How California Can Seize Momentum to Advance Carbon Dioxide Removal

As the U.S. federal government continues to roll back crucial environment and climate legislation, California’s climate leadership is more important than ever — including its policies to scale up carbon dioxide removal (CDR), which includes a suite of technological processes that remove carbon dioxide directly from the atmosphere. CDR is necessary to address greenhouse gas emissions from hard to abate sources, which along with deep emissions reductions, can achieve net-zero emissions.

As the fourth largest economy in the world and an engine of innovation, California has the economic and entrepreneurial capacity to incubate a large enough CDR industry to drive lower costs and learning-by-doing, increasing the likelihood that other states or national governments will adopt similar policies. California also has a comprehensive climate policy framework that will ensure that CDR supplements —rather than substitutes for — deep emissions reductions.

In September, the California legislature passed a substantial package of climate and energy legislation, which included an unmistakable signal of support for CDR via a bill known as the Carbon Dioxide Removal Purchase Program (SB 643), which saw nearly unanimous legislative support. SB 643 would have established a $50 million grant program to fund innovative, verifiable CDR projects in California no later than 2035. It would have also mandated matching private sector funds, ultimately creating a $100 million program.

However, when SB 643 reached Gov. Gavin Newsom’s desk, he vetoed it. While still recognizing the importance of CDR to achieving the state’s net-zero goals, he noted that SB 643’s program could be implemented using funds allocated under a previously passed bill, SB 840, which allocates $85 million for climate-focused innovation and deployment projects that advance California’s plan to achieve net-zero emissions by 2045. This legislation expands on the state’s suite of climate policies helping define the role of CDR.

Although it was surprising and disappointing to have SB 643 vetoed, California policymakers have other tools that can and should be used to achieve the goals of the legislation.

Directing State Funds Toward CDR Sends an Essential Demand Signal

Outside of the overwhelming bipartisan legislator support for SB 643, numerous private sector stakeholders, including CDR project developers and environmental non-government organizations, showed support. Leading voluntary carbon market buyers were encouraged by the prospect of high-quality carbon credits funded by the program.  

This highlights an innovative ecosystem ready to build and the momentum echoes the positive market response observed from the U.S. Department of Energy’s $35 million CDR Purchase Pilot Prize launched in 2023 — the first instance of government policy to directly purchase CDR credits. Even without a mandate, at least one private sector buyer, Google, made a public pledge to match 100% of the prize awards, setting off a broader wave of demand signals, which in turn enabled project developers to raise capital. Although this program is no longer active, the Department of Energy had selected 12 companies as semi-finalists in mid-2024, most of which were California-based, further demonstrating the state’s leadership for CDR know-how and project development.

Without an immediate, reliable demand signal backed by public funds, California faces a real risk that its homegrown companies will relocate out of the state or stall in the so-called “valley of death” between innovation and commercialization. Industry experts agree the voluntary carbon market alone cannot scale CDR solutions sufficiently by mid-century, in part because the vast majority — 80% — of voluntary credits to date have been contracted by a single corporate buyer — Microsoft. Public policy-driven demand is indispensable for meeting California’s climate goals and demonstrating leadership that other states can emulate.

California Must Act Now

Newsom’s support for this year’s climate legislation package underscores the strategic importance of carbon management (which includes CDR) to California’s economy. A back-of-the-envelope estimate (assuming about $100/ton of carbon dioxide) suggests CDR could become an $8 billion industry in California by 2045, if the state achieves the ambitious goal of removing 75 million tons of carbon dioxide annually. The California Air Resources Board (CARB), the state's environmental regulator, is charged with deploying pathways and market mechanisms to realize this abatement wedge with high-quality CDR — an imperative that calls for proactive use of currently available funds in the Greenhouse Gas Reduction Fund (GGRF) for climate technology innovation under SB 840 to signal demand immediately.

If the California budget allocated a portion of the GGRF slated for climate innovation technologies explicitly toward CDR procurement, it would provide a necessary market foundation. The legislature could require that this immediate demand signal be matched by private investment, unlocking capital for developers and yielding valuable lessons to inform ongoing protocol and regulatory development. In 2026, the legislature should consider multi-year appropriations to ensure there is continuous funding available to support CDR deployment, building on any funding already allocated in fiscal year 2026-2027.

In implementing a CDR program through the GGRF, CARB should follow the guidelines that were included in the vetoed SB 643 bill, including supporting a diverse portfolio of high-quality CDR approaches, ensuring that CDR results in long-term carbon sequestration, requiring community benefits, and ensuring that any use of biomass is limited to responsibly sourced wastes or residues. After all, California’s legislature overwhelmingly endorsed these safeguards when it passed SB 643.

California stands at a pivotal crossroads: Equipped with policy frameworks, legislative momentum and a vibrant CDR ecosystem, it now needs decisive and immediate public sector action to translate intent into impact. The clock is ticking toward CARB’s target to remove 7 million tons of carbon dioxide by 2030, and the state must act to meet its net-zero goals and secure its leadership in scalable, durable carbon removal.

How California leads in this space will also signal opportunity for what other states and nations can do, helping shape the global future of safe and high-quality CDR.

Deepika Nagabhushan is a senior policy researcher at Project2030 where she conceptualizes new approaches for carbon dioxide removal deployment in California that empower the local public and enable California to exceed its 2030 and 2045 climate targets.