Google’s $10 million contract with early-stage carbon removal startup Holocene offers a unique but risky template for corporations evaluating direct air capture technology that are deterred by the high prices commanded by this approach.
Under the deal, the tech company will pay $100 per metric ton for 100,000 tons of carbon removal from Holocene projects, starting at an unspecified date in the early 2030s. It’s the lowest publicly disclosed price for a deal involving direct air capture, a method of removing carbon dioxide directly from the atmosphere regardless of the location. The average per-ton price for this technology is far higher, at $500 to more than $1,000, say subject matter experts.
“Holocene is forward-selling its learning curve,” said Alexander Rink, co-founder and CEO of CDR.fyi, which tracks durable carbon removal methods that remove and store CO2 over long periods of time. “They have extrapolated their efficiency gains realized in testing to gain confidence they can hit the desired cost levels in the early 2030’s timeframe.”
Contract includes big upfront payment
Getting to this declared price took a creative deal structure. Under the contract, Google is making a “major portion” of its payment to Holocene upfront before credits are actually delivered — a model akin to buying a stock option — although it declined to say how much.
That prepayment is intended to help the startup win financing to get more pilots and test projects up and running more quickly. The deal makes use of the federal 45Q tax credit for carbon capture, which pays suppliers such as Holocene $180 per ton per ton of carbon removed.
Holocene is projecting a non-subsidized price of $280 per ton by the time it officially reaches production in the early 2030s. With the incentive, that makes Google’s net price $100 per ton. It will be up to Holocene to improve its cost model enough over the next eight years to justify that price point.
“The structure of this partnership — providing immediate funding to achieve an ambitious but important price in the medium term — is just one way to support carbon removal as its scales,” said Randy Spock, carbon credits and removals lead at Google, in a blog about the deal.
Google’s deal isn’t the largest contract for direct air capture; Microsoft, by far the largest corporate buyers of carbon credits, plans to buy 500,000 metric tons’ worth of credits over six years from Occidental Petroleum subsidiary 1PointFive. The terms weren’t disclosed.
Far more supply and demand needed
Research suggests that the world will need to abate 6 billion to 10 billion metric tons of carbon annually to reach net zero, but the market is a mere fraction of that today. The largest direct air capture facility, being built by Climeworks, will have a capacity of 36,000 metric tons per year.
“There is widespread interest in [direct air capture] because of the quality it brings,” said Alex Dewar, managing director and partner at Boston Consulting Group. “The challenge is buyers’ willingness to pay.”
Google’s contract with Holocene is unusual for its transparency, Dewar said. It’s not the only corporate buyer of carbon removal using 45Q tax credits to make a deal pencil out for both buyer and seller, but the declared price is lower than any other announced deal. “Most are reluctant to state a price publicly,” he said.
This is Google’s first carbon removal outside the $1 billion Frontier carbon buyers group, of which it is a founding member. Google contracted for about 62,500 metric tons of removal through that relationship in 2023, with Charm Industrial, a biomass carbon removal and storage startup; Lithos Carbon, which uses enhanced rock weathering to improve soil capture; and CarbonCapture, another direct air capture venture.
In March, Google pledged $35 million over the next 12 months to carbon removal credit purchases, to match the Department of Energy Carbon Dioxide Removal Purchase program. Its Holocene contract counts toward that promise.
What’s unique about Holocene
Holocene, founded in 2022 and based in Knoxville, Tennessee, is developing a system that uses a “waterfall” containing amino acids and other organic compounds to capture carbon dioxide from ambient air. The captured CO2 is heated at a relatively low temperature of 110 Celsius and concentrated, so it can be transported and stored.
The chemical breakthrough at the heart of its system was licensed from the Oak Ridge National Laboratory, and it uses widely available industrial equipment, one thing that will keep costs lower that other options.
Holocene is one of the companies funded with $500,000 in 2023 through the “prepurchase” program backed by Frontier, and one of two that has signed a formal offtake contract for carbon removal credits since then.
