Unstable policy is driving capital away from climate infrastructure just when we need more of it.
The other day, a biochar developer we were working with contacted us to say their company was shutting down. They had feedstock suppliers in place, the right team, and independent verification in hand. And still, they folded — not because the technology failed, but because they couldn’t raise funding.
They’re not alone.
There’s no net zero without carbon removal, yet it is the most underfinanced corner of clean tech. Projects can already prove they work; what they can’t do is raise the capital to build their first plants. With policy signals growing less predictable by the day, financial institutions must step up.
The current U.S. policy environment has sent a chill through climate finance. Although President Trump’s “One Big Beautiful Bill” left the related tax credits intact, the bigger picture is grim. The Department of Energy just canceled $7.5 billion in support for clean energy and carbon capture projects, after axing $3.7 billion in May.
It’s proof the ground can shift overnight.
Naturally, investors are pulling back. Since January, 56 clean energy manufacturing projects worth more than $45.9 billion and involving more than 51,000 jobs have been slowed or paused. Investment in renewable energy is down 36 percent compared to the second half of last year. For the first time, more cleantech projects were canceled last quarter than announced.
Policy isn’t just about incentives and mandates — it shapes how investors price risk. Stable rules reduce the cost of capital, and unstable rules drive it up. The signal to investors is clear: Don’t trust the rules to stay the same. If lenders can’t be sure of the cost of doing business, they treat projects as riskier, which means higher interest rates, tighter terms or no financing at all.
Even if we decarbonize as fast as possible, we’ll still overshoot our carbon budget. That means we need to remove 5 to 10 billion tons of carbon dioxide every year by mid-century. There’s no net zero without it. But carbon removal overall makes up barely 1 percent of cleantech investment — nowhere near enough to build the infrastructure needed.
Meanwhile, capital that does move is flowing disproportionately to direct air capture. Between 2020 and 2024, investors poured $3.3 billion into the technology, almost matching the $3.4 billion spread across all other emerging carbon removal technologies combined. Investors chase direct air capture not because it’s the only answer, but because it slots neatly into federal subsidies.
Direct air capture isn’t the villain, of course, but it is still years away from delivering at scale. Other approaches like biochar, which turns waste biomass into a charcoal-like material that locks away carbon for centuries or more, can already deliver verified removals today.
Case in point: Biochar has already removed more than 700,000 tons of carbon dioxide from the atmosphere, the most of any engineered method. Direct air capture has removed less than 10,000. Yet biochar projects struggle to attract capital.
Sites can remove 50,000-100,000 tons of carbon dioxide a year — big enough to matter, but too small to qualify for billion-dollar project finance. They lack the exponential growth curve venture capital looks for. And they’re too new and too policy-sensitive for banks to treat as low-risk. That strands projects in the middle.
We’ve got to figure out how to make it easier for biochar companies to access capital. In the absence of coherent federal policy, financial institutions play a key role.
A recent $210 million deal between JPMorgan, Microsoft and Chestnut Carbon points to a way forward. In that deal, the developer carried delivery risk, the buyer carried market risk and the bank carried credit risk — the same structure that unlocked financing for solar 20 years ago.
But right now, most large-scale carbon removal deals are bespoke and rare. How can we make them faster and more replicable?
Banks can fund portfolios of projects rather than single facilities. They can design funds so big buyers or public partners take the first hit if a project stumbles, a safety net that lowers the cost of borrowing for everyone else. And they can push buyers toward standardized long-term contracts that reliably unlock loans.
Financial institutions have a huge opportunity. As buyers, brokers, risk managers and innovators, banks can shape this market and profit from it. The institutions that move first will gain expertise, relationships and influence in what could become one of the world’s largest commodity markets by mid-century. Latecomers will just have to take whatever terms are left.
If we want fewer shutdown texts and more ribbon cuttings, we must finance carbon removal as infrastructure — every bit as essential to net zero as clean energy. Fix the financing, and we build the market the climate demands.
Michelle You is CEO and co-founder of carbon removal marketplace Supercritical.
