How US States Can Lead on Carbon Removal Policy

Carbon dioxide removal (CDR) is increasingly showing up in United States climate policy. While actively removing CO2 from the atmosphere is not a substitute for rapidly reducing emissions, it is an important part of the country’s broader strategy to reach net zero by 2050. Carbon removal will be needed to complement emissions reductions efforts and help balance out residual emissions that can’t be eliminated through other means.

The U.S. federal government has recognized this importance through an influx of recent policy support and funding, including $5 billion offered through the Inflation Reduction Act’s Climate Pollution Reduction Grants. States are taking notice, leaning into these generous federal CDR incentives. Some are even setting the pace themselves by seizing on their unique opportunities and cultivating regulatory environments favorable to CDR development. 

What states do on CDR is important. They can pave the way for effective carbon removal by developing policies and projects that are tailored to their economic, geographic and political contexts. And they can be models for one another, inspiring collective action and cooperation to bolster responsible carbon removal approaches and reach not just state, but also federal, climate targets.

We analyzed current carbon removal policies in selected states across the country and found that they generally fall into three categories: states going beyond net zero to integrate carbon removal into comprehensive climate policies; those focused on deploying carbon management infrastructure; and those still early in the process of developing CDR policy.

Through this lens, we analyze the existing landscape of carbon removal policy in the U.S. and discuss opportunities for states to further advance and improve their strategies. While the opportunities are framed within the context of these specific types of states, the underlying principles are broadly applicable and can benefit any state pursuing carbon removal.

States Going Beyond Net Zero Are Models

Many of the states leading on carbon removal policy are already forerunners in climate and environmental action, such as California, Washington and New York. When it comes to carbon removal, these states are going ‘beyond net zero,’ with policies that seek not only to scale up removal efforts, but to holistically integrate them into broader climate strategies. This includes measures to ensure that carbon removal doesn’t substitute for ambitious emissions reductions and to avoid potential environmental or social harms linked to carbon removal projects.

California stands out for having separate targets for emissions reductions and carbon removal. The California Climate Crisis Act (AB1279) mandates that the state reduce emissions by 85% from 1990 levels by 2045, without relying on carbon removal to meet this target (although CDR can be used to address residual emissions).  Separately, California set ambitious targets to gradually increase the amount of carbon it removes over time, starting with 7 million metric tons by 2030 and growing to 75 million by 2045. This dual-target approach is critical for ensuring that carbon removal complements emissions reductions rather than replacing them.

Other states are introducing legislation to make their CDR targets binding. New York, for example, has a proposal to start purchasing significant amounts of carbon removal from 2024, with targets doubling annually (though this is not yet enacted).

Additionally, some states are utilizing low-carbon fuel standards (LCFS) to lower emissions, particularly in transportation. California, Oregon and Washington are leading the way, with others considering similar legislation. These standards allow technologies like direct air capture to generate compliance credits, which California LCFS-regulated companies — such as fuel producers — can purchase to meet their emissions reduction targets. While carbon removal doesn’t directly reduce emissions in these programs, it offers a financial incentive for companies to support the deployment of direct air capture and other carbon removal methods, helping to scale up these technologies and drive future cost reductions.

Next steps: Ensuring responsible carbon removal deployment

Many of these states are already expanding their carbon removal footprints, with projects like direct air capture and biomass carbon removal (BiCRS) underway. While this momentum is promising, it’s essential that ambitious carbon removal policies are paired with responsible project development that prioritizes equity, community engagement and safety. For states at the forefront of CDR policy and climate ambition, several actions can help enhance their efforts:

• Adopting comprehensive safety standards for CDR deployment that cover all systems, processes and infrastructure, including long-term monitoring and rigorous project approval, with state-level oversight to enforce these regulations in addition to existing federal requirements.
• To ensure the fair distribution of benefits and harms, CDR projects should mandate community engagement, equity assessments and strict monitoring to protect local air quality and environmental health. For instance, states applying for UIC Class VI well “primacy” to regulate carbon storage should demonstrate a commitment to addressing past environmental harms from the fossil industry, fostering community trust and ensuring transparent enforcement. The EPA is increasingly evaluating such applications with a focus on equity considerations, reinforcing the need for responsible and inclusive regulation.
• States should adopt measurement, reporting and verification (MRV) best practices for CDR approaches, following guidance from national labs, to ensure robust measurement of carbon removed through lifecycle accounting that captures both emissions and gross removals to assess net-negativity. Monitoring should follow measurements to track long-term carbon storage, while transparent reporting to third parties, regulators and nearby communities is essential for accountability. Verification by accredited third parties can help ensure the accuracy and reliability of data, preventing errors or fraudulent reporting.

California is leading by example with legislation such as SB905, which lays a regulatory foundation for safely deploying carbon capture, removal and storage technologies. It is also seeking to address the permanence and durability of CDR efforts through efforts like SB308.

Massachusetts is also on the leading edge with its Carbon Dioxide Removal Leadership Act, which establishes a competitive, standards-based procurement program for long-duration carbon removal, ensuring that projects are cost-effective, socially beneficial and incorporate community consultation. Similarly, Washington’s Climate Commitment Act (CCA) emphasizes environmental justice and equity by directing funds from emission allowances toward climate-resilience projects and addressing health disparities.

States have the potential to drive CDR action forward through such measures, as well as by participating in regional emissions markets and streamlining approval processes for projects that involve geologic sequestration. Cross-state collaboration on carbon removal initiatives, like the 4 Corners Carbon Coalition, can also help states share best practices, align regulations and create a more cohesive market for these technologies.

States Leading on Carbon Management Infrastructure Can Further Develop Net-negative Strategies

States like Texas, Louisiana, Oklahoma and Wyoming are, in part, tackling decarbonization by facilitating the build out of carbon management infrastructure. These states tend to have economies dominated by heavy industry and fossil fuel production and are moving quickly to build infrastructure that will enable them to capture, transport sequester and utilize CO2. This includes, for example, CO2 pipelines, geologic sequestration wells in which to inject CO2, and enhanced oil recovery (EOR), in which CO2 is injected into depleted oil fields to extract more oil. This same infrastructure can also be used to transport and store carbon captured from the atmosphere through novel CDR technologies like direct air capture (DAC) and bioenergy with carbon capture and storage (BECCS).

In these states, existing carbon management policy is largely focused on encouraging development of CO2 transport and sequestration projects. To hasten the permitting process, for example, North Dakota, Wyoming and Louisiana have each been granted regulatory authority over geologic CO2 sequestration wells by the EPA — also known as Class VI well primacy — with other states following similar processes. Texas, the largest oil producing state, has also applied for Class VI primacy, motivated by opportunities offered by the 45Q federal tax credit for carbon capture or removal and sequestration. Louisiana has established regulations on issues such as eminent domain for CO2 transport and liability limits for sequestration operators.

Some states are incentivizing the carbon capture for producers — such as by offering mandates and grants for carbon capture technology on power plants — and for offtakers, via tax credits for EOR using captured carbon dioxide.

With favorable geology, well-developed CO2 transport and sequestration infrastructure, regulatory certainty, permitting authority and in-state technical expertise, these states have become attractive options for technological CDR project developers. Some of the largest planned direct air capture projects in the world are sited in Oklahoma, Louisiana and Texas.

Next steps: Accelerating fossil fuel phase out

For states already developing carbon management infrastructure, it will be critical to define clearer pathways toward a zero-carbon or carbon-negative future. While carbon capture, utilization and sequestration can reduce emissions in the short run, and enhanced oil recovery offers a way to compensate for some of the emissions from oil production, these states should work to emphasize policies that ultimately reduce emissions at the source. Carbon removal can complement these reduction efforts to achieve net-negative emissions.

These states also have an invaluable opportunity to leverage their existing infrastructure, technical expertise and permitting authority to continue scaling up DAC and explore scaling up BECCS, yielding valuable lessons for future projects as well as climate and economic benefits.

Moving forward, states that have already built out carbon management infrastructure can:

• Articulate robust net-zero plans. These should include specific carbon dioxide removal targets that are separate from the state’s emissions reduction targets, like in California, to avoid deterring emissions reduction efforts.
• Replace incentives for enhanced oil recovery with state-wide or regional carbon pricing mechanisms. This can preserve economic incentives to capture or remove carbon dioxide without encouraging fossil fuel extraction.
• Pursue interstate cooperation and coordination on carbon dioxide removal, transport and sequestration projects, sharing the expertise gained from existing intrastate efforts.
• Explore ways to incentivize and optimize non-technological methods of carbon removal — such as BiCRS, marine carbon dioxide removal, carbon mineralization, soil-based carbon sequestration, afforestation, reforestation and others — through state legislation and regulation.

There is momentum on these fronts, though more can be done. For example, North Dakota’s governor “challenged” the state to become carbon-neutral by 2030, but stopped short of creating an executive or statutory net-zero target. The state also provided a $3.5 million grant to develop software to track agriculture-based carbon sequestration in 2022. In Louisiana, the legislature passed a bill that would require 30% of state revenues from carbon sequestration to be directed toward the parishes hosting these projects — however, this bill was ultimately vetoed by the governor. In addition, Oklahoma and four other states founded the Ground Water Protection Council to focus on issues related to community engagement and groundwater protection stemming from carbon sequestration wells and other underground injection wells. The group has since grown to 24 member states.

A possible model for these states to embrace ambitious climate action and forward-thinking carbon removal policy can be found in Colorado. The fourth largest oil producer in the U.S., Colorado will establish a fee per ton of greenhouse gas emissions in 2024. It is also currently developing a roadmap for CDR in the state (set to be released in fall 2024 and finalized by February 2025) and has signed a Memorandum of Understanding with Wyoming to pursue regional cooperation on direct air capture development.

California offers another example: The state recognizes the need for carbon management infrastructure but is seeking to create regulatory guardrails before expanding infrastructure development. SB905 was enacted to ensure the safety of CO2 transport and sequestration infrastructure and plans to address issues of liability in the case of accidents.

States Just Beginning to Explore CDR Policy Can Learn from Early Movers

There are also states that, to date, have developed little or no policy around carbon removal — their climate goals may be more moderate, or their economies are driven by industries that may not benefit from readily available captured CO2. This includes states like Alabama, Kentucky and Missouri.  However, this is starting to change as generous federal incentives supporting carbon dioxide removal and carbon capture and storage spur action.

Some states, such as Alabama and Kentucky, are now building up their CDR portfolios, having already passed legislation that regulates the jurisdiction and authority over geologic storage of carbon dioxide. Both have recently won significant federal awards: Alabama to host the Southeast DAC Hub and Kentucky to advance carbon capture and storage commerciality in its region. Other states, such as  Missouri, have included natural carbon removal projects such as forestry preservation, afforestation and land restoration in their Climate Pollution Reduction Grant proposals, indicating a consideration for CDR as part of their climate goals.

Next steps: Elevating ambition on carbon removal

As these states’ technical and regulatory expertise matures, they may want to consider:

• Exploring how to attract and incentivize carbon removal projects within their borders. Nature-based CDR may be a more accessible entry point to carbon removal, without the complexities and geologic conditions around technological capture, transport and storage.
• Proactively designing CDR regulations to prevent a lock-in of fossil-reliant industries. Policies may have longer lasting power, for example, if they explicitly exclude enhanced oil recovery.

States Can Lead the Way on Carbon Removal

The approaches U.S. states are taking toward CDR policy are as diverse as the states themselves. Different geologic, geographic and economic circumstances necessitate differing approaches to CDR. However, the immediacy of the climate crisis also necessitates urgent and ambitious climate policies across the country that can effectively encourage rapid growth of carbon-negative CDR projects to complement efforts that look to avoid or reduce emissions.

There is more work that can be done in all these states to begin removing residual emissions and, eventually, legacy emissions at a scale large enough to help the U.S. reach net zero by 2050. States can design their own policy frameworks to provide regulatory certainty and streamline permitting, incentivize dramatic scaling of these CDR methods, and put safeguards in place to protect communities, workers and the environment.