Private sector and regulators are gradually increasing their efforts around the technology and tools needed to drive down emissions.
Investment in permanent carbon dioxide removal (CDR) solutions to tackle decarbonisation has increased, but not yet at the pace and scale needed to meet global net-zero goals.
Humans emit around 40 gigatonnes of carbon dioxide (GtCO2) per year, and between 1850 and 2019 were responsible for 2,400 GtCO2 of emissions. According to a recent report assessing the state of global CDR released earlier this year, approximately 7-9 GtCO2 will need to be removed from the atmosphere every year between now and 2050 to achieve the 1.5°C target for global warming set by the Paris Agreement.
However, only 2 GtCO2 per year are currently sequestered through non-permanent methods, such as tree planting – while permanent methods only account for 0.6 million tonnes of removal per year.
Nature-based carbon removals – including reforestation, and seagrass and mangrove restoration – require little infrastructure, are fairly cheap, and are not energy-intensive – but they eventually release the CO2 they sequester. In the case of tree planting, this risk is further exacerbated by forest fires, which are becoming increasingly prevalent.
“Almost all removals today are done through nature, for example through reforestation or afforestation projects,” Shachar Hatan, Product Development Manager at Climate Impact Partners, told ESG Investor. “However, to meet global net-zero goals, up to 10 billion tonnes of CO2 need to be removed from the atmosphere every year by 2050. We need to scale carbon removal technologies to achieve this.”
Last week, Climate Impact Partners launched a CDR programme to help companies to channel financing into innovative technologies.
Although still in relatively early stages of development, direct air capture (DAC) is perhaps the most well-known CDR technology, with some underlining the crucial role it can play in addressing the 1.5°C overshoot.
According to the International Energy Agency, 27 DAC plants have been commissioned in Europe, North America, Japan and the Middle East. Most of them are small-scale, with only a handful of commercial agreements in place to sell or store the captured CO2.
Plans for at least 130 DAC facilities are now at various stages of development globally – the largest of which will be in the US. However, only around 15 facilities are currently in advanced development or under construction.
If all the planned projects go ahead and steadily capture CO2 at full capacity, DAC deployment could help remove up to 3 megatonnes (Mt) of CO2 by 2030 – less than 5% of the 80 MtCO2 needed to be on track for net zero by 2050.
“To meet global climate targets, innovative carbon removal solutions must be scaled, and institutional investors can play a vital role in accelerating the long-term development of scalable carbon removal technologies through channelling finance to scale these solutions,” said Hatan. “Near-term scale-up of carbon removal technologies is critical to achieve the required deployment in the long term.”
Promoting private investment
If barriers to scale are addressed, the global CDR market could represent up to US$100 billion a year between 2030-2035, significantly up from the approximately US$30 billion invested so far.
“Investing in climate tech and carbon removal can improve a company’s reputational image and is a means to show that they are contributing to climate solutions,” said Marlène Ramón Hernández, Policy Expert on carbon removals at Carbon Market Watch.
While many companies include CDR in their net-zero strategies, there is also an over-reliance on the method.
“[Some] companies are even pre-purchasing credits for CDR that are intended to be generated in the future, without any guarantee of such CDR materialising,” Ramón Hernández explained. “Direct air carbon capture and storage has become a primary focus, with major CDR startups such as Heirloom, Climeworks and Carbon Engineering receiving purchases from investments that are looking to offset emissions from their core business.”
Last November, US energy company Occidental Corporation (or Oxy) and BlackRock partnered to develop STRATOS – the world’s largest DAC plant at the time – with the latter investing US$550 million. In May, this facility was overtaken by DAC specialist Climework’s Mammoth plant in Iceland, which currently stands as the world’s largest.
In June, Climeworks unveiled new technology to double CO2 capture capacity per module, while halving both energy consumption and costs the following month.
The same month, carbon technology firm Heirloom announced an investment of US$475 million to create North America’s second largest DAC facility in Louisiana. Construction is expected to start before the end of this year. Meanwhile, fellow tech firm CarbonCapture also revealed the first US DAC system tailored for mass production.
Regulatory ramp-up
Unveiled last month, the UK’s National Wealth Fund is due to combine public and private investment to develop carbon capture utilisation and storage (CCUS) solutions. Further financial support from the UK’s GB Energy project, also confirmed last month, is expected.
Last year, the UK budget included up to £20 billion (US$25.7 billion) of funding for CCUS applications, including for DAC. In addition, the government has been consulting on the integration of greenhouse gas removals into the UK Emissions Trading Scheme, which closes today.
Meanwhile in Europe, the European Council and Parliament approved a voluntary framework intended to increase the deployment of high-quality carbon removal and soil emission reduction activities.
“The [framework] is the first instrument of its kind, however Carbon Markets Watch has been highly critical – not least of the failure to rule out offsetting and double-counting,” said Ramón Hernández. “It is also questionable whether voluntary carbon markets are appropriate for scaling up CDR, given the volatility in prices and difficulty in keeping track of credits.”
The US Department of Energy, for its part, recently unveiled a US$52.5 million initiative to accelerate the development and commercialisation of DAC technologies. Made available through President Biden’s Investing in America initiative, the funding looks to advance technologies that reduce legacy CO2 pollution by removing it directly from the atmosphere to counter-balance emissions in hard-to-abate sectors – such as aviation and shipping.
The US plan also aims to advance the industry, create well-paid jobs, heighten private investment, and help deliver the benefits of climate investments to the communities hosting clean energy projects. In addition, the country is providing funding of US$1.2 billion–3.5 billion for select projects through the Regional Direct Air Capture Hubs programme.
