The California Energy Commission (CEC) has launched a new funding solicitation (GFO-25-307) for pre-commercial Direct Air Capture (DAC) projects, officially released on May 1, 2026. The program allocates a total funding pool of $11 million, with individual project awards ranging from $2.5 million to $5.5 million.
The solicitation is designed to accelerate the development and deployment of advanced DAC and carbon dioxide removal (CDR) technologies through pilot and demonstration-scale projects operating under real-world conditions. The initiative forms part of California’s broader strategy to achieve economy-wide carbon neutrality by 2045 and reflects the growing role of engineered carbon removals in long-term decarbonization planning.
Summary of key requirements
Technical requirement: The program specifically targets DAC technologies at Technology Readiness Level (TRL) 6 or higher, and focuses exclusively on mechanical and chemical DAC pathways, excluding nature-based carbon removal approaches such as biochar or soil carbon sequestration. Moreover, the CEC introduced the following benchmarks that projects must aim to achieve by completion:
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Capture costs of no more than $450 per metric ton of CO2
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Energy consumption below 1,400 kWh per metric ton of CO2 captured
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Net CO2 removal capacity of at least 500 metric tons annually
Financial requirement: A core requirement of the solicitation is that project developers provide at least 20% matching funds. This blended finance approach is designed to de-risk early-stage DAC deployment while ensuring meaningful private-sector participation alongside public investment.
Social requirement: One of the defining features of the solicitation is its strong emphasis on community participation and environmental justice. At least 7% of awarded CEC funding must be allocated specifically to community engagement, outreach, and education activities. All applicants must also submit a formal Community Benefits Plan as one of the requirements.
Regional economic incentives: Applications can score additional points by maximizing the proportion of CEC funding spent within California, reinforcing the state’s goals around local economic development, workforce creation, and domestic clean technology supply chains.
Cleantech preference: Given the high energy intensity associated with DAC systems, the CEC is also incentivizing low-carbon and grid-responsive operations. Projects may receive additional five preference points by submitting clean energy procurement plans that demonstrate how low- or zero-carbon electricity will be sourced, measured, and verified. Examples include on-site renewable energy generation, power purchase agreements (PPA)s, etc.
What this funding means for Carbon Markets
Although modest in size, the solicitation is an important signal for North American carbon markets. California is defining what a credible DAC project looks like through performance benchmarks, efficiency standards, private-sector participation, clean energy use, and community engagement. By targeting technologies above TRL 6 and setting clear cost and performance thresholds, the program shifts DAC from early-stage R&D toward commercial deployment, supporting scalable carbon removals that could eventually feed into compliance carbon markets and industrial decarbonization pathways.
This approach aligns with recent CARB updates to the Cap-and-Invest program, where the modified ISOR introduced the Manufacturing Decarbonization Incentive (MDI) to support the decarbonization of California’s manufacturing industry. The MDI now includes investments in carbon capture, utilization, and storage (CCUS) and has been expanded to refineries. MDI funding may be stacked with CEC DAC funding, creating a layered support system that combines industrial decarbonization incentives with direct support for carbon removal deployment. Together, these policies position DAC as a complementary supply-side tool within the broader Western Climate Initiative framework, helping manage compliance costs while scaling decarbonization solutions.
Next Steps
A Pre-Application Workshop is scheduled for May 21, 2026, from 10:00 AM to 12:00 PM PST, the details of which can be found on the CEC website. The deadline to submit applications is 31st July 2026.
ClearBlue is actively monitoring these developments, for more information about ClearBlue’s advisory services or market intelligence coverage, please contact us.