California advances new funding for CDR projects

In July, the California State Assembly’s Natural Resources Committee and Energy & Utilities Committee both voted in unanimous favor of legislation that would support CDR projects in California. The proposed legislation, SB 643, would require the California Air Resources Board (CARB) to create and administer a competitive grant process known as the Carbon Dioxide Removal Purchase Program. This scale of public fiscal support for high-quality CDR projects is essential for meeting California's climate goals, and it has the potential to scale business opportunities for in-state CDR projects.

How SB 643 would scale CDR

Through existing law, CARB is the designated authority on monitoring and regulating greenhouse gas emissions in California. CARB is required by law to establish a Carbon Capture, Removal, Utilization, and Storage Program to “evaluate the efficacy, safety, and viability of carbon capture, utilization, or storage technologies and carbon dioxide removal technologies” and facilitate the deployment of those technologies in California.

SB 643 would establish funding for the deployment of CDR projects to help meet CARB’s ambitious target of 7 million metric tons of CDR by 2030 and 75 million metric tons by 2045, as established by CARB’s 2022 Scoping Plan for Achieving Carbon Neutrality. SB 643 would create a grant fund with a total of $50 million (of which up to 10% could be allocated to administrative costs) to allocate to at least two of the following CDR pathways:

• Direct air capture (DAC)

• Biomass carbon removal and storage (BiCRS)

• Enhanced mineralization or enhanced weathering

• Marine carbon dioxide removal (mCDR)

The CDR pathways eligible for grants in SB 643 encompass technologies currently available in the market that offer durable storage exceeding 100 years. Outside durability, SB 643 has not defined standards for CDR project quality, such as those defined in Carbon Direct’s Criteria for High-Quality Carbon Dioxide Removal, for eligible CDR projects. SB 643 would require CARB to define the terms of eligibility for CDR projects by January 1, 2028. 

The maximum funding available for any one CDR pathway is capped at $25 million and $12.5 million for an individual CDR project sponsor. To be eligible for this funding, CDR projects would be required to permanently retire the number of carbon credits equivalent in value to the funding received by CARB. Additionally, eligible CDR projects would be required to “incorporate or fund community benefit mechanisms commensurate with the eligible carbon dioxide removal project.” SB 643 would also require third-party verification of carbon removal claims consistent with industry-standard protocols.

SB 643 has bipartisan sponsorship across the State Assembly and Senate from Senator Anna Caballero [D], Senator Jerry McNerney [D], and Assembly Member Laurie Davies [R]. The sponsors’ ability to collaborate across the aisle and incorporate provisions into the bill that address concerns of stakeholders has been critical to achieving unanimous support in both Committees.

Timeline for SB 643 implementation

SB 643 was approved in mid-July by the California State Assembly Natural Resources Committee and the Energy & Utilities Committee. The bill is expected to be introduced to the Appropriations Committee and voted on by September 12. Following bicameral approval, Governor Newsom could sign SB 643 into law between September 12 and October 12. 

On January 1, 2028, and updated annually thereafter, CARB would publish a survey of CDR projects that exist or are under development in California, along with the carbon removal potential, environmental impacts, and economic opportunities of each project. SB 643 would direct CARB to disperse the $50 million to eligible CDR projects between July 1, 2026, and December 31, 2035.

What SB 643 means for buyers of high-quality CDR

SB 643 is well-positioned to increase private sector support for California’s rapidly growing CDR industry by requiring eligible CDR projects to demonstrate the ability to secure funding from third parties that is equal to or greater than the value of the grant funding provided by CARB and requiring independent third-party verification. As written, the legislation would require that CARB develop guidelines for and assess projects based on the potential to accelerate CDR deployment, provide community benefits, incorporate rigorous greenhouse gas accounting, and ensure durable (>100 years) storage. 

Notably, SB 643 was introduced following a pilot of a similar CDR purchase program implemented at the federal level by the US Department of Energy, which effectively demonstrated the capacity to crowd in private funding commitments. The introduction of and strong support for SB 643 within California’s legislature signals the broader political feasibility of public CDR policies that tie public procurement to private sector funding commitments to address common challenges in the market. 

Bipartisan support for SB 643 is significant

SB 643 exemplifies a path forward for bipartisan collaboration in a politically polarized nation. This policy's development involved bipartisan cooperation, and its benefits will extend across California, bridging political divides. CDR has historically garnered bipartisan support at both federal and state levels, and SB 643's progression affirms this continued trend at the state level.

Furthermore, SB 643 demonstrates how public funding can foster private sector growth, benefiting both the climate and society concerns shared by Democrats and Republicans alike. Bipartisan support makes a policy more resilient to political shifts, thereby reducing its risk.