Today, we talk about DAC, majorly why DAC commands such a “good” price in the market. It is slowly evolving to be what we might as well call luxury carbon credits.

Direct Air Capture (DAC), a technology that extracts CO2 directly from ambient air and stores it durably, often underground, reaches $600 to $1,200 per tonne. Companies like Microsoft, Stripe, and Shopify are investing in DAC credits.

We explore the “why” behind this, and also why people choose it - At its core, Direct Air Capture (DAC) is a thermodynamically intensive process, primarily because it targets carbon dioxide at extremely low atmospheric concentrations of approximately 0.04 percent, in contrast to point-source capture systems that operate on streams containing between 4 and 15 percent CO₂. This stark dilution necessitates significantly greater energy input for both separation and compression. A 2023 review published in Joule outlines the primary cost drivers of DAC, highlighting energy consumption, particularly for sorbent regeneration and air handling, as a major factor, with requirements varying depending on whether the system employs liquid solvents or solid sorbents (Herzog, 2023). In addition to the substantial energy demands, capital expenditure remains high, as modular DAC units are not yet standardized or mass-produced. The reliance on bespoke engineering and specialized materials further elevates upfront costs. Operational and maintenance expenses, coupled with suboptimal capture throughput due to low utilization rates in early-stage facilities, also contribute significantly to the levelized cost of carbon.

Despite the steep cost curve, DAC credits are in demand- For starters, DAC offers unparalleled MRV (Monitoring, Reporting, and Verification) fidelity. CO2 is measured precisely at the point of capture and storage, typically injected into geological formations under Class VI wells (e.g., via partnerships with companies like Carbfix or 1PointFive). This level of certainty dramatically reduces the risk of reversal, a critical issue for nature-based credits.

They also score on the permanence scale - With expected storage durations exceeding 1,000 years, DAC credits align with the Oxford Principles for Net Zero Aligned Carbon Offsetting, which stress the need to shift from short-lived to long-lived carbon storage.

Additionally, companies participating in advance market commitments for DAC are not simply offsetting emissions, but are signaling a long-term climate commitment. Investing early in DAC creates a compliance-ready offset portfolio, particularly as removals become favored under frameworks like Article 6 of the Paris Agreement.

However, the current price tag is not a barrier; it is a signal of innovation under scaling pressure. The broader challenge is not demand, but supply. According to the IEA, the global installed DAC capacity was just 10,000 tonnes/year in 2022, compared to a theoretical need for  about a billion tonnes/year by 2050 to stay within a 1.5 degree C pathway.