Carbon recycling firm LanzaTech is spinning out synthetic biology tech

LanzaTech, which turns waste carbon from industrial processes into fuels, materials and proteins, is planning a joint venture to commercialize a process that uses microbes to turn CO₂ into specialty chemicals.

The move underscores the uncertain outlook for U.S. climate tech startups under President Donald Trump, particularly those that rely on federal research and development grants, which his administration has frozen via executive order pending review.

LanzaTech was founded two decades ago to commercialize ways of using captured carbon gases as the feedstock for products — abating emissions and creating a revenue stream in the process. About 180 active companies are developing carbon utilization approaches, and the market could reach $70 billion by 2030, according to Lux Research.

The new company, LanzaX, will take over a pipeline of existing LanzaTech projects focused on refining isopropanol, used in household products, medicines and cosmetics; and acetone, a solvent used in nail polish and paint removers. It will also focus on LanzaTech’s emerging gas fermentation technology, which can turn carbon monoxide or dioxide directly into chemicals.

“I can still keep growing it with one hand behind my back or I can say, this is ready for prime time,” said LanzaTech CEO and chair Jennifer Holmgren, a chemist who has authored 50 U.S. patents. She previously led a renewable energy and chemicals business at Honeywell company UOP, spearheading low-carbon aviation fuel development.

Pressure for profit

LanzaTech, based in Skokie, Illinois, was founded in 2005. The company has scored contracts with companies such as Lululemon and Zara, which used polyester recycled through its processes; and Nivea, which uses LanzaTech ingredients in some moisturizers. Key partners include steelmaker ArcelorMittal.

The company went public in February 2023 via a special purpose acquisition company in a deal valued at $2 billion, or $10 per share. Its stock trended downward throughout 2024, recently sinking below $1 per share.

“We’re in the market, and it doesn’t love us,” Holmgren said. “Why doesn’t it love us? Because they don’t want growth, they want profit right now, and for us to get into profit, we’ve got to focus.”

The spinout of LanzaX would save LanzaTech $8 million annually and allow it to scale up its existing biorefineries for producing ethanol. LanzaTech has plants in Belgium, China, India and the U.S. state of Georgia. Some of those facilities are licensed; the company has an equity stake in some and generates revenue from the products produced from the recycled emissions.

“If I were a chemical company, I would look at [LanzaX] very carefully,” Holmgren said. “I really believe this is how chemicals will be made in the future.”

One wildcard is uncertainty over the fate of two grants LanzaTech received in late 2024. LanzaTech was awarded $3 million through a Department of Energy program supporting approaches to turn captured carbon into “economically valuable” products. It’s also counting on funds from a $200 million commitment via Project SECURE (Sustainable Ethylene from CO₂ Utilization with Renewable Energy). LanzaTech declined to comment on the status of that funding.

Tipping point for carbon recycling?

This is LanzaTech’s second spinout. It launched LanzaJet in June 2020 with an infusion of $25 million in outside capital to scale up sustainable aviation fuel production. That company has partnered with British Airways, Virgin Atlantic and All Nippon Airways. Microsoft is also a notable investor.

New York-based investment firm Tharsis Capital is partnering with LanzaTech to find backing for the new LanzaX joint venture over the next six months, said Holmgren. “If it takes you more than six months to do something like this, you really need to stop and think again,” she said. “It means something’s not resonating.”

About 30 employees will move over to the new synthetic biology company, along with several existing contracts and a portfolio of more than 100 molecules that LanzaX hopes to commercialize.

Carbon utilization could become increasingly attractive to companies relying on carbon removal to abate emissions if incentives for sequestering or storing it instead dry up, said Mukunda Kaushik, a Lux Research analyst for carbon capture and utilization. Some of the biggest markets include sustainable fuel, concrete and specialty chemicals. The technology LanzaX will commercialize is interesting because it doesn’t need a pure carbon dioxide stream to produce chemicals, he said.

“LanzaTech has taken this to the scale we need,” Kaushik said. “Synbio has challenges, but the potential is that it can produce a wide range of chemicals.”