U.S. carbon capture is facing a make-or-break moment as the Trump administration moves to withdraw billions of dollars in federal support. The sudden funding cuts could hit many early-stage projects hard and weaken private sector participation in the market.

At the end of May, the U.S. Department of Energy canceled about $1.2 billion in Industrial Demonstration Program (IDP) funding. While many of the funds were for pioneering projects, some of the industry's biggest names, including ExxonMobil (114, 1.52, 1.35%) and Heidelberg Materials AG, will also lose funding. Another $700 million unrelated to IDP funding is also facing cuts, with Calpine alone set to lose $540 million.

The government's policy shift will also spread to the private market. Even before the funding cuts, private capital investment had weakened significantly in the first half of the year as political uncertainty - including funding cuts, tariffs, deregulation and proposed changes to the 45Q tax credit - has deterred many investors.

U.S. deals tracked in the first half of 2025, all from public funds allocated before Trump took office in January, totaled just $112 million, compared with nearly $2.9 billion in 2024 and $4.4 billion in 2023.

This could hit the market hard, slowing projects and hampering U.S. competitiveness around the world. The U.S. funding cuts come as other major markets such as Saudi Arabia, Europe and the U.K. advance proof-of-concept projects worth billions of dollars.

U.S. companies will have to scale back carbon capture plans or seek other funding sources. Looking ahead, state-level clean energy support programs, such as California's cap-and-trade program, will become increasingly important to ensure the United States' competitive advantage.