The world is racing to reduce carbon emissions to prevent the worst impacts of climate change. The bulk of that focus has been on cutting the amount of carbon emitted into the air by switching energy sources from fossil fuels to cleaner alternatives. Amazon (AMZN 3.43%) has been a leader in supporting renewable energy. It's the largest corporate buyer of renewable energy on the planet. 

However, renewables are only part of the solution. Carbon capture, utilization, and sequestration (CCUS) is emerging as a potentially viable option to help decarbonize the global economy. Occidental Petroleum (OXY -0.15%) is a leader in this technology. The oil giant's ambitious CCUS plans recently got a big boost from Amazon, which agreed to buy carbon dioxide removal credits from the company to support its first direct air capture (DAC) facility in Texas. The strategic collaboration will help Amazon reach its climate goals while boosting Occidental's emerging CCUS business.

Drilling down into the partnership

Amazon has agreed to buy 250,000 metric tons of carbon dioxide removal credits from Occidental Petroleum's 1PointFive subsidiary over a 10-year period. That's the equivalent of the carbon dioxide naturally stored in over 290,000 acres of forests. The purchase supports Occidental's STRATOS development, its first large-scale DAC facility in Texas. The plant will be able to capture up to 500,000 metric tons of carbon dioxide directly from the air each year when it starts operations in mid-2025. The company expects to spend $1.1 billion to build the facility. 

Occidental Petroleum will sequester the captured carbon supported by Amazon's credits in underground saline reservoirs. That will bring Amazon closer to its goal of reaching net-zero carbon emissions across its entire global operations by 2040. It will help offset carbon emissions the company can't eliminate through using renewable energy and electrifying its fleet. 

Another aspect of the deal is that Occidental will use digital infrastructure from Amazon Web Services to analyze performance data and optimize the operations of its first DAC plant. That data will enable the company to improve future DAC plants. 

Grand carbon capture ambitions

STRATOS is the first of many DAC plants Occidental Petroleum hopes to build in the coming years. The Biden administration recently agreed to invest $1.2 billion into two commercial-scale DAC facilities, including Occidental's South Texas DAC hub. The company plans to build an even bigger facility to remove up to 1 million tons of carbon dioxide annually at this hub. It has secured enough pore space to safely sequester 3 billion metric tons of carbon dioxide in the region. That's big enough to support DACs that could eventually remove and store up to 30 million metric tons of carbon dioxide annually. 

Occidental Petroleum envisions building 100 DAC facilities by 2035 across its South Texas hub and other areas. Government incentives, especially those in the Inflation Reduction Act, have made DAC investments more commercially viable. 

The oil company believes it could eventually make as much money on CCUS as it currently earns from producing oil and gas. It estimates that CCUS will become a $3 trillion to $5 trillion global industry in the coming years as more companies use the technology to offset their emissions. Driving that market opportunity is the need to remove 1 trillion tons of carbon dioxide this century to keep warming below the 1.5 degrees Celsius limit established by the Paris Agreement. 

Occidental Petroleum launched its 1PointFive subsidiary to help the world achieve that goal. It's building DAC facilities, securing sequestration sites, and investing in sustainable fuels produced with captured carbon. 

Another pathway to helping solve a huge problem

Amazon has been a leader in spearheading renewable energy development by signing power purchase agreements to support hundreds of projects worldwide. It's furthering its commitment to decarbonization by supporting the world's largest DAC project to help commercialize Occidental Petroleum's technology. Carbon capture could provide the world with another pathway to reduce emissions. It could also become a very lucrative business for Occidental Petroleum, which has the potential to be a major player in what could be a massive market opportunity.