Carbon capture and carbon removal are gaining prominence in global energy innovation as governments and investors look for technologies capable of cutting emissions from industry and the atmosphere, according to the International Energy Agency’s State of Energy Innovation 2026 report.
Carbon capture gains policy momentum
Carbon capture, utilization and storage, known as CCUS, is increasingly embedded in government strategies aimed at decarbonizing heavy industry and existing energy infrastructure. The IEA notes that policy support is expanding as countries seek solutions for sectors where electrification or fuel switching is difficult.
One example is Denmark’s carbon capture and storage fund, launched in 2025 with a budget of about $4.2 billion. The program offers 15-year contracts covering CO2 capture, transport and permanent storage, with support open to emissions from fossil fuels, biomass or atmospheric sources.
Though a recent government-organized tender had just two bids from an initial field of ten, the effort is still considered as at least partial progress that highlighted policy design flaws in a complex environment.
At the same time, carbon capture technologies are moving through the innovation pipeline, from early research to large-scale demonstration projects. The report highlights several “first-of-a-kind” commercial initiatives under development that aim to prove the technical and commercial viability of large carbon management projects but also notes that “..there is less reliance on certain large-scale applications for which first-of-a-kind projects are currently under construction, such as for carbon capture, utilisation and storage
(CCUS) for process emissions, which is down by one-fifth.”
Developers say the biggest challenge is financing the step between pilot projects and full commercial deployment, something shared with most of the other technology areas. Large energy technologies often face what the report calls the “missing middle” in financing: projects are too expensive for venture capital alone but still considered too risky for traditional lenders.
Government support, joint ventures with industrial partners and long-term offtake agreements are increasingly used to bridge that gap and bring projects to construction.
Carbon removal emerges as a fast-growing sector
Alongside capture technologies for industrial emissions, interest in carbon dioxide removal (CDR) is rising rapidly. These technologies aim to remove CO2 directly from the atmosphere through methods such as direct air capture or engineered storage.
The IEA report finds that carbon removal has become part of a new wave of emerging energy technologies attracting venture capital. Since 2021, seven sectors including carbon dioxide removal, nuclear technologies and next-generation geothermal have offset much of the decline in venture funding previously directed toward electric vehicles.
In the second half of the 2010s, these emerging sectors together accounted for less than 5% of energy venture capital investment. By 2025, they represented about one-third of the total, a sign that investors are shifting toward technologies seen as essential for deep decarbonization.
Startup activity is expanding quickly as well. Nearly 400 companies have been founded in these emerging technology areas over the past decade, with more than 60% launched after 2020, according to the report, though 2025 did see a drop in startups receiving their first funding.
Read more: SMI Urges Dedicated Fund To Close CCS Financing Gap
