Lessons From California’s Carbon Dioxide Removal Policies

California has long been a national leader on ambitious climate policy and action. In 2006, the state passed landmark legislation that led to the first economy-wide cap-and-trade system. It later became the first state to set strict greenhouse gas (GHG) emissions standards for vehicles and last year approved a net-zero plan to eliminate GHG emissions by 2045, five years ahead of the national target.

Now, California is beginning to lead the nation in its carbon dioxide removal policies and actions to mitigate climate change and help meet net-zero goals. Carbon dioxide removal approaches directly remove carbon dioxide (CO2) from the air and are needed alongside deep emissions reductions to reach net-zero.

The carbon removal-related policies that were recently passed or proposed in California are largely the first of their kind in the U.S. or are unique and innovative in other ways. The legislation establishes a foundational framework to guide responsible carbon removal development in California, which could provide a model for other states.

California’s Scoping Plan and Key Carbon Dioxide Removal Policies

In late 2022, the California Air Resources Board, the air pollution regulator in California, adopted the state’s latest Scoping Plan, which serves as a roadmap for how California can reach carbon neutrality by 2045 or sooner. Although it does not create any laws, it serves as a guide for agencies and regulators. Included in this fourth update is a target for net-zero GHG emissions by 2045 and as part of achieving that, a mandate to reduce GHG emissions to 85% below 1990 levels by that same year. The 2022 Scoping Plan also lays out specific targets for carbon removal in California: 7 million metric tons of CO2 in 2030 and 75 million metric tons of CO2 in 2045.

These targets include removals by both natural (such as forests or grasslands) and working lands (such as croplands), as well as novel, technological approaches, such as direct air capture and bioenergy with carbon capture and storage. However, because the Scoping Plan only expects a small role for net removals from natural and working lands (roughly 1.5 million metric tons of CO2 per year through 2045), the majority of removal to meet these two targets are expected to come from newer, technological methods.

Recent legislation and federal funding — which can all help meet the goals outlined in the Scoping Plan — are putting California at the forefront of scaling up carbon dioxide removal.

Existing and Proposed Carbon Dioxide Removal Policies and Activities in California

California’s Innovative Policy Directions

California is the only U.S. state so far that has set a specific quantitative target for scaling up carbon removal. Complementing this, the state has begun to develop a broader regulatory framework to scale and meet these targets.

Ensuring Carbon Removal Doesn’t Take Away from Emissions Reduction Efforts  

The California Climate Crisis Act, or AB 1279, was signed into law in September of 2022, and requires net-zero greenhouse gas emission by 2045 and net-negative emissions thereafter. It mandates at least 85% emissions reductions from 1990 levels by 2045, ensuring that carbon dioxide removal does not play an excessive role in meeting net zero.

A common concern is that carbon dioxide removal could be used as an excuse to not reduce GHG emissions, and as part of that, continue oil and gas production. By placing legal requirements on the amount of emission reductions needed by mid-century, legislation like AB 1279 helps ensure that the state’s priority remains on emission reductions and avoids over-relying on carbon removal to achieve climate targets; or it being used to justify continued production and use of fossil fuels.

Other states, particularly those with net-zero targets, should make sure that emissions reduction remains the top priority in reaching net zero, which can be done by establishing minimum emission reduction levels (for example 85% or higher), as part of the overall target. This helps ensure that carbon removal does not end up playing an excessive role in helping meet climate targets.

Besides California, New York has also set an 85% emissions reduction requirement and Washington has set a legally binding 95% GHG emission reduction goal by 2050 — both part of goals to reach net-zero by 2050.

Beyond requiring specific levels of emission reductions, other states that have net-zero targets could also consider making the role of carbon dioxide removal more explicit, defining residual emissions that are appropriate to be counterbalanced by carbon removal, and distinguishing between the role of enhancing natural carbon sinks and scaling up novel, technological carbon removal approaches, as California has also done in its Scoping Plan.

While California’s Scoping Plan relies exclusively on direct air capture and bioenergy with carbon capture and storage, there is a broad range of carbon removal approaches that should be considered (with some approaches being more applicable in some states compared to others) including carbon mineralization, seaweed cultivation and other types of biomass carbon removal. Previous analysis looking at carbon removal potential in California found that biomass conversion to hydrogen with carbon capture could play a large role.    

Laying a Regulatory Foundation for Scaled-Up Carbon Dioxide Removal  

The Carbon sequestration: carbon capture, removal, utilization, and storage program, or SB 905, was signed into law at the same time as AB 1279. This bill establishes regulatory foundations to enable scale up of carbon dioxide removal, as well as carbon capture, utilization and sequestration projects. The two processes are distinct from one another: Carbon capture technology captures emissions at the source, while carbon removal approaches directly remove it from the air. However, some carbon removal approaches — like direct air capture or biomass with carbon capture and storage — can share infrastructure with carbon capture approaches. Therefore, SB905 will help create a regulatory framework around both approaches. 

SB 905 directs the California Air Resources Board to establish a program to evaluate the safety and viability of different technologies, while also facilitating and governing the safe deployment of carbon capture and carbon dioxide removal projects where appropriate. The bill also requires the board to adopt regulations to minimize GHG emissions, co-pollutants, air and water pollution, seismic impacts, and potential health and safety risks to local communities. The monitoring of social and environmental criteria as well as toxic air pollutants is also required.

The California Air Resources Board is also required to establish a unified permitting approach; publish a governing framework to address when multiple landowners overlay a geologic sequestration site; adopt regulation for CO2 sequestration operators to take on a minimum of 100 years of liability; and develop a centralized database to track carbon capture and carbon dioxide removal projects.

It is important to note that implementation of SB 905 is just beginning, with many details still to be worked out in regulatory proceedings. Several amendments to this law are also currently under consideration.

SB 905 Requirements

Selecting one agency to oversee regulation of these activities can streamline processes and improve coordination and is an approach that could be adopted by other states seeking to implement carbon removal projects. At the same time, it’s important to note that California’s Air Resources Board is the nation’s largest and most well-resourced state-level environmental regulator, so centralizing regulatory authority might be more difficult in other states. Although the details are still being worked out, SB 905 demonstrates the value of having one comprehensive regulatory framework that addresses key issues related to carbon capture, removal and sequestration.

Requiring Emitters to Pay for Carbon Dioxide Removal

In early 2022 California State Sen. Josh Becker (D) introduced a bill called the Carbon Dioxide Removal Market Development Act, or SB 308. Although the proposed bill is currently on hold and may be revised, it provides an innovative framework that could hold emitters accountable while increasing state-level carbon removal capacity. It could help scale-up the carbon removal capacity that will be needed alongside emission reductions to reach net zero. If passed, it would be the first state-level carbon removal legislation of its kind (in comparison to other state level bills that require government procurement of carbon removal).

If enacted, SB 308 would direct the California Air Resources Board to adopt regulation that would require emitters already reporting emissions to the state inventory, and producing more than 25,000 metric tons of GHGs annually, to compensate for their climate impact by buying carbon removal credits equal to a certain percentage of their emissions. This percentage would start small, requiring emitters to compensate for 1% of their emissions with carbon dioxide removal in 2030, ramping up to 100% by 2045, when net zero is targeted. These obligations would be additional and separate to those of the California cap-and-trade program.

The California Air Resources Board would establish rules and processes to certify carbon dioxide removal activities eligible to produce carbon removal credits and to track those removals over time, creating a framework that would make SB 308 one of the first pieces of legislation to establish rigorous and standardized eligibility, monitoring and reporting requirements.  

SB 308 would be a mechanism to require emitters to begin paying for carbon removal and thus creating a market to enable its scale up. While several proposals have advocated for the government’s role in procuring carbon removal, fewer have put this responsibility directly on emitting entities. And because it sets purchase thresholds tied to existing emissions, it goes beyond incentives and actually mandates the purchase and scale up of carbon removal.

While requiring emitters of GHG gases to purchase carbon removal credits is a direct method to address the origin of the climate problem, it presents obstacles that would need to be navigated in many states. For example, in California, many emitting entities already subject to the cap-and-trade system oppose this mandate as an additional burden. While government and voluntary market support can play critical and catalytic roles, they will likely not be able to finance long-term scale up of carbon removal alone, so regulation requiring emitting entities to do so can be a powerful mechanism to support that needed scale up.

Including Communities: Emerging Lessons from Direct Air Capture Hubs

Kern County, located in the southern part of California’s Central Valley, is the host to four potential direct air capture projects that were awarded millions of dollars in August 2023 from the Department of Energy’s Regional Direct Air Capture Hubs program, funded through the Bipartisan Infrastructure Law. Three feasibility projects will receive around $3 million each; and one project will receive around $12 million for an engineering and design study.

The $3.5 billion U.S. Department of Energy program ultimately aims to fund the development of four Direct Air Capture Hubs across the country and represents the largest public investment into technological carbon removal. Each hub must demonstrate the capture and storage or end-use of at least 1 million metric tons of CO2 removed annually, while meeting requirements for community engagement, environmental justice, and workforce development.

These hubs are likely to be built in locations that have safe geologic storage sites and space to support clean energy. Additionally, the workforce and infrastructure needed for projects combined with Bipartisan Infrastructure Law requirements mean they are likely to be sited in communities with a history of extractive or other environmentally damaging industry, which have negatively impacted health, air quality and the overall environment.

For example, the two projects at the construction stage awarded a total of $1 billion are both in the Gulf Coast, an industry-heavy region. Given that these communities are likely to have faced longstanding and systemic discrimination and multiple dimensions of disadvantage and vulnerability, Direct Air Capture Hubs should commit to renewable energy sources for their operations so they don’t further contribute to negative health impacts, and prohibit the use of enhanced oil recovery. Most of the projects awarded funding indicate this commitment, but without a lot of detail.

Ensuring that Direct Air Capture Hubs remove carbon in a way that minimizes environmental and social harm will require effective and meaningful community engagement; free, prior, and informed consent; a seat at the decision-making table; and continuous proactive outreach. One way of prioritizing community needs and incorporating communities’ concerns and considerations into siting and decision-making processes, is through Community Benefit Agreements. These legally binding agreements are negotiated by communities and project developers prior to the approval of a project. They generally include provisions for employment, housing, environmental safeguards, and other benefits. All Department of Energy-funded projects under the Bipartisan Infrastructure Law require Community Benefits Plans, which may turn into Community Benefit Agreements.

Another emerging idea is around alternative, or public, ownership models to help expedite the scale up of carbon dioxide removal. For example, following a utility or waste management model where the state plays a role in overall siting and ownership to ensure the infrastructure is built out quickly, safely, with high environmental standards, and access is at-cost, while avoiding monopolies forming in the private sector. Although this model is untested in the United States and requires additional research, it could help ensure that communities benefit from projects, and play an integral role in their design and deployment. One of the three feasibility studies awarded in California is designed to explore these models while prioritizing delivery of meaningful community benefits.  

What’s Next for Carbon Dioxide Removal Policy Across the U.S.?

Looking ahead, there is still a lot to be seen in terms of how carbon removal projects are developed and operated. Many of the policies are still pending or have only recently passed. The policies are also largely the first of their kind in the U.S., establishing the foundation of a crucial legislative framework to guide carbon removal developments in California.

Although states across the U.S. have different political contexts and levels of interest in climate policy, the way that California has approached carbon removal in policy can provide valuable insights if not a model for other states on how to ensure carbon dioxide removal does not take away from emissions reduction, how to create a potential financing backstop and how to establish a comprehensive state-level regulatory framework. At the same time, given the magnitude of California’s commitment toward carbon removal — 75 million metric tons of CO2 per year by 2045 — there is still room for additional innovation and creativity to help achieve this ambitious goal.