BHP DAC Strategy: 1 Venture Investment, 1 Steel Partnership, and a $3.1 B Market Signal (2021-2025)

Industry Risks & BHP’s Strategic Response

BHP navigated the high-risk environment of Direct Air Capture by shifting from a passive venture investment footing before 2025 to actively building demand-side readiness through industrial partnerships in 2025, a move that avoids direct capital exposure to volatile early-stage projects. This approach contrasts with the direct offtake agreements pursued by technology companies and the varied low-carbon approaches of energy majors like Halliburton.

Venture Capital as an Early Position

• Prior to 2025, BHP’s primary engagement with Direct Air Capture was through its venture arm, BHP Ventures, which held an investment in DAC pioneer Carbon Engineering. This provided the company with strategic exposure and insights into the technology’s development without committing operational capital to unproven, large-scale facilities.
• This venture-led strategy allowed BHP to monitor the sector’s progress from a distance, aligning with its 2025 annual report’s stated focus on synchronizing technology adoption with commercial and technical readiness. It positioned the company as an informed future customer rather than an early-stage developer.

Shift to Demand-Side Collaboration in 2025

• In 2025, BHP’s strategy evolved toward actively building the business case for carbon removal. The partnership with Blue Scope, Rio Tinto, Mitsui, and Woodside to explore decarbonization pathways for steelmaking exemplifies this shift.
• By focusing on hard-to-abate emissions within its own value chain, BHP is helping create the foundational demand that will be necessary to make future large-scale DAC projects commercially viable, effectively de-risking the market for when the technology matures.

Contrasting Industry Approaches

• BHP’s calculated approach differs significantly from other major corporations in 2025. Technology firms like Microsoft took a more direct role in stimulating the supply side by signing multi-year offtake agreements for carbon removal credits with developers such as Deep Sky.
• This positions BHP in a middle ground, staying engaged through strategic partnerships while avoiding the direct capital commitments of project developers or the binding offtake agreements signed by early corporate adopters.

Investment and Cancellations

While government incentives like the U.S. Department of Energy’s $3.1 billion fund for carbon management attempted to spur the market, the subsequent cancellation of key projects validated BHP’s cautious approach of avoiding direct capital allocation to DAC facilities in 2025.

The Volatile Policy Landscape

• The U.S. Inflation Reduction Act’s enhanced 45 Q tax credit, offering up to $180 per ton for CO 2 captured via DAC and permanently stored, was a critical catalyst for early project proposals. This incentive, combined with direct funding programs, created significant market momentum.
• In January 2025, the DOE announced $3.1 billion in available funding for carbon management technologies, signaling strong government support for the sector and encouraging the formation of new DAC projects and hubs.

The California DAC Hub Cancellation

• The fragility of this policy-driven momentum was exposed in October 2025, when federal grant cancellations jeopardized four carbon capture projects in Kern County, California, including the proposed California Direct Air Capture Hub.
• This event highlighted the significant project-level risks associated with reliance on government subsidies and sent a cautionary signal throughout the industry, reinforcing the prudence of BHP’s decision to not yet commit major capital to its own DAC facilities. The challenges of securing reliable funding are also a factor in broader CCUS hub development, as seen in regions like Alberta.

Table: Notable DAC Market Funding and Cancellation Events (2025)

Partnership Data

In 2025, BHP prioritized broad decarbonization partnerships with industrial value chain players over signing specific DAC offtake agreements, a strategy focused on tackling hard-to-abate emissions at their source and building future demand for carbon removal.

The Blue Scope Steel Decarbonization Pact

• The most significant collaboration involving BHP in 2025 was the partnership with Blue Scope, Rio Tinto, and others, detailed in Blue Scope’s FY 2025 sustainability report. The goal is to accelerate the decarbonization of steelmaking.
• This collaboration does not directly involve building or funding a DAC plant. Instead, it focuses on evaluating and enabling the technologies required to reduce emissions in an energy-intensive industry, thereby defining a future use case and market for carbon removal solutions like DAC.

The Rise of Carbon Removal Offtake Deals

• BHP’s strategy contrasts sharply with the trend of direct offtake agreements seen elsewhere in the market. In October 2025, Microsoft signed a multi-year deal with Canadian startup Deep Sky to purchase carbon removal credits.
• These deals represent a different form of market participation where buyers commit to purchasing carbon removal as a service, directly funding the construction and operation of new DAC facilities. This approach is favored by companies with net-zero goals seeking to secure a future supply of high-quality offsets.

Table: Key DAC and Decarbonization Partnerships (2025)

Geography

While North America, driven by U.S. policy incentives, became the epicenter for DAC project development and funding announcements in the 2021-2025 period, BHP’s strategy remained global, focused on its operational and customer footprint, particularly in steelmaking regions.

U.S. as a DAC Development Hub

• The United States solidified its position as the leading region for DAC development, propelled by the 45 Q tax credit and DOE funding programs. This led to major project announcements, including Occidental’s Stratos facility in Texas, which neared completion in early 2025.
• The concentration of activity was evident in the competition for federal funding, such as the now-jeopardized California Direct Air Capture Hub. This demonstrates how national policy directly shaped the geographic distribution of DAC projects. Other energy companies, such as Petrobras, are also making significant low-carbon investments driven by regional opportunities and assets.

BHP’s Global Industrial Focus

• BHP’s activities are not geographically constrained by DAC-specific incentives. Its partnership with Australia-based Blue Scope underscores a strategy tied to its global industrial value chain and customer base.
• This approach means BHP’s future interest in DAC will likely be dictated by the decarbonization needs of its operations and customers in key markets like Australia, China, and Japan, rather than solely by where DAC technology is being subsidized.

US Dominates Global DAC Project Capacity Pipeline
The United States significantly leads global Direct Air Capture (DAC) project development, with 8.71 Million Tonnes of CO2 planned or under construction. This capacity dwarfs other nations, with Kenya and UAE at ~1 Million Tonnes each, and France and the UK trailing substantially, indicating a highly concentrated market.

(Source: International Energy Agency — via Chevron Carbon Capture 2025: A Bold Strategy Unveiled)

Technology Maturity

BHP’s 2025 strategy reflects the reality that DAC technology, despite progress, remains commercially immature, with prohibitive costs and high energy requirements preventing large-scale industrial deployment.

The Prohibitive Cost and Energy Barrier

• The economic viability of Direct Air Capture remained a primary obstacle in 2025. Capture costs were cited as being above $300 per tonne of CO 2, significantly higher than mature point-source Carbon Capture and Storage (CCS) technologies, which can achieve costs of $35-40 per tonne.
• Furthermore, the technology’s high energy intensity was a major challenge. One 2025 study noted a total energy requirement of 1, 289 k Wh per ton of CO 2 captured, a substantial operational cost and a potential strain on local power grids.

Venture-Backed Technology Development

• BHP’s early investment in Carbon Engineering through its venture arm was a method of tracking technological progress without bearing the full risk of development. This reflects a market still in a competitive phase, with various companies developing different solid sorbent and liquid solvent-based approaches.
• The market’s focus remains on scaling up from pilot and demonstration phases to megaton-scale facilities. Until a dominant, cost-effective technology design emerges and proves its reliability at scale, direct investment by industrial players like BHP remains a high-risk proposition.

SWOT Analysis

The analysis reveals a strategic choice by BHP to leverage its financial strength and market position to de-risk its entry into the DAC sector, prioritizing long-term value chain integration over the high-risk, high-cost nature of early-stage project development.

Table: SWOT Analysis for BHP’s DAC Strategy (2021-2025)

Partnerships Show Resilience as Traditional M&A Declines
Traditional M&A activity has sharply declined by 29% from its 2021 peak of 30,808 deals to 21,707 in 2024, signaling a cautious market. Conversely, Joint Ventures & Alliances (JV&A) deals, representing partnerships, have remained relatively resilient, fluctuating around 20,000 deals annually despite a slight dip to 17,448 in 2024.

Strategic Alliances De-Risk Growth in Volatile Markets
The sustained preference for JV&A reflects a strategic shift towards de-risked growth and market agility. Companies are increasingly leveraging collaborative models to access new technologies, expand market reach, or share the significant capital investments required for long-term projects, avoiding the complexities and full financial commitments of outright acquisitions.

(Source: Refinitiv; BCG analysis. — via The Promised Carbon Capture Revolution Is Long In the Making | Internationale Politik Quarterly)

Scenario Modelling

The primary indicator to watch for a shift in BHP’s strategy will be its transition from foundational partnerships to its first direct DAC pilot project or a significant carbon removal offtake agreement.

Signals of a Strategic Shift

• If the cost of Direct Air Capture falls significantly, approaching the $100-$150 per tonne range, and a specific technology pathway demonstrates proven reliability at scale, watch for BHP to move from its current enabling role to one of direct participation. The company’s focus on decarbonizing its value chain provides a ready-made business case for activation.
• A key signal would be the announcement of a feasibility study for a DAC facility integrated with one of its mining operations or a steelmaking partner’s plant. This would mark a shift from exploring decarbonization in theory to engineering its practical application.

Potential Triggers for Action

• Increased pressure from investors for more concrete decarbonization actions beyond Scope 1 and 2 emissions could compel BHP to accelerate its timeline. A commitment to a carbon removal target would necessitate offtake agreements or direct investment.
• A successful outcome from the Blue Scope steelmaking study that explicitly defines a critical role for DAC could trigger the next phase of investment, providing the internal justification needed to commit capital to a pilot project.

The questions your competitors are already asking

This report covers one angle of industrial strategy in the Direct Air Capture market. The questions that matter most depend on your work.

• Industrial partnerships for steel decarbonization
• Carbon removal offtake agreements list
• Direct air capture cost per ton 2026 forecast
• US direct air capture projects under construction

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