In conversation with UP Catalyst CTO Sebastian Pohlmann

Estonian startup UP Catalyst is turning CO₂ emissions into battery-grade graphite. As one of the 47 strategic projects selected under the EU’s Critical Raw Materials Act (CRMA) and with funding from the European Investment Bank (EIB), UP Catalyst’s twin mission is to help Europe reduce its dependence on Chinese graphite and address decarbonisation. Following a site visit in Maardu, just outside Tallinn (Estonia), Benchmark sat down with Sebastian Pohlmann, Chief Technology Officer (CTO) at UP Catalyst, to learn more about the company, its low-carbon production process and the opportunities and challenges in accomplishing its twin mission.

UP Catalyst’s carbon-negative graphite production process and 2030 production target

UP Catalyst is a University of Tartu spin-off developing carbon-negative, battery-grade graphite from CO₂ emissions and biomass waste, positioning itself as a low-carbon alternative to conventional graphite production. For this, it uses its patented Molten Salt Carbon Capture and Electrochemical Transformation (MSCC-ET) process, in which molten salt is heated to around 700°C and renewable electricity is used to convert CO₂ or biomass into oxygen and solid carbon materials, including graphite.

“The graphite produced by us is even carbon-negative, requiring 4 kg of CO₂ to produce 1 kg of graphite”, explained Pohlmann.

The company claims that the MSCC-ET process produces a carbon footprint up to 20 times lower than conventional routes to comparable carbon materials.

UP Catalyst sets a production target of 30,000 t/year of graphite by 2030, primarily for lithium-ion battery anodes in both electric vehicles (EVs) and stationary energy storage systems (BESS). However, Pohlmann emphasised that this depends on successful validation, scale-up, and supply chain integration. The company is now scaling up by constructing its first industrial production unit.

UP Catalyst’s facilities

UP Catalyst faces a funding gap and competitiveness challenges, even with the EU CRMA Strategic Project designation

Last year, UP Catalyst moved into the European spotlight as its project was designated as one of the 47 strategic projects under the EU CRMA. Those projects are supposed to benefit from streamlined permitting, improved access to finance, and coordinated support from both national governments and EU institutions. The EIB provided an EUR18 million ($21 million) injection of venture debt in 2025 to support UP Catalyst’s early-stage scaling of its capital-intensive technology and industrial project. Next to EU funding, the Estonian start-up has received national backing from the Estonian government.

With China currently accounting for 96% of synthetic and 72% natural graphite production according to the Benchmark Natural and Synthetic Graphite Forecasts, UP Catalyst must compete globally with low-cost Chinese producers and therefore balance sustainability with cost competitiveness. To illustrate this, Pohlmann outlined that the original equipment manufacturers (OEMs) usually show a strong interest in UP Catalyst’s low-carbon graphite. However, in practice, their purchasing decisions still tend to favour established Chinese suppliers, mainly because of cost, scale, and perceived supply security.

“Downstream players and consumers are not willing to pay a green premium”, emphasised Pohlmann.

Even though the EU has already implemented sustainability requirements in public procurement rules, as well as carbon footprint requirements in the EU Battery Regulation, he claims that more measures are needed to incentivise demand for low-carbon EV and ESS batteries, alongside classic supply-side support. Otherwise, UP Catalyst and other similar low-carbon CRM projects will struggle to displace incumbent CRM players, especially in the Chinese-dominated graphite and anode market.

Even with EU Strategic Project designation under the CRMA and multiple available EU funding tools, Pohlmann argued that a funding gap persists, especially for smaller players. He refers to the US, where it is usually easier for smaller technology companies to secure support from government institutions such as the US Department of Energy. European policy support and funding not only lag behind in scale but also in effectiveness, as accessing EU-level support often requires navigating complex, time-consuming application processes. “For a start-up with fewer than 50 employees, we do not have a dedicated team solely working on securing grants and navigating all EU funding schemes”, said Pohlmann.

A greater sense of urgency, more demand-side measures and public-private partnerships are needed

Finally, turning policy strategies and action plans into concrete action remains a challenge for Europe.

“Industrial policy strategies should be matched by urgency in implementation, which is currently lacking”, feels Pohlmann.

This disconnect is particularly apparent in the time required to move from CRM Strategic Project designation under the CRMA to full financial close and the construction of large-scale plants. In addition to the previously mentioned need for demand-side measures, blended finance and public-private partnerships were identified as ways to help close the funding and competitiveness gaps in Europe.