EDITORIAL: What do Climeworks' 'headwinds' tell us about the state of the engineered CDR sector?

Quantum Commodity Intelligence - Switzerland-based direct air capture (DAC) specialist Climeworks is a leading company in the engineered CO2 removals (CDR) space, but the DAC firm has come up against headwinds in recent times after a period of rapid growth.

Last week Climeworks made two announcements — one on its website and another through its co-chief executive Jan Wurzbacher on social media — outlining several issues the company is facing. If a CDR outfit with as prominent position in the sector as Climeworks is having problems then that should also raise alarm bells for the rest of the sector.

On May 14, Wurzbacher and co-CEO Christoph Gebald announced in an update on Climeworks' website that the company is planning to reduce staff levels in the face of uncertain market conditions.

"To ensure Climeworks remains resilient through today's global challenges and able to lead toward a gigaton-scale future, we are planning to reduce the size of our team," they said. This week the company confirmed 106 jobs would be lost, 78 of which will be in Switzerland.

Adapting

Climeworks is "proactively adapting its business plan to stay future-oriented" against a background of "current macroeconomic uncertainty, shifting policy priorities where climate tech is seeing reduced momentum in some areas, and the pending clarity for our next plant in the US", the duo said in the update.

"As the best funded scale-up in the industry, we are grateful for the trust of our investors, but we need to be mindful that our funding must be managed with diligence," they added — the company raised $500 million in a funding round back in 2022.

While the exact details on staffing are still to be finalised, the co-CEOs said that the company would "approach any final decision to reduce positions with the utmost care, taking into account all inputs we are currently collecting from our team".

Two days later Wurzbacher admitted on LinkedIn to delays in the ramp up of the company's 'Mammoth' DAC plant in Iceland. "Mammoth faced technology headwinds during its first year with just a portion of its capacity installed at launch," he said, adding that Climeworks had now "identified solutions and expect to show target run rates of our collectors by 2026".

Mammoth was launched last year with nameplate capacity of up to 36,000 tonnes of CO2 equivalent a year (tCO2e/y), an upscale addition to the company's 4,000 tCO2e/y Orca plant in the country, which started operations in 2021.

However, so far, Mammoth, which is still in its early operational phase, has only removed 105 tCO2e from the atmosphere and Orca 953 tCO2e in three years, according to Finland-based Puro.earth registry.

"The difference between theoretical and actual output is due to various factors such as planned and unplanned down-times, weather, filtering losses, and the distraction of grey emissions and has been documented on our website since 2024," said Wurzbacher.

The announcement about cutting staff comes just over two years after the company said it planned 100 new jobs in the US, on top of the 300 it employed in Europe at that time. Climeworks' LinkedIn page gives the ambiguous range of 201-500 employees currently.

Costs

Climeworks could be described as one of the 'big players' in the engineered CDR space, which covers a wide range of different technologies as well as DAC. Much of the focus in the sector has been on working towards cost reductions to under $100 a tonne of CO2 equivalent by the 2030.

However, if Climeworks is having to cut costs, then some other companies may not be around come 2030. Just this week Quantum reported a Canadian firm in the biochar field was shutting up shop, although no specific reasons were given.

Like any new sector, and engineered CDR is still in its early stages, there are going to be teething troubles. Whether this is a political problem for the time being, with CDR projects pressured by a tough financing environment following the election of Donald Trump to the US presidency, or something more widespread remains to be seen.