By Brent Li
As global energy supplies are threatened by the shutdown of the Strait of Hormuz, a Chinese startup is pitching an alternative future. Carbonology, a company founded by former Tesla executive Robin Ren in 2024, recently announced it has successfully produced artificial oil from air and water using solar and wind power.
The company says the technology extracts carbon dioxide directly from the atmosphere and combines it with hydrogen derived from water to synthesize fuels. While Carbonology initially planned to produce its first barrel of “oil” by the end of 2025, the milestone was finally achieved in March 2026. For a startup exploring cutting-edge technology, such a delay shouldn’t be worrying. Ren, a longtime college friend of Elon Musk and who previously served as Tesla’s vice president for the Asia-Pacific region, says the ultimate goal is to stop extracting fossil fuels entirely by finding alternative carbon sources.
Betting on the skies
Rather than focusing on fuel for everyday cars, Carbonology is primarily targeting the Sustainable Aviation Fuel, or SAF, market. This strategic choice aligns with shifting automotive trends. In China, electric vehicle sales surpassed internal combustion engine cars in 2025, a sign that the traditional gasoline market is shrinking. However, the prospect of fully electric passenger planes and cargo aircraft remains bleak, at least in the foreseeable future. “In the next 30 or 50 years, we believe airplanes will definitely still need to use aviation fuel,” says company co-founder Zhang Hongxi.
Even so, gasoline is still king in the U.S. — a report from S&P Global showed electric vehicles only accounted for about 10 percent of the country’s auto sales between July 2024 and July 2025. Last year, an American startup named Aircela announced it had created usable car gasoline from carbon dioxide found in the air.
The reality of cost
While making fuel from air and water sounds like a silver bullet for climate change, the underlying technology requires massive amounts of energy and remains notoriously expensive.
Back in 2021, Chinese scientists made global headlines by successfully synthesizing starch from carbon dioxide in a laboratory. Five years later, however, there is still no news of this technology being commercialized. If it were cheap to scale, humanity might no longer need to plant corn or soybeans.
Cost is equally critical for Carbonology. The startup claims to have “sufficiently reduced costs,” but has not disclosed any detailed financial data, suggesting the price tag remains extraordinarily high. SAF currently costs between $2,000 and $3,000 per ton, compared to about $1,500 of regular aviation fuel. And fuel made from direct air capture can only be substantially more expensive. The company acknowledges it is relying on a “green premium” — a willingness from buyers to pay extra for environmentally friendly products — to sustain its current operations.
Scaling up in the desert
For now, Carbonology’s 300 million yuan ($42 million) research and development center in Shanghai’s Lingang area serves primarily as a technology testing ground. According to JF Daily, the facility houses a 100-ton production line that requires 400 tons of captured carbon dioxide to produce 10 tons of SAF.
The energy-intensive nature of this process means commercial production must be relocated to regions with abundant wind and solar resources. The company says it plans to build a larger 1,000-ton pilot base in northwestern China’s Ningxia region in 2026. If the startup can stick to its ambitious schedule, it aims to launch a 50,000-ton commercial SAF project by 2027.
Investors appear willing to bet on this timeline. Following an angel funding round backed by Sequoia China, Carbonology recently secured investment from Chinese tech giant Tencent. Whether the startup can replicate the rapid cost reductions seen in the solar and lithium battery industries remains to be seen, but the company says it is already in partnership talks with Shanghai Airport Group and Cathay Pacific, an airline that’s been hit badly by the current volatility in oil prices caused by the Iran war. Alternative fuels could offer a crucial hedge for international airlines against the turbulence caused by geopolitical tensions in the Middle East.
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