California's $11M DAC Fund Sets a New Performance Bar

California is putting $11 million on the table for pre-commercial direct air capture projects, and the dollar amount is almost beside the point. What matters are the benchmarks: projects must capture CO2 at no more than $450 per metric ton, using no more than 1,400 kilowatt-hours per metric ton. The California Energy Commission (CEC) is drawing a clear line for what credible DAC looks like.

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What Is California's CEC Actually Funding?

The CEC launched solicitation GFO-25-307 on May 1, 2026, targeting pre-commercial DAC demonstration projects at Technology Readiness Level 6 or higher. That filter matters: only systems already proven at meaningful scale can apply. The program focuses exclusively on mechanical and chemical DAC pathways and excludes nature-based approaches like biochar. Projects must also advance at least one TRL level during the grant period.

Awards range from $2.5 million to $5.5 million per project, with two to four projects expected to receive funding. Each project must demonstrate net CO2 removal of at least 500 metric tons per year by project completion. Applicants must submit a formal Community Benefits Plan, and at least 7% of CEC funds must go directly to community engagement, outreach, and education. A pre-application workshop is scheduled for May 21, 2026.

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Why Do the Performance Benchmarks Matter?

A capture cost ceiling of $450 per metric ton is an ambitious target for pre-commercial work. Current costs at the world's largest DAC facility are far higher. Climeworks co-CEO and co-founder Jan Wurzbacher confirmed that the Mammoth plant in Iceland operates at a cost "closer to the $1,000 per ton mark" than to $100 per ton. Climeworks' Generation 3 technology targets total net removal costs of $400 to $600 per metric ton by 2030, according to the company's official cost roadmap released in June 2024. The CEC is asking pre-commercial projects to aim for a benchmark that the industry's most advanced technology expects to reach at megaton scale six years from now.

The energy cap of 1,400 kWh per metric ton also pushes applicants toward efficient system design. The global DAC market was valued at approximately $147.4 million in 2025 and is projected to reach $17.57 billion by 2035, at a compound annual growth rate of 61.3%, according to Research Nester. Setting hard performance floors now shapes what that future market looks like.

How Does This Fit California's Carbon Removal Strategy?

This solicitation is part of California's Carbon Removal Innovation Support Program (CRISP), which draws funding from the state's Cap-and-Invest revenues. The 2022 California Climate Crisis Act set a target of reaching carbon neutrality by 2045 and reducing greenhouse gas emissions 85% below 1990 levels. The California Air Resources Board's Scoping Plan concluded that mechanical carbon dioxide removal will be required to meet that goal.

California has been building its own carbon removal infrastructure. In October 2025, Governor Gavin Newsom signed SB 614, enabling dedicated CO2 pipelines connecting capture facilities to underground storage. SB 840 allocated $85 million from the Greenhouse Gas Reduction Fund for carbon tech innovation in the 2026-27 budget cycle. This new CEC solicitation sits within that broader investment structure.

Recent updates to California's Cap-and-Invest program also introduced the Manufacturing Decarbonization Incentive, which now includes carbon capture and storage investments. CEC DAC grant funding can be stacked with that incentive, creating layered support for qualifying projects.

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What DAC Projects Already Exist in California?

California currently has four to six direct air capture projects at pilot, demonstration, or early operational stage. The state is home to the first commercial DAC facility in the United States, operated by Heirloom Carbon Technologies in Tracy, California. Heirloom's system accelerates limestone's natural ability to absorb CO2 using renewable energy. The company raised $150 million in Series B funding to scale its technology, with a goal of removing 1 billion metric tons of CO2 by 2035. That figure represents 10% of the global annual carbon removal needed by mid-century.

As of early 2025, around 150 DAC companies operated globally, with roughly three dozen plants operational worldwide, according to the World Resources Institute. The California DAC Hub consortium, backed by the U.S. Department of Energy, and Southern San Joaquin Valley hub concept studies led by Lawrence Berkeley National Lab add further depth to the state's emerging DAC pipeline.

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How the Program Structures Risk and Accountability

Applicants must provide at least 20% matching funds in cash or in-kind contributions. Projects that commit to spending more CEC funds within California earn additional preference points. So do projects that submit clean energy procurement plans, reflecting the high energy intensity of DAC systems and the need to run them on low-carbon power.

Requirement	Specification
Technology Readiness Level	TRL 6 or higher; must advance at least one TRL level
Capture cost ceiling	No more than $450 per metric ton of CO2
Energy consumption limit	Below 1,400 kWh per metric ton of CO2 captured
Minimum annual removal	At least 500 metric tons of CO2 per year
Match funding	Minimum 20% of CEC award (cash or in-kind)
Community engagement	At least 7% of CEC funds; formal Community Benefits Plan required

What California Is Trying to Define

The real question this solicitation is answering is not "can we fund DAC?" It is "what does a credible DAC project actually look like?" Publishing hard benchmarks on cost, energy, and removal volume creates a public record of what passes. That record matters as DAC moves into compliance carbon markets. California's Cap-and-Invest program recently made carbon dioxide removal eligible as a compliance offset. Projects that demonstrate performance against the CEC's benchmarks today are better positioned to generate compliance-grade credits in the future.

With the global DAC market projected to grow from $147.4 million in 2025 to $17.57 billion by 2035, the decisions states make now about standards and accountability will shape the industry's credibility for years to come. California is not waiting for federal direction. It is writing the playbook itself.

Frequently Asked Questions

Who can apply for CEC solicitation GFO-25-307?

Any public or private entity can apply. Projects must be located in California, use mechanical or chemical DAC technology at TRL 6 or higher, provide at least 20% matching funds, and submit a formal Community Benefits Plan with a committed host community partner.

What are the minimum performance requirements for funded projects?

Projects must demonstrate net CO2 removal of at least 500 metric tons per year, with capture costs no higher than $450 per metric ton and energy use below 1,400 kWh per metric ton captured by project completion.

How does this solicitation connect to California's carbon compliance market?

California's 2025 legislation made carbon dioxide removal eligible as a compliance offset in the Cap-and-Invest program. CEC DAC grant funding can also be stacked with the Manufacturing Decarbonization Incentive for qualifying industrial projects, creating multiple funding pathways for developers.