Mr Musk, who this month briefly overtook Amazon’s Jeff Bezos as the world’s richest man, took to Twitter to make the announcement and promised more details next week.
“Am donating $100M towards a prize for best carbon capture technology,” tweeted Mr Musk.
Carbon capture and storage is an attempt to remove waste carbon dioxide emissions from the air to help impact climate change.
The carbon dioxide emitted at a factory or refinery is captured at its source and then stored to try and remove the harmful byproducts.
In response, several of Mr Musk’s followers who shared the tweet suggested a simple solution — plant more trees.
The prize will be connected to the Xprize Foundation, which is a non-profit that hosts public competitions to encourage technological development, reported Tech Crunch.
New president Joe Biden has placed huge importance on his climate plan and says he wants to put the US on the road to be carbon neutral by 2050.