As the pace of change in the digital economy takes so much of our attention, we don't always see the trends reshaping the industrial economy. Constraints on heavy industry and the natural resource sectors are tightening, not loosening. While economic upside from artificial intelligence is flowing to technology companies, environmental liability and regulatory risk is concentrating in sectors that provide our foundational goods: energy, metals, agriculture, water, cement, and minerals. Compliance costs are increasing. This is straining tight margins in industrial sectors and in many cases eroding value.

We're seeing, however, a small but growing group of industrial companies looking ahead and securing their license to operate and compete in an uncertain world.

They're beginning to move from buying carbon offsets to building their own carbon removal capacity. Viewing their industries through a carbon lens, they can realise enormous strategic optionality. Integrating carbon removal helps them:

• comply with regulations

• lock in future supplies of negative-emissions products, and

• gain industrial-scale access to the carbon market just as it's taking off.

A changing landscape: rising regulation, rising energy demand

We started Counteract five years ago to help accelerate the growth of carbon removal. There were just a handful of carbon removal companies in 2020, but now there are over a thousand companies exploring various carbon removal pathways and solutions.

The sector has grown as the digital and industrial economies collide, resulting in an even greater need to lower greenhouse gas emissions. The exponential growth of data centres and compute capacity requires massive quantities of input from foundational industries. For example, a 2kg server requires the extraction of 800kg of raw materials, while rising energy demand extends the life of fossil fuel assets. At the same time, governments and society increasingly demand lower-impact sourcing, lower carbon energy, and more equitable working conditions.

This trend intersects with a rapidly maturing carbon regulatory environment. Voluntary carbon commitments are moving towards becoming hard law.

• Standards are solidifying. Voluntary frameworks like the Greenhouse Gas Protocol, Science Based Targets Initiative, and ISO Net Zero are becoming blueprints for regulations like the EU’s Carbon Removals and Carbon Farming framework (CRCF).

• Governments are building market structures. Governments in the UK, Germany, and Australia are aligning carbon removal plans with their Nationally Determined Contributions, anticipating carbon removal's integration into Emissions Trading Systems. Germany and California have established a carbon removal procurement program, moving from planning to action.

• Enforcement is going global. Sector-specific mandates from bodies like CORSIA (aviation) are gaining traction. International trade mechanisms like the EU’s Carbon Border Adjustment Mechanism penalise embodied carbon, effectively laying the groundwork for carbon pricing. The costs of inaction will rise like a line item on corporate balance sheets.

Compliance, however, is a challenge. There are limits to how much an industrial company can reduce its emissions. There will be 10-20% of emissions that are not cost-effective to abate. Intervening in the core processes responsible for these residual emissions can introduce unacceptable risks. For companies already operating under regulated carbon pricing, these residual emissions represent a rising cost.

Integration is a solution

Rather than seeing carbon as a cost center, forward-looking companies are building their own carbon removal capacity in ways that bolster their core business and complement their expertise.

From their perspective, carbon removal isn't a tax on business. It’s an industrial opportunity: a way to hedge against costly regulation, sell into a growing carbon market, create new revenue streams, and secure long-term optionality.

Because of their established supply chains, resource pools, and engineering expertise — as well as their immense scale — large industrial companies are uniquely positioned to capitalise. We’re seeing this play out across the industrial landscape at an increasing rate. Many companies are already moving into carbon removal space and securing talent, IP, and key ingredients.

Carbon removal optionality in action

• Halliburton is the go-to provider of oil and gas drilling services. If you need a well dug, they’re the folks to call. Geologic carbon sequestration requires similar skills and know-how. But operating a well to inject, monitor, and mineralise CO₂ is a different game. By working closely with mineralisation and storage developer Cella they’re giving themselves upside optionality in a market where CO₂ storage is an inevitability.

• Mining giant Anglo American has gone further upstream in the value chain. It's utilising legacy mining byproducts, once considered waste and liability, to remove atmospheric CO₂. Partnering with MRV startup ZeroEx through Project Earthstone, Anglo are repurposing slag from their own operations for enhanced-weathering-based carbon removal. They can now go on the defensive and minimise their company’s overall cost of compliance, and/or: they can go on the offensive as carbon markets grow, capitalising on their scale, volume, and access to "wasted" assets to shape the market.

• Giga Metals is one of many mining companies looking to Arca Climate for similar value-adds to existing operations. Arca can mineralise mafic rocks (left over as mine waste) on-site, cost effectively. Finding a new revenue stream through carbon removals helps Giga Metals smooth short-term fluctuations in nickel prices and, over time, derisks mining operations. As with Anglo American, the carbon removal can also be part of an internal "insetting" strategy for net zero compliance.

• Occidental Petroleum is an early mover in buying foundational carbon removal IP. It’s acquired two direct air capture (DAC) companies: Carbon Engineering and Holocene. Oxy’s management realised that DAC has operational upside today along with downside protection. Carbon management regulations could require millions of tonnes of capture capacity. Licensing the technology later or buying this capacity later would be very costly. Buying the IP today is cost-effective and strategically sound, especially when the technology mirrors Oxy’s core processes: as an oil and gas company they understand how to build, operate, and finance large scale liquid-pumping facilities.

We could go on:

• Carmeuse is diving into lime-based carbon storage with Planeteers as a possible new demand driver for their limestone.

• CREW Carbon is working alongside water treatment companies to cut costs while also removing CO_2.

• Mitsui O.S.K. Lines is leveraging expertise in gas handling and logistics to bring direct ocean capture with to market with Captura.

Companies are moving into carbon removal now to secure the best options for the long term. We believe that industrial companies that wait will be stuck with the highest bills — and the most value left on the table.

Takeaways for the year ahead

Securing optionality in carbon removal and carbon management has become a smart move for many large industrials. There's a defensive case for mitigating risk and controlling costs as well as an offensive case for being an early mover in an emerging, multi-billion-dollar market.

In some industrial sectors the carbon removal opportunity is obvious: it presents an immediate value-add to a business — and this is often the hook that allows a company to explore long-term options. We recognise, though, that the opportunities for other companies may be smaller; they may not be a clear integration option.

But there are compelling questions for both industrial companies and carbon removal developers to consider in the years ahead.

• Industrial companies: think about how carbon removal, across its many pathways, can integrate with your operations while creating financial and regulatory optionality.

• Developers: think about how your technology or approach integrates with industry and how that enables optionality for certain profile(s) of company. This may unlock a customer, a pilot, or an exit.

We know that many industrial companies are considering how the carbon economy can work for them, not against them. While we’ve highlighted a few examples of carbon removal's industrial integration opportunity, there are others. It’s showing up in many forms as well: through knowledge transfer, offtakes, financial returns, or strategic acquisitions.

Carbon removal is now a strategic industrial asset, and the opportunities for all sides will keep growing.