Just because a technology is critical to meeting long-term climate goals doesn’t mean it will find a market on its own.
The most recent assessment from the UN Intergovernmental Panel on Climate Change issued a strong warning about the world’s current emissions and temperature trajectory. A complex chart included in the publication depicts hundreds of technologies or practices that potentially reduce emissions, their potential to do so this decade, and the costs of implementing them.
In terms of cost and scale, wind and solar energy are the clear winners, with projected annual emissions reductions of gigatons. A half-dozen forms of transportation are as well. Industrial measures have a lot of potential, but they come at a hefty cost. Building applications, particularly energy services and lighting, are profitable, but others, such as “improvement of existing building stock,” are not.
A modest (in terms of 2030 potential) and aggressive bar for carbon capture and storage is located at the bottom of the energy section. It has a limited emissions potential in the next decade and is expensive.
Climeworks AG, a Swiss carbon removal company, announced it had raised $650 million just as the IPCC report was released.
This is by far the largest investment in any carbon removal company. In the first four months of 2022, there will be twice as much investment in carbon capture technology as in the previous four years.
The size of the key investors is just as essential as the quantity of the investment. As of December 2021, Partners Group AG manages $127 billion; Baillie Gifford, more than $450 billion; and GIC, Singapore’s sovereign fund, an estimated $700 billion or more — a total of well over $1 trillion in assets under management. The commitment to reducing carbon emissions in general is significant.
Carbon removal is “critical” to zeroing out greenhouse gas emissions, according to the vice-chair of the working group that produced this latest IPCC report.
However, being critical to long-term climate goals does not automatically create a market. Even in the absence of large global governmental backing, a list of investors like the one above suggests that there will be a market for carbon removal at scale.
Furthermore, as Shayle Kann of Energy Impact Partners points out, carbon removal not only has a cost of operation, but it is a cost. Carbon removal requires both financial investment and a significant amount of energy to power the removal processes. It also provides a societal benefit, but it does not provide electrons, molecules, or services in the same way as renewable energy or building energy services do.
Capturing large amounts of carbon dioxide molecules and storing them safely for centuries or longer is a difficult task to solve. Carbon-removal companies are typically referred to as “hard tech” by their investors since their work is complex and needs time-consuming technology and infrastructure (not software and services). Success will not come quickly, and it is possible that it may not arrive until after the IPCC report’s 2030 interval.
Amory Lovins, the cofounder and chairman emeritus of the energy think tank RMI, wrote a short but important article regarding the future of American energy in 1976. He referred to the current — and anticipated — system of massive power plants and intricate engineering as the “hard path” to the future. The alternative is a “soft path” that relies on “smaller, far simpler supply systems entailing vastly shorter development and construction time, and on smaller, less sophisticated management systems.”
After more than four decades, the IPCC has concluded that, while the soft path is fast scaling, the hard route will continue to be needed to handle difficult problems. Developers and investors in technology seem to agree.
