metric tons of CO₂ annually by late 2025Oxy's STRATOS Update: The Future of Direct Air^[2]. By controlling both capture and storage—whether through enhanced oil recovery (EOR) or permanent sequestration—Oxy reduces the financial and operational risks that have deterred smaller players.

Oxy's acquisition of Holocene, a liquid sorbent DAC startup, further illustrates its strategy to hedge against technological uncertaintiesWhy Oxy’s Acquisition Of Holocene Signals A Maturing Carbon Removal Industry^[3]. This move signals a broader industry trend: consolidation and integration are becoming prerequisites for scalability. As Cottone noted, a single entity owning the entire value chain could mitigate the “asymmetric risk” that has stifled innovationOxy Executive Says Direct Air Capture Model Isn’t Bankable Now^[1].

Industry-Wide Trends and Scalability Challenges

The DAC sector is transitioning from hype to execution, but scalability remains elusive. According to a 2025 report by Sylvera, full-scale deployment is still years away, with most projects operating at “super pilot” scales of hundreds to low thousands of tonnes per yearDirect Air Capture in 2025: The End of Hype, the Start of Realism^[4]. Key barriers include energy intensity, capital costs exceeding $100 per ton of CO₂, and the need for reliable geological storage. Innovations such as modular designs and AI-driven systems are emerging, but most remain at pilot stagesCarbon Capture Technologies in 2025: Innovations and Challenges^[5].

Regional dynamics are also shaping the landscape. Canada and Kenya are emerging as leaders due to favorable geology, renewable energy access, and policy supportDirect Air Capture in 2025: The End of Hype, the Start of Realism^[4]. For example, Canada's hydroelectric power and tax credits create a low-risk environment for DAC, while Kenya's basalt-rich geology enables cost-effective CO₂ mineralization. These examples highlight the importance of localized strategies, yet they also underscore the lack of a one-size-fits-all solution.

Financial Viability and Investor Risks

The financial landscape for DAC is equally complex. In Q1 2025, U.S.-based DAC startups secured only $58 million in venture capital—a 60% drop from the previous yearWhy Investors are Souring on Direct Air Capture^[6]. This decline reflects investor caution amid high costs (up to $1,000 per ton of CO₂) and policy uncertainties, particularly in the U.S., where potential rollbacks of the Inflation Reduction Act (IRA) threaten key incentives like the 45Q tax creditWhy Investors are Souring on Direct Air Capture^[6].

Despite these headwinds, government support remains a lifeline. The U.S. Department of Energy's $1.8 billion in new funding for DAC projects aims to bridge the gap between pilot and commercializationOCED Announces up to $1.8 Billion in New Funding for Transformational Direct Air Capture^[7]. However, private-sector confidence hinges on policy stability. As Bloomberg noted, “DAC's bankability depends on a single entity owning the entire value chain”Oxy Executive Says Direct Air Capture Model Isn’t Bankable Now^[1], a model that Oxy is testing but which remains unproven at scale.

Pathways to Bankability and Scalability

To overcome these challenges, three enablers must align:
1. Policy Stability: Long-term, credible incentives (e.g., extended 45Q credits, advanced market commitments) are essential to attract investorsDirect Air Capture Market Size, Trends | Industry Report^[8].
2. Energy Integration: Leveraging low-cost renewables and industrial co-location can reduce operational costs and energy demandsDirect Air Capture in 2025: The End of Hype, the Start of Realism^[4].
3. MRV Systems: Transparent monitoring, reporting, and verification frameworks will build trust in carbon removal credits, critical for market growthDirect Air Capture in 2025: The End of Hype, the Start of Realism^[4].

Oxy's STRATOS project and Holocene acquisition exemplify the first step—vertical integration. However, broader adoption will require systemic changes, including risk-sharing mechanisms and standardized MRV protocols. Deloitte's analysis of carbon capture projects highlights the need for government-backed guarantees to mitigate technical and operational risksNew Report From Deloitte Explores The Bankability Of Carbon Capture Projects^[9], a lesson applicable to DAC.

Conclusion: A Balancing Act

The DAC sector stands at a crossroads. While Oxy's progress and industry innovations offer hope, the path to commercialization is fraught with financial and technical hurdles. Investors must weigh the promise of a $1.699 billion market by 2030Direct Air Capture Market Size, Share | CAGR of 61.4%^[10] against the realities of high costs and policy volatility. For DAC to achieve climate-relevant scale, stakeholders must prioritize integration, policy clarity, and scalable financing models. As the sector matures, the line between innovation and commercial viability will narrow—but only if the industry can align its ambitions with the hard realities of bankability.