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The carbon removal company has a pitch to solve the industry’s biggest “moral hazard.”

The carbon removal industry has exploded over the past few years, with billions of dollars in government funding and venture capital flowing to startups, nonprofits, and university research centers working on different ways to pull carbon out of the atmosphere. But all the attention has also stirred up a long running controversy about whether this solution is a dangerous distraction.
Critics worry that governments and corporations will not work as hard to cut greenhouse gas emissions if they believe they’ll eventually be able to reverse them. Some have warned this is already happening. On Thursday, Climeworks, one of the leading companies developing machines that suck carbon dioxide from the air, published a manifesto of sorts to fend off the risk that its technology is used to delay climate action.
The Swiss company’s statement calls for “a clear distinction between emissions reductions and carbon removals” in corporate and national climate plans and in the carbon market. It can be read as a pitch to improve the ever-popular but dangerously vague net-zero pledge. In theory, a plan to achieve net-zero emissions should involve both reducing emissions and then reaching a sort of equilibrium where any remaining releases are canceled out by removing carbon from the atmosphere.
The problem with net zero is it puts a lot more emphasis on the second part, and doesn’t require much transparency about the first. For example, a clothing brand pledging to achieve net zero by 2050 might buy renewable energy to power its stores, but avoid making more difficult changes to its production process or supply chain to reduce emissions, with the vague intention to balance them out later.
Climeworks is urging companies and governments to instead set two separate targets: One for how much they plan to reduce their carbon output, and a second for the level of remaining emissions they plan to balance out with carbon removal. It’s an idea with roots in academia; a 2019 paper argued that unpacking net-zero goals this way would help ensure that investments in carbon removal are truly additional to essential investments in emissions reductions.
“What we are saying is that removals should not stand as an excuse to not reduce your emissions,” said Louis Uzor, the climate policy manager at Climeworks.
The prospect of removing carbon from the atmosphere is undeniably seductive. “Depending on how you look at things, the technology represents either the ultimate insurance policy or the ultimate moral hazard,” New Yorker writer Elizabeth Kolbert wrote in a 2017 story about the kinds of machines that Climeworks is building.
It’s not hard to see how the fantasy version could turn into a nightmare. Our future ability to remove carbon will be limited by all kinds of constraints, like clean energy availability, land use, finance, and community support. If we operate under the assumption that we’ll be able to remove huge amounts of carbon from the atmosphere in a few decades, and that capacity doesn’t materialize, we could end up with more catastrophic warming — and still be far off from stabilizing the climate.
“Carbon removal capacity is going to be finite,” said Holly Buck, an assistant professor of environment and sustainability at the University of Buffalo. “Its in our interest to really constrain the residual emissions to the smallest amount possible to make sure that we can, in fact, compensate for them.”
At first glance, it may seem like Climeworks’ manifesto undermines its entire business model. Carbon removal "has a different role to play and should not be substituting emission reductions,” the statement reads. But today, companies like H&M and Square pay Climeworks for carbon removal to compensate for some of their emissions. Even the band Coldplay has bought credits to offset emissions from its tour.
Uzor argues its clients are not purchasing removals in place of cutting emissions. Paying Climeworks to remove carbon is still really expensive — upwards of $600 per metric ton of carbon. “It’s quite obvious that if you can reduce [emissions] for even up to $200 per ton, you’re still better off reducing than going with Climeworks,” he said. Rather, customers are lining up because they have emissions that are considered “hard to abate,” meaning there may not be any way to eliminate them for a long time. Uzor said their clients understand that if they want to achieve net zero in the next few decades, “they better start working with us now, because we have a whole industry that needs to scale up.”
Buck, of the University of Buffalo, pointed out that making it the norm to set a carbon removal goal could actually be great for Climeworks’ business. She’s optimistic that the company’s message comes from a place of genuine concern, but she thinks governments should be the ones leading the way by setting stronger requirements to cut emissions. “If people in the private sector are going to try to basically create policy in the absence of governments doing it, this seems good, but I don't think it’ll solve all the problems.”
Gilles Dufrasne, a lead on global carbon markets at the nonprofit Carbon Market Watch, said his organization supports the ideas in the statement, noting that this clear distinction would bring more transparency to climate plans and progress.
Climeworks’ statement also included a second, related plea. The company wants carbon credit certifiers to distinguish between projects that reduce or avoid emissions, like a wind farm or protection of a forest that might otherwise be chopped down, and those that remove carbon from the atmosphere, like Climeworks’ direct air capture plants. Thus far, Uzor said, Climeworks has refrained from working with large carbon registries like Verra or the American Carbon Registry, where many companies go to buy carbon offsets, because it couldn’t compete in that environment as long as its projects were lumped together with those that reduce emissions, which sell offsets for a fraction of the price.
This is another delicate subject. The growth of carbon removal projects is colliding with major tumult in the carbon market. Traditional carbon offset projects that purport to reduce emissions have been raked over the coals by researchers and journalists who have found time and again that those projects exaggerated their benefits. Derik Broekhoff, a senior scientist at the Stockholm Environment Institute, said that the Science Based Targets Initiative, a nonprofit that creates voluntary standards for corporate climate action, has also begun discouraging companies from buying these kinds of offsets while encouraging investments in carbon removal. “It’s led to this kind of perverse outcome where everyone’s chasing removals,” said Derik Broekhoff, a senior scientist at the Stockholm Environment Institute. “Yet if you look at a global level, what we really need to do is reduce emissions rapidly and significantly. So it ends up being a bit of a distraction.”
Uzor said some have opposed the idea to clearly separate removals because it could make them seem like a superior product. But he insisted that wasn’t Climework’s intent. “Currently, global emissions are still on the rise, so any avoided emission that is timely and properly done, based on robust assessment, is massively needed.”
It doesn’t seem like this will end up being such a big ask. Verra, the largest carbon offset registry in the world, plans to introduce a “removals” label in the middle of this year, said Anne Thiel, Verra’s senior manager of communications in an email.
But shoring up the integrity of the market is another question altogether — and one where Climeworks does have a clear advantage. The benefits of a direct air capture project are pretty easy to measure, but other types of carbon removal projects, like those that involve storing carbon in soil or sinking it to the bottom of the ocean, will be a lot harder to verify.
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1. Suffolk County, New York – Rarely do I get to say battery fire fears can be quelched but we have a very good example brewing in the Empire State.
2. Loudon County, Virginia – I can’t believe it: Data Center Alley is going to enact a moratorium.
3. Pulaski County, Arkansas – Entergy has dropped the lawsuit it filed against an Arkansas newspaper over the publication of a power deal with Google.
4. Darlington County, South Carolina – We conclude this week’s Hotspots with a focus on a GOP-leaning county rejecting a renewables moratorium.
A conversation with Sam Lyman of the Bitcoin Policy Institute.
This week’s conversation is with Sam Lyman, head of research at the Bitcoin Policy Institute. Originally focused on cryptocurrency, Lyman’s organization has expanded to policy and messaging development around data centers, most notably providing research many AI boosters cite to claim foreign influence is driving opposition to new hyperscale projects. Last week, the think tank released a new report calling for a novel solution to the data center permitting bottleneck: direct cash payments from data center projects to individuals involved with building them, as well as residents nearby facilities once they’re operating.
I reached out to BPI and asked for a chat with Lyman about the data center dividend proposal. I also tried to get to the bottom of where this increasingly relevant think tank stands on the general idea of a national data center law. The conversation was immensely informative. So here it is, in a lightly abridged and edited format.
Let’s start with the data center dividend proposal. Walk my readers through it.
Data center dividends came from the idea that, ideally in the AI revolution, we want all Americans to benefit. Especially rural Americans. You look at the landscape today, the majority of AI data centers are being built in rural America. It’s critical they’ll benefit from the massive wealth AI will unlock.
There’s lots of ways to make that happen. People point to the jobs AI data centers will build out, for example. But with data center dividends, we take the logic of the Alaska Permanent Fund and we apply it to America’s rural counties, which are sitting on a proverbial gold mine right now but lack any kind of public mechanism allowing them to benefit from that in a maximal way.
If you look at the tax revenue these data centers create, which is astronomical, how do we distribute this tax revenue in a way where it has the most tangible impact on the families living there? We believe data center dividends are the best way to do that – after allocating money for schools, public safety, and infrastructure, it allows these counties with tens of millions of dollars left over to distribute them as they see fit. They should distribute that money to the men and women who make those data centers happen in the first place.
The most effective form of a dividend would take a direct payment: a cash payment, a physical check, a direct deposit. Or the form of credits paying back property taxes, utility bills, an endowment for scholarships. There’s a number of different forms this can take.
Hopefully this gets the conversation going about how we can make these work for everybody.
Who do you want to see set up this dividend mechanism? How’s your approach to implementation?
The report is addressed to county commissioners. I’m thinking of commissioners who represent both sides of the political spectrum facing this huge backlash. Many of them want to do good by their communities and their voters, even if it means doing a data center, in places where it’s difficult to explain right now. Dividends make this indisputably clear.
I tried to put myself in the shoes of an enterprising county commissioner who sees the merits in the data center buildout and wants to break out of the political storm. It’s important to note data centers can be a huge economic boon for communities, in ways that can impact lives positively.
Have any communities – counties, as you noted – taken this idea up yet? Are there any models for this proposal?
The best analogue is West Feliciana, Louisiana, which is the case study we feature. West Feliciana made an agreement with a data center developer where in lieu of taxes, they make direct payments of about $90 million a year to the parish. That triples the community’s tax budget every year. It leaves ample room not only for essential services but dividends afterwards. Louisiana then passed a law – Act 434 – that allowed West Feliciana to remit some of those payments to residents as a tax credit. This bill first provided the opportunity for the parish to even remit those payments as cash, but it was changed in the legislature to make it a credit. That’s the closest we’ve gotten so far.
As far as reaching out to individual counties, we’re a think tank. We put ideas into the universe. We haven’t had anyone reach out to us since the publication of the report so far but we’re hoping they will.
Your report does lay out how there’s a bottleneck in development and this could help with easing it. Do you see an impetus to put ideas like the dividend out there right now, in light of the increased data center scrutiny in this year’s midterms?
Our publication is irrespective of the midterms. But it is tied to the fact that a bottleneck facing the data center buildout includes it becoming a politicized issue. We’re of the belief these projects shouldn't be political at all. One way to break through the noise is by showing how they can benefit those involved in construction and residents who live there. Data centers are critical infrastructure; other forms of critical infrastructure aren’t being politicized. Our efforts are to demonstrate how these shouldn’t be political.
When it comes to the future of AI data center regulation, this proposal is obviously geared towards incentivizing a resolution to the bottleneck through using resources produced from data centers – namely, new investment.
Where does your organization stand on the increased push for environmental or siting regulation on AI data centers?
I’m not familiar with what you might be referring to there.
I mean, there’s all kinds of proposals at the federal level and in states for everything from being required to pay for infrastructure upgrades to being required to use closed-loop cooling to siting restrictions, like temporary moratoria.
What I’m asking is, what else do you as an organization believe when it comes to regulating AI data center development at the federal level? State level?
We believe data centers should work for the communities where they’re being built. That’s important. So the concept of BYOP – Bring Your Own Power – we very much support that idea. We think the Ratepayer Protection Pledge is a great proposal because ultimately we want data centers, with them being critical infrastructure, to not only strengthen our national security but strengthen the communities where they’re being built.
Some states are rejecting data centers. We think that’s a mistake because it's something that’ll ultimately short-change the people who live there. For the states that do decide to build data centers, it's up to them what regulations make data centers more sustainable over time.
There’s increased public discussion for policy on AI development – as an organization, do you see any role in the federal government making policy here with a national data center law?
We think AI will be key to America’s prosperity over the long-term. We have concerns about the regulation of open-source artificial intelligence; bitcoin is a form of open-source software and open-source money. We believe intelligence should be something available to all Americans. That’s our concern with talk about regulating AI right now, it feels like a ploy for regulatory capture.
But what about national policy on AI data centers? Does your think tank support the national legislature doing a federal data center bill or is that something best for localities or states?
It depends on the bill. Are you talking about Sen. Bernie Sanders’ national moratorium?
With a permitting deal seemingly on the horizon, Republican Gabe Evans and Democrat Scott Peters may be about to see their partnership pay off.
The fate of permitting reform legislation that could smooth the way to all kinds of new and improved energy infrastructure — including transmission lines and renewables — is currently hostage to opaque discussions between Senate committee chairs. Rhode Island Senator Sheldon Whitehouse, the Democratic ranking member of the Senate Environment and Public Works Committee, told a Rhode Island business group earlier this week that “we’re actually in a pretty good place on permitting reform,” and that there was “maybe another week of negotiations.” Whitehouse’s Republican counterpart on the EPW committee, West Virginia Senator Shelly Moore-Capito, told Semafor on Friday that any bill has “got to pop out of here in the next 48 hours.”
If that’s going to happen, it will be because Republicans and Democrats have decided it’s worth it to get along. Any deal will eventually have to be voted on by the House, which has already produced several bills on a bipartisan basis, and even passed one — the SPEED Act — late last year.
Two of the busier House members on this issue are Scott Peters, a Democratic former environmental lawyer from San Diego, and Gabe Evans, a first term Colorado Republican representing a suburban and rural district north of Denver that includes wind farms and crude oil production. “The district that I represent truly is an all of the above energy district,” Evans told me.
Their latest effort is a bill aimed at smoothing out permitting for transmission development, especially interregional transmission. Last week, the two congressmen unveiled the CLEAR Act, seeking to apply a stricter set of standards for lawsuits against transmission projects that aligned with how natural gas and hydropower projects are treated under the Federal Power Act (it’s much harder to sue to stop these projects). Earlier this year, the two also sponsored the CERTAIN Act, a more comprehensive streamlining of federal permitting for energy infrastructure projects.
“We’re proud to have a lot of our work as the foundation for this, and I think if they send us over something that includes this, it’s got a really good chance of passing in the House,” Peters told me. Evans added that bringing forward bipartisan bills “gives a little bit more impetus to the Senate to know that the House is looking for these things.”
While the Senate’s deal will be up to the senators, Peters told me he envisions a broad permitting package that could include reforms to the National Environmental Policy Act to shorten permitting timelines, preventing the president from nixing individual projects, and reform Section 401 of the Clean Water Act which effectively devolves power to tribes and states to block a variety of interstate projects. “I think it’s coming together pretty well,” Peters said. “Obviously, we’re waiting for white smoke from the Senate.”
A permitting reform package may be one of the last major bills several bipartisan-minded House members get to vote on.
Election day is about six weeks off, and while Peters will likely have an easy time getting reelected for this eighth term, Evans is in a tough race. His purple-hued district is a target for the House Democratic campaign arm, which is hoping to flip it to former Colorado House of Representatives member Manny Rutinel, who worked as a lawyer at the environmental group Earthjustice. The Cook Political Report rates the race as toss-up, and Nate Silver gives Rutinel a roughly 75% to win.
But Rutinel won’t be getting any campaign help from Peters.
When I asked Peters about the timing of releasing a bill that could boost an endangered Republican’s bipartisan bona fides less than two months before an election, Peters told me that he and Evans had been working on it “for a while,” and that “my colleagues know that I’ve worked with Republicans to get problems solved.”
He said he wasn’t “participating in Gabe’s election” and wasn’t giving any money to his campaign, but also that he wouldn’t campaign Evans’ challenger, despite the opportunity to bolster his own caucus.
Peters is not shy about praising Evans. “What I appreciate about Gabe is that it takes a little bit of initiative to separate yourself from the majority — particularly when you’re in the trifecta — and do your own thing. He’s been a good partner in helping find ways to reduce process and make things go faster,” he told me.
Evans told me that he and Peters met early in this Congress, as Evans was getting settled into his new office in the Longworth building. “We’ve built the relationship over the last two years with a lot of the different areas that we’ve collaborated on.”
“I always try to meet the members of my committee and find out who will work with me. And I was fortunate to find Gabe,” Peters said.
“I do want to win the majority in the next Congress,” Peters went on, but “the norm should be that we figure out ways to work together to solve problems, and, you know, we’ll let the voters of Colorado 8 decide who to send me.”
Evans, for his part, told me that he had to work with Democrats to get anything passed as a member of a minuscule Republican minority in the Colorado statehouse, and that the 40-plus members of the bipartisan Problem Solvers Caucus have agreed not to campaign against each other. “There’s 385 other members that you can go pick fights with,” he said.