SB 643: California Allocates $50 Million for Carbon Dioxide Removal Projects to Meet 2045 Climate Goals

Key Takeaways

• SB 643 establishes a Carbon Dioxide Removal (CDR) Purchase Program with $50 million allocated for funding eligible carbon removal projects in California, focusing on technologies like Direct Air Capture (DAC), biomass carbon removal, enhanced mineralization, and marine CDR.
• Project eligibility requires compliance with criteria such as location in California, additionality, permanent carbon sequestration (100 years), and inclusion of community benefits (e.g., local hiring, revenue-sharing).
• Grant limits are capped at $25 million per protocol and $12.5 million per sponsor, with the goal of spreading funding across various technologies and project developers.
• Two-protocol rule: To encourage diversity, projects must operate in at least two CDR protocols to qualify for funding, though the State Board can adjust this requirement if deemed infeasible based on market conditions.
• SB 643 is expected to stimulate private and public sector investment, helping scale innovative CDR technologies and potentially integrating CDR into California’s Cap-and-Trade program in the future.

Introduction

The 2022 Scoping Plan for Achieving Carbon Neutrality, developed by the California Air Resources Board (CARB), lays out ambitious targets for carbon dioxide removal (CDR). Specifically, the plan aims for 7 million metric tons of CO₂ equivalent by 2030 and 75 million metric tons by 2045. To meet these targets, new approaches to removing CO₂ from the atmosphere will be vital, and Senate Bill 643 (SB 643) provides a pivotal role toward scaling these solutions.

Figure 1: Tech-based CDR Investments by Funding Type (Last 5 Years), Source: cCarbon.info

Out of the $6.5 billion invested in engineered carbon removal (CDR) technologies, as captured in our proprietary database of CDR investments and offtake deals, approximately 47% of the total funding comes from grants. This significant portion of grant-based funding can be attributed to the early, nascent stage of the CDR industry, where technologies are still in development or pilot phases.

SB 643 represents a critical step forward in establishing a robust carbon dioxide removal market in California. By allocating funds to both established and emerging CDR technologies, the bill provides a clear market signal, encouraging both private and public investment in the sector.

What is SB 643?

This bill establishes a Carbon Dioxide Removal Purchase Program through a competitive grant process, designed to fund projects that remove CO₂ from the atmosphere. The bill allocates $50M towards funding CDR projects, of which no more than $5M can be used towards administrative costs in establishing the program.

The bill supports CDR projects within four key protocols:

1. Direct Air Capture (DAC)
2. Biomass Carbon Removal and Storage
3. Enhanced Mineralization or Enhanced Weathering
4. Marine Carbon Dioxide Removal

The funding cap for each category is $25 million, with a $12.5 million cap for individual sponsors. These limits are set to ensure that funding is distributed across a range of projects, promoting diversity within the CDR landscape.

Eligibility

To ensure that the funds are allocated to high-impact projects, SB 643 sets forth a series of eligibility criteria:

• California-based Projects: Projects must be physically located in California to directly contribute to the state’s climate goals.
• Additionality: Projects must demonstrate that they will remove carbon that would not have been removed otherwise, ensuring that the funding supports genuine, additional carbon removal.
• Permanence: The CO₂ removed must be stored for at least 100 years, with permanence guidelines to be published by the State Board by 2028.
• Community Benefits: Projects must include community benefit mechanisms, such as local hiring, benefit-sharing agreements, and revenue-sharing, ensuring that communities, particularly those in disadvantaged areas, also benefit from the project’s development.
• Third-Party Purchases: Projects must secure third-party carbon removal purchases (offtakes) that match the funding provided by the program.

The tons of CO₂ removed through state funding must be permanently retired, preventing any future claims of the same removal in carbon markets.

Two-Protocol Rule

One of the more distinctive elements of SB 643 is the requirement that projects must operate in at least two of the four designated protocols to be eligible for funding. This provision aims to encourage innovation and diversity in the types of carbon removal technologies supported. By incentivizing projects that incorporate multiple approaches, the bill promotes a broader range of solutions to meet California’s CDR goals.

Examples of dual pathway projects largely include combinations for DAC and Mineralization, and Marine CDR with enhanced weathering. In Iceland an agreement between Climeworks, ON Power and Carbfix come together to capture ambient CO2 which is then stored underground where natural mineralization takes place through basalt formations.

In California, Equatic captures CO₂ from seawater through electrochemical processes, converting it into stable solid carbonates. The captured CO₂ is then stored in the ocean, effectively combining direct ocean capture with mineralization. They also have a pilot plant in Singapore.

However, SB643 recognizes that the feasibility of this two-protocol rule may change as the market develops. If the State Board determines that it is not feasible to meet the two-protocol requirement due to a lack of available projects or technologies, the Board has the discretion to delay or adjust the funding. In such a case, the State Board is expected to make a reasonable effort to continue purchasing carbon removals in a manner that remains equitable.

cCarbon’s View

SB 643 will directly stimulate the CDR market by creating a guaranteed demand for verified carbon removals from California-based projects. The state’s commitment to fund CDR technologies provides a clear market signal, encouraging both private and public sector investment. This demand will likely attract additional stakeholders including CDR project developers and venture capitalists and private investors looking for new opportunities in the burgeoning carbon removal sector.

The grants provided under SB 643 will give developers the financial resources they need to pilot and scale new technologies. This is especially crucial for innovative and unproven technologies like DAC and marine carbon removal, which have the potential to scale rapidly but face high capital barriers. SB 643 provides a critical bridge to help these technologies move from early-stage trials to market-ready solutions.

Additionally, the CDR landscape in California may one day become a key part of the state’s Cap-and-Trade program. While previous amendments to AB 1207 sought to introduce a 2% offset limit for CDR projects, this measure did not pass possibly due to insufficient in-state supply. However, as more projects receive funding and CO₂ removal volumes increase, this proposal could reappear in future rulemaking, further integrating CDR into California’s broader carbon pricing framework.

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