A hot topic for a cooler planet? In the fight against climate change, every avenue must be explored. But does carbon dioxide removal deliver on its promises? And where does the banking sector fit in?
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There’s no doubt that climate change is widespread, rapid, and intensifying. The climate clock is ticking, and the time for action is now. Achieving the 2050 net zero goal seems like a far-off dream, yet the latest IPCC report has stated that we have the solutions in all sectors to at least halve emissions by 2030.
The spotlight has been cast on carbon dioxide removal (CDR), the latest star of the show, which the IPCC report has deemed as an ‘unavoidable’ tool to meet our climate targets.
Bold claim or a key piece to the puzzle? Let’s dive into it.
What is carbon removal & why is it important?
Carbon removal, as the name suggests, refers to the process of removing carbon dioxide (CO2) from the atmosphere and storing it for the long term in carbon sinks such as plants, soils, oceans, rocks, saline aquifers, or long-lived products like cement. Geologic CO2 storage provides the most secure, long-term storage of CO2 for thousands of years.
So far, carbon removal may look like any other tech-focused climate change mitigation solution. In order to fully understand the true selling point of CDR, we need to dig a little deeper. That starts with distinguishing between carbon capture and carbon removal, two terms which are too often used interchangeably.
As highlighted by American University, their key difference is the location from where the carbon is captured. While carbon capture and storage (CCS) focuses on point source carbon capture, from a smokestack or flue in a coal-fired power plant, carbon removal provides a broader method, focusing on capturing carbon directly from the atmosphere. In short, carbon capture aims to prevent carbon from entering the atmosphere, while carbon removal focuses on reducing what is already there.
But why do we need carbon removal?
To put it frankly, we needed action yesterday. With each passing day, the climate crisis begins to change our daily lives. To halt and reverse this, we must leverage every tool we have – this includes carbon removal.
CO2 is the greenhouse gas that has contributed the most to global warming and stays in the atmosphere for thousands of years. Since billions of tons of CO2 have already been emitted since the start of the Industrial Revolution, which continue to contribute to global warming, we need a solution to permanently remove these historic CO2 emissions from the air.
“The scientific evidence is there: drastic emissions reductions, combined with CDR, are our best option to reduce our emissions to net zero by mid-century.”
Add to this the fact that even with the most drastic emission reduction measures, some unavoidable emissions will likely continue being emitted by 2050. For example, from sectors which are incredibly hard to decarbonize, such as the chemicals, steel or cement industry.
According to the latest IPCC report, all calculations to limit global warming to 1.5°C use CDR to some extent, ‘to neutralize emissions from sources for which no mitigation measures have been identified’.
Put in numbers, the IPCC estimates that by 2050, we will need to remove 3-12 billion tons of CO2 from the air every year in order to meet the Paris Agreement goals, and ultimately avoid the catastrophic trickle-down effect caused by climate change.
Yet the question arises: if the use of CDR is truly unavoidable, how come its global uptake seems to stagnate?
The challenges that lie ahead
Innovations don’t come without challenges and carbon removal is no exception. A number of different strategies fall under the umbrella of carbon dioxide removal, such as reforestation or direct air capture and storage (DAC+S), each leveraging different risks and co-benefits.
With a price tag of up to $50 per ton of CO2 removed, reforestation and afforestation are the cheapest and currently most technologically and geographically feasible carbon removal method . The price varies greatly from provider to provider with higher quality offsets usually costing more. Yet the capacity of trees to store carbon is limited on the long-term and moving beyond reforestation to tackle global warming is unavoidable.
Direct air capture and storage (DAC+S) is a complementary approach to tree planting, as it offers a more permanent and scalable solution for carbon removal. This is what Swiss company Climeworks is focusing on. Their direct air capture machines consist of modular collectors and can capture CO2 directly from the atmosphere. When air is drawn through the collectors, CO2 is captured on a highly selective filter material. Once the filter material is saturated with CO2, the collectors are closed and heated to around 100°C. This releases the high-purity CO2, which can then be stored permanently or recycled as a raw material.
But as you may have guessed, high-end technology does not come without a price.
Illustration of Climeworks’ carbon removal solution via direct air capture and storage. © Climeworks
At our current technological status quo, DAC is 5 to 12 times more expensive than its nature-based competitor. This, however, is not uncommon for new climate technologies. Solar technologies have come a long way in becoming a cost-competitive source of clean energy. DAC is expected to follow a similar cost reduction path over the next decades, driven by the industrial scale up of operations.
The scientific evidence is there: drastic emissions reductions, combined with CDR, are our best option to reduce our emissions to net zero by mid-century. What is now missing is the necessary funding, both private and public, needed to scale DAC to a truly impactful level.
Supporting the uptake of carbon removal projects: the role of banks
When it comes to the uptake of carbon removal projects, it’s a typical chicken or the egg problem: what has the bigger impact, a bottom-up or top-down approach? Spoiler alert, it’s both!
On the one hand, private capital and government funding are required to drive research and development, reduce costs and increase the global demand for carbon removal. On the other hand, a bottom-up approach driven by the consumer itself is needed, to raise awareness on the topic and nudge these top-down actors to provide regulatory frameworks, permits, and financing.
And that’s where banks become key agents of change. Their advantageous position as both direct investors and powerful trailblazers in the market is the key to bringing new climate technologies forward, through combining consumer empowerment to drive relevant ESG investments while becoming active changemakers themselves presentone of the greatest opportunities for the financial services industry. And considering that the cost resulting from a lack of climate action is expected to reach $1.7 trillion a year by 2050, it is clear that green finance is our way forward and it needs to be the future. But banks need not go at it alone. Sustainability is a multi-faceted topic that requires expertise. ecolytiq was founded to help banks do just that.
ecolytiq provides a Sustainability-as-a-Service® solution, which enables banks, fintech companies and financial service providers to show their customers the individual impact their purchasing behavior is having on the environment in real time. The ecolytiq software calculates personal environmental impacts, such as CO2 values, on the basis of payment transactions and empowers bank customers to cultivate more climate-conscious purchasing and investment behaviour.
Climeworks empowers people and companies to fight global warming by offering carbon dioxide removal as a service via direct air capture (DAC) technology. At Orca, Climeworks’ DAC facility in Iceland, the CO2 is permanently removed from the air by capturing and geologically storing it for thousands of years with Climeworks’ storage partner Carbfix.
Climeworks’ DAC facilities run exclusively on clean energy, and their modular CO2 collectors can be stacked to build machines of any capacity. Founded by engineers Christoph Gebald and Jan Wurzbacher in 2009, Climeworks is on a journey to climate impact at scale. To do so, it strives to inspire 1 billion people to act and remove CO2 from the air.